VAT at 21% and 11%, the reinvested-profit exemption after OUG 8/2026, and the deductibility limits on protocol, social expenses, company cars and sponsorships — a short guide for SMEs.
Translated from Romanian. This article covers Romanian labour and tax law; the Romanian version is canonical and is updated first.
When people talk about a company’s taxes in 2026, the conversation often stops at salaries: contributions, the minimum wage, dividends. We gathered those in our guide to the 2026 tax changes for payroll and HR. Here is the other half: the VAT on invoices, corporate profit tax and which of the company’s expenses can reduce it. It doesn’t show up on the payroll register, but it is decided in the company all the same — at every purchase, gift or business trip.
Below are three things an SME manager would do well to know before talking to the accountant: the VAT rates, the reinvested-profit exemption and expenses with limited deductibility.
The text explains the general rules, not your company’s situation. The articles of law cited are from the Fiscal Code (Law no. 227/2015), in the form in force at the date of publication. What you buy and how you record an expense are things to settle together with your accountant.
The VAT rates concern any company registered for VAT, and the VAT limits on cars and gifts (below) apply in the same way, micro-enterprises included. The reinvested-profit exemption and the deductibility limits in art. 25 concern only companies that pay profit tax (impozit pe profit), not micro-enterprises.
| Micro-enterprise | Profit tax payer | |
|---|---|---|
| The tax | 1% of revenue (art. 51) | 16% of taxable profit (art. 17) |
| Conditions, among others | revenue up to the equivalent of 100,000 euro and at least one employee (art. 47) | the company doesn’t apply, or can no longer apply, the micro regime |
| Reinvested profit (art. 22) | does not apply | applies |
| Deductibility limits (art. 25) | don’t change the tax, which is calculated on revenue, not on profit | matter directly |
A micro-enterprise that exceeds 100,000 euro in revenue during the year becomes a profit tax payer from the quarter in which it crossed the limit (art. 52 para. 1); from then on, the rules below apply to it as well.
For fiscal year 2025, OUG 8/2026 (Emergency Ordinance 8/2026, art. 7) grants ex officio a 3% bonus on the annual profit tax or on the micro-enterprise income tax to companies that have filed all their returns, paid the 2025 tax in full and on time, and have no other arrears at the deadline for filing the return that declares the 2025 tax. The procedure was approved by Order of the Minister of Finance no. 987/2026 (Official Gazette no. 678 of 17 August 2026). The bonus is not a permanent facility: it is granted year by year, only if a legal act provides for it. The general mechanism (conditions, set-off) is explained in our article on the 3% bonus, which describes the first time it was granted, for fiscal year 2024.
Since 1 August 2025, through Law no. 141/2025 (Official Gazette no. 699 of 25 July 2025), the Fiscal Code has a standard rate of 21% and a single reduced rate of 11% (art. 291). The 5% rate disappeared, the 9% rate went up to 11%, and some operations that used to be at 9% moved to the standard rate.
| Rate | What it covers, in short |
|---|---|
| 11% | human-use medicines; food, including drinks, for human and animal consumption; water supply and sewerage; textbooks, books, newspapers and magazines (in print or electronic); access to museums, castles and historical monuments; accommodation in the hotel sector; restaurant and catering services |
| 21% | everything that is not exempt and not on the reduced-rate list (for example consulting, IT equipment, software), plus the exceptions inside the categories above: alcoholic drinks, non-alcoholic drinks under NC code 2202, food with added sugar of at least 10 g per 100 g of product (except powdered milk for young children) and food supplements as defined by Law no. 56/2021 |
The full list, with the NC codes, is in art. 291 para. (2) and in the implementing norms. Temporary VAT measures for the purchase of housing by individuals don’t concern the day-to-day business of most companies (except those building or selling homes) and we don’t detail them here.
Art. 22 exempts from tax the profit invested in certain assets. It doesn’t mean money back, but a lower profit tax in the year the assets are put into operation — with conditions that last for years. In 2026 the regime of the reserves built up from the exempted profit also changed.
Para. (1) lists investments in technological equipment (machines, tools and working installations), computers and peripherals, cash registers and control and invoicing devices, software and software usage rights, as well as assets used in production and processing or for re-technologisation, set by order of the Minister of Finance.
The assets can be produced or purchased, including under a finance lease, and must be put into operation and used in the business — what counts is the moment of putting into operation, not the moment of payment. They must also be new: not used before the date of purchase (implementing norms).
For tangible assets, except those used in production and processing or for re-technologisation, the law points to subgroup 2.1 and class 2.2.9 of the Catalogue of fixed assets, that is, to fixed assets. From 2026, a tangible asset becomes a tax-depreciable fixed asset from 5,000 lei (art. 28 para. 2 letter b, amended by OUG 8/2026), not from 2,500 lei as until 2025. Cheaper equipment, booked straight to expenses, therefore usually doesn’t qualify for the exemption — check the classification with your accountant before you buy.
The invested profit is the cumulative gross accounting profit from the start of the year up to the quarter or year in which the assets are put into operation (para. 2). The exemption is limited to the value of the investment and to the profit tax calculated cumulatively up to that point; in practice, the exempt tax is 16% of the amount invested, if the profit covers it.
An illustrative example, built on the model in the implementing norms: a profit tax payer has a cumulative gross accounting profit of 300,000 lei and puts into operation a machine of 100,000 lei and computers of 20,000 lei. The amount invested, 120,000 lei, is covered by the profit, so the exempt tax is 16% × 120,000 = 19,200 lei. Had the profit been lower than the investment, the exemption would have been calculated on the profit only.
Expenses incurred for the purpose of the business are, in principle, deductible (art. 25 para. 1). The Fiscal Code, however, caps some of them (para. 3) and excludes others entirely (para. 4). The limits in art. 25 concern profit tax payers. The VAT rules below — the 50% deduction on vehicles also used for personal purposes, the VAT on gifts worth more than 100 lei, goods given as sponsorship — apply to any company registered for VAT, micro-enterprises included.
| Expense | The rule (art. 25 para. 3) |
|---|---|
| Protocol | up to 2% of the accounting profit plus the profit tax plus the protocol expenses; the VAT charged on gifts worth more than 100 lei also falls here |
| Social | up to 5% of the payroll expenses: aid, gifts and gift vouchers for employees and their minor children, cultural and crèche vouchers, tourism and treatment services, other expenses under the collective agreement or internal regulations |
| Meal vouchers, holiday vouchers | listed separately from social expenses (letter c); deducted under the terms of their own special laws |
| Vehicles also used for personal purposes | 50%, for vehicles with a maximum authorised total mass of up to 3,500 kg and up to 9 seats; 100% for certain categories |
| Management cars | running, maintenance and repair costs follow the same letter l rule (usually 50%), for a single car per person with a management or administration role |
On top of the accounting profit, the profit tax and even the protocol expenses themselves are added to the base of the protocol limit. Illustrative example: accounting profit 168,000 lei, profit tax 32,000 lei, recorded protocol 12,000 lei. The base is 168,000 + 32,000 + 12,000 = 212,000 lei, and the 2% limit is 4,240 lei; the remaining 7,760 lei is non-deductible. In a weak year, with a small profit, the limit drops close to zero.
In practice, gifts to clients and partners fall under protocol, while those to employees and their minor children, including gift vouchers, are social expenses. What you can offer employees and how each benefit is treated can be found in our articles on fringe benefits, gifts and gift vouchers and meal vouchers.
VAT has a threshold too: according to the implementing norms, protocol gifts worth up to 100 lei (excluding VAT) each are not treated as supplies of goods. The threshold applies to the gift, not to the item: a gift may consist of several items, and a set of three articles worth 50 lei each is one gift worth 150 lei. For gifts above the threshold, the part over 100 lei is treated as a supply: the company adds up the excesses within a fiscal period and charges VAT on that sum, if the tax on the purchase was deducted in full or in part, and the VAT charged is added to protocol.
For vehicles with a maximum authorised total mass of up to 3,500 kg and up to 9 seats (including the driver’s), not used exclusively for business, 50% of the expenses is deducted (letter l). The expenses are deducted in full for vehicles used exclusively for emergency, guard and protection or courier services; by sales and purchasing agents; for paid passenger transport, including taxis; for paid services, including rental or instruction in driving schools; or as goods for commercial purposes. For full deductibility you justify the use with accounting documents and a route sheet, which must contain at least the vehicle category, the purpose and place of the trip, the kilometres driven and the own fuel consumption norm per kilometre (implementing norms, point 16). Depreciation is not covered by the 50% rule; for category M1 cars (up to 9 seats, including the driver’s), however, at most 1,500 lei per month for each car is deductible, with the exceptions in art. 28 para. (14).
The limitation applies twice: first to VAT, where only 50% of the tax related to the vehicle and its expenses is deducted (art. 298 para. 1), then to profit tax, where 50% applies to the expense plus the VAT left non-deductible. Example: fuel of 1,000 lei excluding VAT, with 21% VAT (210 lei). 105 lei of VAT is deducted and 105 lei stays non-deductible; the base is 1,000 + 105 = 1,105 lei, of which 552.50 lei is non-deductible for profit tax.
Sponsorship is not a deductible expense (para. 4 letter i); you subtract it from the profit tax due, up to the lower of 0.75% of turnover and 20% of the tax due. For non-profit entities or places of worship, the beneficiary must be listed, at the date of the contract, in the ANAF register of entities eligible for tax deductions. Goods given as sponsorship are not treated as supplies for VAT purposes as long as their annual value stays within 3‰ of turnover.
From the list in para. (4), those most often met in small companies:
Conversely, expenses borne by the employer for the telework activity of employees who work that way, under the law, are deductible (para. 2¹). The difference between telework and home-based work is explained in the dedicated article.
The standard rate is 21% and the single reduced rate is 11% (art. 291, as amended by Law no. 141/2025, applicable from 1 August 2025). Accommodation and restaurant or catering services are at 11%, except for alcohol and non-alcoholic drinks under NC code 2202, which are taxed at 21%.
Not while you pay the micro-enterprise income tax: the exemption in art. 22 is part of the profit tax regime. If the company becomes a profit tax payer during the year, it can apply the facility to assets put into operation from the quarter in which it became a payer (art. 22 para. 4).
The asset must be kept in the company’s assets for at least half of its economic useful life, but no more than 5 years. If you sell it or remove it earlier, outside the exceptions in the law, the profit tax for that amount is recalculated, with accessory charges, and the company files an amended return.
No. In general, gifts to clients fall under protocol, with the 2% limit, while those to employees are social expenses, with the 5% limit on payroll expenses. You settle the classification of each case with your accountant.
No. Fines, confiscations, penalties and late-payment interest owed to the authorities are non-deductible (art. 25 para. 4 letter b), except those under contracts concluded with those authorities.
Workly is an HR platform, not accounting software: it doesn’t calculate VAT, profit tax or deductibility limits — those stay in your accountant’s software. It does connect to two places where a company meets the topics above.
The first is payroll expenses, which the 5% limit on social expenses is based on: Workly payroll prepares the payroll register as a draft, from worked days and approved leave, which the accountant validates, and the SAGA-format export (CSV) takes the same data to accounting, with no re-entry. The second is equipment: the register in the Assets module keeps an internal record of laptops, phones and other company equipment — who has them, when they were returned, their history and when the warranty expires. It is useful for knowing which equipment is still in the company, but it doesn’t replace the accounting record of fixed assets and doesn’t calculate depreciation or the reinvested-profit exemption.
Informational article, accurate at the date of publication. Not tax or legal advice. Tax legislation changes frequently, sometimes through ordinances that apply immediately — always verify the form in force at the official source (ANAF, the Ministry of Finance, Monitorul Oficial) or with an accounting specialist before making a decision.
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