The number of micro-enterprises in Romania has dropped significantly to 326,461 in 2024 from a peak of over nearly 900,000 in 2022, according to Profit.ro. The decline follows successive tax regime restrictions introduced by the Romanian government in response to pressure from the European Commission.

The European Commission has long criticised Romania's micro-enterprise regime, claiming it enabled tax avoidance by allowing larger companies to split into smaller entities to qualify for favourable income tax terms. The scheme also became popular among professionals, such as IT workers, who used it to reduce personal tax liabilities.

The tightening of the rules is part of Romania's commitments under the European Union's Resilience and Recovery Facility. Authorities have reduced the revenue threshold for qualifying as a micro-enterprise from EUR 500,000 in 2023 to EUR 250,000 in 2024. Further restrictions are set to take effect in 2026, lowering the threshold to EUR 100,000. The threshold used to be EUR 1 million in the past.

The sharp drop in eligible companies follows years of gradual reductions in the ceiling and eligibility criteria for the income tax regime. Under the current rules, micro-enterprises pay a lower income tax instead of the standard corporate profit tax, making the scheme attractive for smaller or fragmented businesses.

Romanian officials have argued that the reforms are necessary to create a fairer tax system and align with European norms. The country's previous EUR 1 million threshold was among the highest in the EU and had drawn repeated criticism from Brussels.

The number of micro-enterprises has now reached its lowest level since 2012.

iulian@romania-insider.com

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