30 October 2023
Employment Tax
Impact: High
Summary
New amendments of the Law No. 227/2015 (Romanian Fiscal Code) are adopted through the Law No. 296/2023 that was published in the Official Gazette No. 677 on 27 October 2023. The income tax and social security amendments will come into force starting with November 2023, January 2024 and July 2024.
The Detail
Limited income tax exemption and reduced rate of the mandatory pension contribution similarly applicable for software developers, for workers in the constructions sector, as well as food industry and agriculture
Law 296/2023 is limiting the income tax exemption on salary income and income assimilated to salaries up to and including RON 10,000 gross, derived by individuals who carry out software development activities, similar to the ones rendering constructions activities or work in agriculture or the food industry, until 31 December 2028. The exemption is applicable where the employee has the primary workplace.
The part of the gross monthly income exceeding RON 10,000 does not benefit from tax relief.
Additionally, for employees in the construction sector, food industry and agriculture, as well as for employees carrying out software development activities, the mandatory pension contribution will be decreased with the percentage of the contribution for the privately managed pension fund – 2nd Pillar (the decrease is 3.75% currently, however the decrease may be 4.75% as of 1 January 2024). Nonetheless, the employees may opt to maintain the current full pension deductions, by signing an agreement with the employer.
These provisions come into force from the 1st of November 2023.
Elimination of some social security facilities applicable to the employees working in the construction sector, the food industry and agriculture
The exemptions from the payment of the health insurance contribution, the social security contribution for special working conditions and the reduced work insurance contribution are eliminated for the employees deriving salary income in the construction sector, the food industry and agriculture starting from November 2023.
Limitation of the social security facilities applicable to some salary benefits
The value of meal vouchers and holiday vouchers will be introduced into the calculation basis of the health insurance contribution, starting with January 2024. Thus, these benefits remain exempt only from the payment of the pension contribution.
The value of the tourist or/and treatment services, including transport, during the vacation period, for the employees and their family members, are not subject to income tax and social security contributions, within the annual limit provided by the law and the monthly ceiling of 33% of the base salary corresponding to the job occupied, only in case the employees do not benefit also from holiday vouchers.
The health insurance contribution due by the individuals deriving income from independent activities and other private income
The annual calculation basis for the health insurance contribution is equal to the net annual income/gross realised income or the annual income norm, but not exceeding the level of 60 national minimum gross salaries in force at the filing deadline of the annual income tax and social security declaration 212. Annual fiscal losses reported from previous years may not be considered when calculating the health insurance contribution due.
These provisions apply for self-employment income derived from the year 2024 onwards.
Additionally, if individuals derive income from intellectual property rights, rental income, investment income (capital gains, dividends, interest), from agricultural activities, forestry and fish farming, other sources which cumulatively exceed the thresholds of 6, 12 and 24 national minimum gross salaries, the health insurance contribution is also due.
For the purpose of establishing the thresholds of 6, 12 and 24 national minimum gross salaries to which the health contribution rate is applied, the paid income from interest and dividends (net income) will be considered and not the gross value of the interest and dividends, as it was provided before.
Income from unidentified sources
Starting July 2024, any income for which the source cannot be identified by the tax authorities, will be subject to 70% income tax rate (in the previous regulation the rate was 16%) applied to the adjusted taxable base. The tax authorities will issue a tax decision with respect to the income tax and late payment charges due for this income.
New taxable base for income from independent activities realised based on contracts for sports activities
The health contribution due for income from independent activities realised based on contracts for sports activities will be deductible for the calculation of the income tax due starting January 2024.
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
Cristina Cristea
Senior Manager
cristina.c.cristea@vialto.com
Ioana Petric
Manager
ioana. petric@vialto.com
Raluca Stancila
Manager
raluca.stancila@vialto.com
Raluca Ursu
Senior Associate
raluca.ursu@vialto.com
Further information on Vialto Partners can be found here: www.vialtopartners.com