Finance Minister explains key proposed 2027 tax policy changes on income tax

Minister of Finance Victoria Belous today presented the main proposed changes to the 2027 tax policy regarding income tax. The provisions concern the taxation of legal entities and individuals engaged in entrepreneurial activity, the taxation of individuals, and the taxation of non-residents.

Thus, regarding the taxation of legal entities and individuals engaged in entrepreneurial activity, the main changes concern increasing the income tax on the profits of peasant farms, increasing the income tax for the financial and insurance sector, extending the 0% rate for undistributed profits, and eliminating certain income tax exemptions.

1. Increase of income tax on the profits of peasant farms (GȚ)

In this respect, it is proposed to raise the income tax rate from 7% to 12%. “The goal is to apply equal tax treatment for peasant farms, sole proprietorships, and labor taxation,” explained Victoria Belous.

2. Increase of income tax for the financial and insurance sector

For the 2027 tax year, the income tax rate for financial and insurance activities (section K  CAEM) will increase from 12% to 18%. The measure aims to tap the tax potential of the sector and create additional revenues to finance public expenditure and development priorities.

3. Extension of the 0% rate for undistributed profits

It is proposed to extend the application of the 0% rate for reinvested profit until 2029 (currently, the facility is valid for 2023–2026). At the same time, the threshold for turnover or asset value will increase from 100 million lei to 200 million lei so that more companies can benefit from this facility. The measure is intended to stimulate investment and business development.

4. Changing the conditions for applying the 4% tax for those using the IVAO regime

Currently, taxpayers may apply the 4% rate if consulting revenues account for less than 60% of sales revenues. It is proposed to reduce this threshold to 25%. Thus, if consulting revenues exceed 25% of total sales revenues, the standard 12% rate will apply.

5. Elimination of certain income tax exemptions

The draft proposes eliminating income tax exemptions for savings and loan associations, trade unions and employers’ organizations, and private educational institutions.

The Minister of Finance emphasized that the purpose of these measures is to broaden the tax base, reduce tax incentives, and ensure uniform tax treatment. Private educational institutions will pay income tax at a rate of 12%, even if they have non-profit organization status.

In the area of taxation of individuals, the measures concern increasing the personal allowance, amending the rules on the “primary residence,” and revising the taxation of investment income.

1. Increase of the personal exemption

The annual personal exemption will increase from 29,700 lei to 40,000 lei. The measure aims to reduce the tax burden and increase the disposable income of the population.

2. Amending the rules on the “primary residence”

Individuals will be able to demonstrate that a property is their primary residence either by having their registered domicile there for at least 3 years or by showing that it was their only dwelling during the same period. The change facilitates the application of the tax exemption on the sale of the residence.

3. Revision of the taxation of investment income

The following changes are proposed: capital gains will be fully taxed at 12% (and not only 50% of the gain); the dividend tax will increase from 6% to 8%; monetary donations granted by economic agents to individuals will be taxed at 12% instead of 6%.

Victoria Belous noted that the purpose of the measure is to simplify the system and apply more uniform tax treatment for different types of income.

4. Broadening the tax base

In this area, it is proposed to reduce the number of tax-exempt income types in order to ensure a fairer and more easily administered tax system.

The following will become taxable:


	
royalty income earned by individuals aged 60 and over in the fields of literature, art, and science;
	
winnings from lotteries and sports betting exceeding 100 lei for each win;
	
prizes from promotional campaigns exceeding 1,000 lei for each win.


5. Amending the rules on capital gains

The 50% reduction applied in calculating capital gains will be abolished. The taxable gain will represent the difference between the sale price and the tax value of the asset.

When determining the tax value, repair expenses may also be included, provided they are supported by a tax invoice and proof of payment.

Also, the obligation to calculate and declare capital gains will lie with the individual, and the legal entity will no longer be required to withhold tax in advance in such cases.

In the area of taxation of non-residents, it is proposed to apply a 12% rate to most income paid to non-resident individuals and legal entities and to apply an 8% rate to dividends paid to non-residents.

At the same time, the list of taxable income received by non-residents will be expanded by including assets received as gifts or inheritance. The measures aim to ensure fair tax treatment between residents and non-residents, the Minister of Finance noted.

The tax policy draft was presented today by Prime Minister Vasile Tofan and submitted for public consultation.