Profit tax vs. micro-enterprise: a comparison

16 June 2026 · Guides

Choosing between the micro-enterprise regime (Romanian microîntreprindere) and profit tax is one of the most important fiscal decisions a company director in Romania will make. It is not a mere accounting formality: the way your company is taxed directly affects cash flow, net margin and the amount you can reinvest or distribute as dividends.

The core difference is easy to state but has major consequences. A micro-enterprise pays tax on revenue — a percentage applied to total income, regardless of expenses. Profit tax is applied to profit — the difference between revenue and deductible expenses. From this follows a practical rule: the higher the margin and the lower the costs, the more advantageous the micro regime tends to be; the higher the costs and the thinner the margin, the more attractive profit tax becomes.

For international investors, this decision is especially relevant because it feeds into reporting to the parent company and the treatment under double taxation treaties. In this article we explain the mechanics of each regime, the eligibility thresholds and conditions, and then show through a worked example how the analysis should be done. One principle up front: the decision is always made on the company’s concrete numbers, never on general rules of thumb.

How the micro-enterprise regime works

The micro-enterprise is a simplified taxation regime in which tax is computed as a percentage of total revenue, without regard to the level of expenses. The main advantage is predictability: you know from the outset what rate you pay on every leu earned. The disadvantage appears when the company has high costs — because the tax is due even if profit is modest or nil.

Access to this regime is subject to several criteria that lawmakers have tightened steadily in recent years. Typical conditions include:

• an annual revenue ceiling below which the company may remain a micro-enterprise (the ceiling has been reduced in stages — please check the value currently in force);
• the obligation to have at least one employee (full-time or equivalent);
• a limit on how many micro-enterprises a shareholder with a significant holding may own;
• the exclusion of certain activities (for example consulting and management above a given share of revenue).

The tax rates for micro-enterprise revenue have changed frequently and may differ by activity. For this reason, do not rely on a percentage you memorised years ago — verify the rate applicable for the current tax year and for your company’s activity code. The trend in recent years has been to narrow the regime.

How profit tax works

Profit tax is levied on taxable profit, computed starting from the accounting result (revenue minus expenses), adjusted for non-deductible expenses and any non-taxable income. The standard rate is 16% (reference value July 2026 — please verify the rate in force).

The key element is the notion of a deductible expense. Not every expense reduces the taxable base: to be deductible, it must be incurred for the purpose of the business and properly documented. Some expenses are fully deductible, others only partially (for example certain protocol expenses or vehicles not used exclusively for business), and others are entirely non-deductible.

The major advantage of profit tax is that the company is taxed on its real gain. If a year is weak and costs exceed revenue, no profit tax is due (a tax loss is recorded, which under conditions may be carried forward). In return, administration is more complex and demands more rigorous bookkeeping. This is where the support of a chartered accountant makes the difference — see our services.

Direct comparison: micro vs. profit tax

The table below summarises the essential differences.

A simplified worked example

Suppose two companies with the same annual revenue of RON 500,000 but different cost structures. For illustration we use a hypothetical micro rate of 1% and a profit tax rate of 16% (indicative figures — verify the actual rates in force).

• Company A — consulting, costs RON 100,000, profit RON 400,000. As micro: 1% × 500,000 = RON 5,000. Profit tax: 16% × 400,000 = RON 64,000. Micro is clearly far more advantageous.
• Company B — low-markup retail, costs RON 460,000, profit RON 40,000. As micro: RON 5,000. Profit tax: 16% × 40,000 = RON 6,400. The gap is small, and with an even thinner margin profit tax becomes the cheaper option.

The example shows clearly why there is no universal answer: the same turnover leads to different decisions depending on margin. A correct analysis means projecting realistic revenue and expenses and comparing the actual tax amount in each scenario.

What to weigh beyond the tax itself

Comparing the two rates does not tell the whole story. The analysis also involves:

1. Dividend tax — due separately when profit is distributed to shareholders, regardless of the company-level regime; the rate changes periodically.
2. Shareholder contributions — CASS and possibly other contributions due at the personal level.
3. VAT — a regime independent of the micro/profit choice, but relevant to cash flow.
4. Reporting obligations — e-Factura, SAF-T (the D406 return), e-Transport and payroll apply regardless of regime, and SAF-T in particular demands well-structured accounting.
5. Legislative stability — the micro regime has changed often; a growing company may be forced to switch to profit tax mid-year upon exceeding the ceiling.

For foreign-capital companies there are additional considerations around reporting to the parent company and double taxation treatment, where the choice of regime must align with the group structure. See how we help.

Making the decision, step by step

We recommend a structured approach:

1. Estimate realistic revenue and deductible expenses for the coming year.
2. Check eligibility for the micro regime (ceiling, employee, activity, shareholder structure).
3. Compute the tax under both scenarios, using the rates in force for the current year.
4. Add the effect of dividends and personal-level contributions.
5. Factor in foreseeable growth and the risk of exceeding the ceiling.
6. Reassess every year — a choice that is right today may become suboptimal after a legislative change.

The decision is not permanent: the company may switch between regimes at the start of the tax year, subject to legal conditions. What matters is that the choice is informed and made on the numbers, not out of inertia.

Conclusion

There is no regime that is “better” in absolute terms. The micro-enterprise rewards companies with high margins and low costs through simplicity and predictability. Profit tax favours companies with substantial costs and thin margins, taxing only the real gain. The key is analysis based on your company’s real numbers, updated each tax year.

If you would like a concrete comparison for your company, using the rates and thresholds in force in 2026, the Conta Fiscal team in Cluj-Napoca will run the analysis and recommend the optimal regime. Contact us for a discussion tailored to your situation.

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