In case you didn’t know, if you own a Romanian company, increasing the company’s capital can bring you a reduction of its tax due for the period 2021 – 2025. More precisely, according to an emergency ordinance approved by the Romanian government, Romanian companies that increase their capital with a minimum percent can benefit in the next period of significant tax reductions.
Through this ordinance, the Romanian government wants to stimulate the recapitalization of companies that have negative capital.
We describe below the conditions under which you can benefit from the provisions of this ordinance and what is the tax reduction that can be applied to your company.
First, we consider it important to specify that this incentive came into force with the publication of Emergency Ordinance 153/2020. Thus, according to the provisions of this ordinance, the Romanian companies that can benefit from a decrease of their tax burden by increasing their own capital are:
What is the tax decrease you can benefit of by increasing the company’s capital?
The measures taken by the government provide that during the period 2021 – 2025 Romanian companies can benefit from tax reductions under the following conditions:
| Annual increase in adjusted capital | Annual tax reduction (%) |
|---|---|
| less than or equal to 5% | 5% |
| between 5% and 10% inclusively | 6% |
| between 10% and 15% inclusively | 7% |
| between 15% and 20% inclusively | 8% |
| between 20% and 25% inclusively | 9% |
| more than 25% | 10% |
| Annual increase in adjusted capital | The year for which the tax is due |
|---|---|
| 5% | 2022 |
| 10% | 2023 |
| 15% | 2024 |
| 20% | 2025 |
Can a company cumulate all three tax reductions described above?
Yes, indeed, according to the provisions of Ordinance 153/2020, a company can benefit from all the three tax reductions. Thus, if the company meets the conditions for the first one, it can apply it, if it qualifies for the second, it can cumulate it with the first, and so on. In this way, the percentages of reductions can be cumulated, coming to benefit from the maximum possible tax reduction.
At what moment can the tax reduction be applied?
The moment at which the corporate tax reduction can be actually applied will be as follows:
The capital increase tax incentives enforced through the Ordinance 153/2020 represent the initiative of the Romanian Ministry of Public Finance, which claims that there are currently many Romanian companies with negative capital. According to the Ministry, this is a common situation especially among small firms, which tend to actively distribute dividends throughout the year.
Thus, it is desired to ensure a financial stability of companies by capitalization, which will be encouraged by the tax reductions described above.
The initiators of the ordinance claim that such measures to stimulate capitalization have also been applied in other European countries such as Belgium, Italy or Portugal.
