1. The Rationale Behind the Regulation of the Minimum Turnover Tax (IMCA)
The Minimum Turnover Tax (IMCA) applies starting from 1 January 2024 to taxpayers whose turnover exceeds EUR 50 million, and consists of a 1% tax levied on revenues determined through a specific calculation formula—i.e. total revenues, from which certain categories of income, assets under construction, and new accounting depreciations are deducted.
The legal basis is Article 181 of the Fiscal Code, introduced by Law No. 296/2023 on certain fiscal-budgetary measures aimed at ensuring the long-term financial sustainability of Romania, with no expiration date currently provided for its application.
According to the Explanatory Memorandum, the introduction of this minimum taxation mechanism, derived from the corporate income tax, was intended to strengthen financial discipline, given that certain corporate income taxpayers were found to bear a lower fiscal burden than micro-enterprise taxpayers with similar financial indicators, particularly targeting those registering repeated losses.
2. Practical Effects of the IMCA and Proposals for Its Repeal
For taxpayers subject to the IMCA, the fiscal paradigm has shifted dramatically: the focus has moved away from profit itself toward turnover, with the intended purpose of broadening the tax base and eliminating aggressive tax optimization practices through which large corporations report losses year after year while continuing to record significant turnovers.
However, examining the current configuration of the regulation, it appears that the establishment of the IMCA obligation stems from a presumption of bad faith on the part of taxpayers—namely, the artificial generation of losses. This undifferentiated form of taxation, meant to counter sporadic abusive conduct, has instead led to major financial imbalances, inevitably affecting even compliant taxpayers who represent the rule rather than the exception.
For example, one taxpayer who has so far paid IMCA in the amount of approximately RON 6.4 million and estimates an additional RON 1.3 million for the fourth quarter, reported the following year-to-date gross results (before tax) by quarter:
(i) –8.1 million in Q1;
(ii) –12.5 million in Q2;
(iii) –6.5 million in Q3; and
(iv) –17.6 million in Q4.
A first legislative proposal to repeal the IMCA is currently under debate in the Chamber of Deputies, after having been rejected by the Senate. The rationale for this proposal highlights, among other negative effects, the competition risks created by a value-based discrimination between taxpayers with turnovers just below the EUR 50 million threshold and those slightly exceeding it.
Subsequently, the repeal of the IMCA was also included in the initial draft of a law forming part of the second fiscal measures package (Package 2); however, the abrogation provision was no longer included in the version submitted for promulgation, which has in turn been challenged on constitutional grounds.
As a result, the fate of the IMCA remains uncertain, depending on how public debates evolve in the near future.
3. Comparative View: IMCA vs. Corporate Income Tax
The IMCA is a creation of the Romanian legislator. Possible sources of inspiration for this mechanism include both the EU-level regulation on the global minimum tax applicable to multinational enterprise groups and large-scale domestic groups, as well as turnover-based sectoral taxes implemented in certain European countries.
Below is a comparative table outlining the advantages and vulnerabilities of the two tax categories:
| CORPORATE PROFIT TAX | MINIMUM TURNOVER TAX (IMCA) | |
| Tax Base | Taxable profit – essentially correlates with financial performance | Turnover (in fact, tends toward the totality of adjusted revenues) – essentially correlates with the volume of activity |
| Advantages | • Reflects the taxpayer’s actual ability to pay • Greater fiscal flexibility, allowing deductions, loss carryforwards |
• Greater predictability in tax collection for the State • Innovative tool for preventing tax non-compliance |
| Disadvantages | • Vulnerable to aggressive tax optimization | • Disproportionate taxation relative to payment capacity – may cause insolvency for companies with low profit margins • Distorts competition due to the potentially discriminatory nature of the value-based criterion • Possible unconstitutionality issues (e.g. breaches of principles regarding fair distribution of the tax burden, proportionality, and fiscal equity) given the sui generis nature of this form of taxation |
4. Conclusions
Within the current fiscal environment, the IMCA emerges as a mechanism attempting to balance—albeit precariously—the legitimate interests of the State and those of the taxpayer.
On the one hand, the innovative nature of the IMCA provides, at least at first glance, an important lever for the State to combat aggressive tax optimization schemes that could erode the tax base. Given that such concerns mainly target multinational companies, it will be relevant to observe how the special taxation regime for affiliates, also introduced under Package 2, will operate—specifically, whether it will apply concurrently with the IMCA or eventually replace it.
On the other hand, considering the negative feedback from the business community, it would be advisable for the legislator to conduct a thorough assessment—beyond a simplistic analysis of percentages—to determine whether the strengths of overlapping the IMCA with the classic corporate income tax outweigh the vulnerabilities of this regulation, which has been repeatedly criticized as a form of excessive taxation.
Otherwise, the IMCA may lead to the erosion of the competitive and investment climate in Romania, as well as negative effects along the entire commercial distribution chain.