The National Council of SMEs (CNIPMMR) cautioned in a press release on Monday that transitioning to corporate income tax, prompted by reducing the threshold for micro-enterprises to EUR 100,000, could escalate inflation. This shift would essentially transfer increased expenses to sales prices, diminishing the competitiveness of Romanian products and services. It could also impede companies’ modernization and digitization projects.
CNIPMMR opposes lowering the threshold for micro-enterprises from EUR 500,000 to EUR 100,000, which would subject them to a 16% profit rate rather than the existing 3% income tax rate.
According to CNIPMMR, micro-enterprises with revenues between 500,000 and 2,500,000 RON in 2022 generated approximately 24 billion RON in profit. Under the proposed 16% profit rate, they would pay around 3.85 billion RON in taxes, exceeding the approximately 600 million RON they paid under the 3% income tax rate.
The document highlights that transitioning to a 16% corporate tax rate could have adverse effects on the business environment. Increased expenses would inflate selling prices, leading to higher inflation. Rising production costs would erode the competitiveness of Romanian products and services, potentially resulting in lost markets. Additionally, decreased liquidity within companies could curtail investments and hinder modernization and digitization initiatives.
Furthermore, CNIPMMR criticizes the introduction of new conditions for micro-enterprise classification, such as aggregating revenues of linked enterprises up to the EUR 500,000 ceiling. This change creates uncertainty and unpredictability for businesses, affecting a larger number of enterprises than those with revenues over EUR 100,000 in 2023.
CNIPMMR argues that the provisions affecting micro-enterprises were introduced without consulting representatives from the business environment, especially SMEs, failing to identify their needs in alignment with the national Recovery and Resilience Plan’s objectives. Consequently, CNIPMMR opposes any new amendment to the Fiscal Code in 2024 and believes that proposed changes to the taxation system for micro-enterprises in the PNRR would negatively impact the business environment and the broader economy.
Moreover, CNIPMMR calls for reducing labor taxation and the immediate launch of national and regional programs worth 6.1 billion euros to support SMEs, which are most affected by the current taxation increase.
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