04 January 2023
Individual income tax and social security
Impact: High
Summary
Law No. 370/2022 approving Government Ordinance No 16/2022 (GO 16/22) – that amends and supplements the Law No 227/2017 (Tax Code) -, repealing certain regulatory acts and other financial and fiscal measures and making amendments to GO 16/22, was published. The amendments apply as of 1 January 2023.
The Detail
Determining the turnover for facilities specific to construction industry
Changes are made to the way the turnover is calculated in order to implement the construction industry facility. To determine the share of the turnover (of 80%) achieved from construction activity out of the total turnover, consider only the revenue from construction activity carried out on the territory of Romania, while the total turnover includes the revenue from all activity carried out on the territory of Romania. Activity carried out on the Romanian territory means activity carried out in Romania for the purpose of making products and providing services. Thus, for the calculation of the total turnover, the activity carried out abroad is excluded; previously also the activity carried out abroad was included in the total turnover.
For newly established employers, i.e., employers registered with the trade register/registered for tax purposes during the year, turnover shall be calculated cumulatively from the date of registration, including the month in which the exemption applies.
For existing employers on 1 January of each year, turnover shall be calculated cumulatively for the corresponding period of the current year, including the month in which the exemption applies.
The provisions related to the flat rate/deduction of 40% for rental income and income from intellectual property rights are eliminated from the article governing the method of assessment and payment of the annual tax due. Thus, an annual tax of 10% is due on taxable income/annual net taxable income by individuals deriving rental income, as well as by those who receive income from intellectual property rights.
This method of calculating the taxable base is not applicable for the taxpayers deriving rental income for which the net annual income is determined under the real system (i.e., gross income minus deductible expenses), income from leasing of agricultural goods from the personal patrimony and income from renting own dwellings for touristic purposes.
For dividends distributed based on interim financial statements prepared during 2022, the dividend tax rate shall be 5%, without any tax recalculation after adjustment on the basis of the annual financial statements for the financial year 2022. The dividend tax rate of 8% is applicable only to dividends distributed after 1 January 2023.
Pension contribution amendments
The annual basis for calculating the pension contribution in the case of individuals who earn self-employment income and income from intellectual property rights, is the taxpayer’s chosen income, which may not be less than:
(a) 12 national minimum gross wages in force at the filing deadline of the annual single tax return – in the case of derived income between 12 and 24 (inclusively) national minimum gross wages;
(b) 24 national minimum gross wages in force at the filing deadline of the annual single tax return – in the case of derived income of more than 24 national minimum gross wages.
Health insurance contribution amendments
The annual basis for calculating the health insurance contribution is of:
(a) 6 national minimum gross wages in force at the filing deadline of the annual single tax return – in the case of derived income between 6 and 12 national minimum gross wages;
(b) 12 national minimum gross wages in force at the filing deadline of the annual single tax return – in the case of derived income between 12 and 24 national minimum gross wages;
(c) 24 national minimum gross wages in force at the filing deadline of the annual single tax return – in the case of derived income of more than 24 national minimum gross wages.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
• Irina Marinescu, Director | irina.marinescu@vialto.com
• Ioana Petric, Manager | ioana.petric@vialto.com
Further information on Vialto Partners can be found here: www.vialtopartners.com
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