The year 2024 comes with new fiscal changes regarding rental income. The flat rate of 20% is reintroduced and rental income is taxed through withholding in the situation where an individual rents a property to a legal entity. At the same time, the obligation to keep records in the real system disappears in the case of natural persons who earn income from the transfer of the use of goods from the performance of more than 5 rental contracts at the end of the fiscal year. The following lines will help you better understand how the new tax changes affect you.
The novelties are chained from one year to the next. At the end of 2022, a series of tax changes caught property owners renting or selling real estate by surprise. In 2023, the flat-rate share of rents, which was 40% until 2022 inclusive, was waived and the obligation to register the contract with the financial administration was introduced. Until 2023 the registration of contracts was considered optional. Along with the fiscal changes that appeared, the taxes paid to the Romanian state would be higher. However, several owners have chosen the real taxation system starting from 2023. A system that involves paying a 10% tax on the difference between the income received and the expenses incurred with the property (here we are talking about commissions, insurance, administration fees, etc.). This is how property owners managed to pay a lower tax.
The new wave of fiscal changes appeared with GEO 115 of 15.12.2023, which enters into force on the first day of 2024.
The reintroduction of the flat rate of 20%, one of the tax changes from 2024
A first change that appears is the reintroduction of the flat rate at the level of 20%. The Romanian state considers that for the income obtained from the transfer of the use of goods, 20% of the income is represented by the expenses that an owner has to obtain this income. Thus, for the income obtained from the transfer of the use of goods, the property owners will pay 10% tax applied to 80% of the income obtained. To better understand the tax change, we come up with an example:
Example – Andrei owns a 2-room apartment in Bucharest that he rents for 500 Euro/month, starting from 02.01.2024 and ending on 05.31.2025. Consult the table below to understand what income tax Andrei owes to the Romanian state for the year 2024. You will notice a comparison between the tax he owes in 2024 and what he would have owed in 2023 with the same amount of rent received:
|Annual rent in 2024 (EUR)
|Equivalent in LEI
|Calculated income tax
|=500 * 11 months =5.500 Euro
|5.500 * 4,97 Lei/Euro = 27.335 Lei
|=20% * 27.335 Lei = 5. 467 Lei
|=27.335 Lei – 5.467 Lei = 21.868 Lei
|10% * 21.868 Lei = 2.187 Lei
|=500 * 11 months =5.500 Euro
|5.500 * 4,97 Lei/Euro = 27.335 Lei
|10% * 27.355 Lei = 2.736 Lei
Thus, in 2024, Andrei will pay a tax of 2,187 lei. Comparing with the year 2023, Andrei pays a lower tax, with 549 lei.
Taxation of rental income through withholding tax in the situation where an individual rents a property to a legal entity
It is about those situations where a natural person rents an asset to a legal entity, which results in income taxation through withholding tax. In this situation, the 10% tax will be withheld by the legal entity and transferred monthly to the state budget, the same procedure being applied (10% applied to 80% of the income), and the rent difference will be transferred to the owner. To better understand the tax change, we come up with an example:
Example: Mihai owns a commercial space that he has rented to a legal entity that has a store. For this commercial space, he signed a contract on 01.02.2024, for the amount of 1,000 Euro/month. What amount will Mihai collect monthly?
Mihai expects to collect the monthly amount of 1,000 Euros for renting his space, according to the signed rental contract. In reality, Mihai will collect less. The commercial company that owns the store will withhold a tax of 10% of the 1,000 Euros/month, a tax applied to the difference between the gross revenues, i.e. 1000 Euros, and the percentage of 20% of the gross revenues, representing the flat rate (in the amount of 200 Euros according to calculations).
Basically, the commercial company will withhold a 10% tax applied to the difference between the income from the declared contract and the flat rate (1000 Euros – 200 Euros = 800 Euros). Until the 25th of the following month, the commercial company will transfer to the State Budget the sum of 80 Euros (10% of 800 Euros) and will transfer monthly to Mihai the sum of 920 Euros, representing the difference between the gross income from the contract and the tax withheld at source.
Fiscal changes regarding CASS. How much CASS will you pay in 2024?
In 2023, individuals who obtained income from the transfer of the use of goods paid CASS at the level of 6, 12, respectively 24 gross minimum wages per economy. In 2023, the gross minimum wage per economy is considered to be 3,000 lei. The table below helps you understand the payment amounts for CASS in 2023:
|Maximum 17.999 Lei
|Between 18.000 lei and 35.999 Lei
|Between 36.000 Lei and 71.999 Lei
|Over 72.000 Lei
*Net income for the real system refers to the difference between recorded income and expenses and for the normal (flat rate) charging system, net income is equal to gross income.
Thus, the maximum amounts of CASS that will be paid for income from the transfer of the use of goods in 2023 represent 1,800 lei, if net income is obtained between 18,000 lei and 35,999 lei, 3,600 lei if income is obtained between 36,000 lei and 71,999 lei or 7,200 lei if income is obtained above 72,000 lei, inclusive.
For the year 2024, the same CASS thresholds are kept, of 6, 12, respectively 24 gross minimum wages per economy, but the level of the minimum wage at the date of this article is 3,300 Lei, the values for the year 2024 being estimated based on it as follows :
|Maximum 19.799 Lei
|Between 19.800 Lei and 39.599 Lei
|Between 39.600 Lei and 79.199 Lei
|Over 79.200 Lei
**The net revenues achieved in the flat-rate system refer to the difference between the declared Gross Revenues and the flat rate of 20% applicable in 2024.
The obligation to keep records in the real system disappears for those who earn income from the transfer of the use of goods in certain cases – another fiscal change
Another amendment brought to the Fiscal Code refers to the elimination of the obligation to keep records in the real system. This applies to natural persons who earn income from the transfer of the use of goods from the performance of more than 5 rental contracts at the end of the fiscal year. If by the end of 2023 you had more than 5 valid contracts, starting from 2024 you are obliged to declare the income in the real system for the next two years, at the time when you opted to declare the income in the real system, even if that condition regarding the number of contracts was not fulfilled. The amendment of the Fiscal Code regarding the declaration of income from the transfer of the use of goods refers to the fact that, in 2024, the income tax can be determined in the real system. Individuals who obtain income from the transfer of the use of goods and choose the real system do not have the obligation to complete the Register of Fiscal Records and Accounting Records Management. However, the Kastel Group team recommends keeping this register in electronic format, in an organized table to have an overview of recorded income and expenses. On the other hand, starting from 01.01.2024, article 84 para. (11) is repealed, therefore starting from January 2024 the real system is no longer possible. There being this contradiction between the two articles, Kastel Group made a written request to ANAF, meaning that we will come back with a new article as soon as we receive an answer and the methodological norms appear. At the same time, according to these changes, even if in 2023 it was decided to determine the taxable income in the real system, from 2024 this will no longer be possible, even if the law states that this system must be maintained for two consecutive years.
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