Income tax- Changes in the Tax Code

1. Individuals are no longer exempt from income tax for income earned as a result of working on the basis of an individual employment contract with Romanian legal entities carrying out seasonal activities specific to the HoReCA fields.
2. New provisions on the calculation of turnover for the application of tax facilities in the construction sector.

In order to determine the share of the turnover actually achieved from the construction activity in the total turnover, the indicator turnover actually achieved from the construction activity includes only the income from the activity carried out on the territory of Romania and the indicator total turnover includes both the income from the activity carried out on the territory of Romania and outside Romania. The activity carried out in Romania means the activity actually carried out in Romania for the production of products and services.

For newly established employers, i.e. employers registered with the trade register/registered for tax purposes during the year, turnover is calculated cumulatively from the date of registration, including the month in which the exemption applies, and for existing employers on 1 January of each year, turnover is calculated cumulatively for the corresponding period of the current year, including the month in which the exemption applies. This turnover is based on contract or order and covers labour, materials, machinery, transport, equipment, fittings and other ancillary activities. Turnover will include production carried out and not invoiced (applies within 3 days of publication of this ordinance in the Official Gazette).

3. The income tax exemption for the construction sector will no longer apply to income up to 30,000 lei, but up to and including 10,000 lei. The part of the gross monthly income exceeding RON 10,000 is no longer tax-favored (applicable as of August 2022).

The condition of a minimum gross wage for 8 hours of work/day of at least 3,000 lei per month is maintained.

4. New provisions on the calculation of turnover for the application of tax facilities in the agricultural and food production sector

For newly established employers, i.e. employers registered with the trade register/registered for tax purposes from June 2022 onwards, turnover is calculated cumulatively from the date of registration, including the month in which the exemption applies, and for existing employers on 1 June 2022, turnover is calculated cumulatively from the beginning of the year, i.e. cumulatively from the date of registration in the case of those established/registered between the beginning of the year and 1 June 2022, including the month in which the exemption applies. For employers in existence on 1 January of each year after 1 June 2022, turnover shall be calculated cumulatively for the corresponding period of the current year, including the month in which the exemption applies. This turnover is based on a contract, order or other document specific to the agricultural and food industry sector and covers labour, materials, machinery, transport, equipment, facilities. Turnover will include production carried out and not invoiced (applies within 3 days of publication of this ordinance in the Official Gazette).

5. The income tax exemption for the agricultural and food production sector will no longer apply for incomes up to 30,000 lei, but up to 10,000 lei, inclusive. The part of the gross monthly income exceeding RON 10,000 is no longer tax-favored (applicable as of August 2022).

The condition of a minimum gross wage for 8 working hours/day of at least 3,000 lei per month is maintained.

6. The threshold for switching from the income-rule-based tax system to the real system is lowered from €100,000 to €25,000.
7. The additional benefits received by employees under the mobility clause according to the law, other than the additional benefits received by mobile workers provided for in Government Decision No 38/2008 on the organisation of the working time of persons performing mobile road transport activities, for the part exceeding 2.5 times the legal level established for the delegation/detachment allowance, by Government Decision, for the staff of public authorities and institutions, are assimilated to income from salaries.
8. The following monthly accumulated income does not constitute taxable income within the meaning of income tax, subject to the monthly limit of not more than 33% of the basic salary corresponding to the job held:

a) additional benefits received by employees under the mobility clause according to the law, other than those referred to in Article 76 (2) (k), within the limit of 2.5 times the legal level established for the delegation/detachment allowance, by Government decision, for staff of public authorities and institutions;

b) the value of the food provided by the employer for his own employees, natural persons earning income from salaries or assimilated to salaries, in situations other than those in which, according to the legislation in force, it is forbidden to bring food onto the premises, as provided for in the employment contract or in the internal regulations, within the limit of the maximum amount, according to the law, of one meal voucher/person/day, provided for at the date of granting, in accordance with the legislation in force. The number of days in the month during which the individual is teleworking or working from home or on rest/medical/leave of absence shall not be taken into account when determining the monthly non-taxable limit . Food means food prepared in the individual’s own establishments or purchased from specialised establishments. The provisions do not apply to employees who receive meal vouchers in accordance with the legislation in force;

c) accommodation and the cost of rent for accommodation/living quarters made available by employers to their employees who are natural persons earning income from wages or salary-like income, as provided for in the employment contract or internal rules, up to a non-taxable limit of 20% of the guaranteed gross national minimum basic wage/month/person, subject to the following conditions:

1. the employee or his/her spouse does not own or use a dwelling in the locality where he/she works;
2. the accommodation/living space is in the employer’s own premises, including hotels, or in a building rented for this purpose from a third party by the employer;
3. the rental contract between the employer and the third party is concluded in accordance with the law;
4. the non-taxable limit  is granted to one of the spouses, if both spouses work in the same locality, for the same employer or for different employers, on the basis of the spouse’s affidavit. When determining the limit  of 20% of the minimum gross basic wage per country guaranteed in payment, the lowest gross minimum wage per country in force in the month for which the benefits are granted is taken into account. Verification of compliance with the conditions is carried out on the basis of supporting documents and is the responsibility of the employer;

d) the cost of tourist and/or treatment services, including transport, during the holiday period, for own employees and their family members, granted by the employer, as provided for in the employment contract, internal regulations, or received on the basis of special laws and/or financed from the budget, up to an annual limit , for each employee, representing the level of an average gross salary used to base the state social security budget for the year in which they were granted;

e) contributions to a voluntary pension fund according to Law no. 204/2006, as subsequently amended and supplemented, and those representing contributions to voluntary pension schemes, qualified as such in accordance with the legislation on voluntary pensions by the Financial Supervisory Authority, administered by authorised entities established in Member States of the European Union or belonging to the European Economic Area, borne by the employer for its own employees, up to an annual limit of EUR 400 per person;

f) voluntary health insurance premiums, as well as medical services provided in the form of subscriptions, borne by the employer for its own employees, so as not to exceed the equivalent in RON of EUR 400 per person per year;

g) amounts granted to teleworking employees to cover the cost of utilities at the place where the employee works, such as electricity, heating, water and data subscription, and the purchase of office furniture and equipment, within the limits set by the employer in the employment contract or internal rules, up to a monthly limit of 400 lei corresponding to the number of days in the month in which the individual works teleworking. The amounts are granted without the need to present supporting documents.

The order in which the income referred to above is included in the monthly limit  of not more than 33% of the basic salary corresponding to the job held is determined by the employer.”

9. The personal deduction comprises the basic personal deduction and the additional personal deduction and is granted up to the limit of the monthly taxable income earned. The personal deduction is granted for each month of the taxable period only for salary income at the place where the basic function is

The basic personal deduction is granted to individuals who have a gross monthly income of up to 2,000 lei above the level of the basic gross minimum wage per country guaranteed in payment approved by Government decision, in force in the month of income. If more than one value of the gross minimum wage per country is used during the same month, the lowest value of the gross minimum wage per country is taken into account.

The additional personal deduction is granted as follows:

1. 15% of the minimum gross basic wage per country guaranteed in payment for natural persons up to 26 years of age, who earn up to 2,000 lei more than the minimum gross basic wage per country
2. 100 lei per month for each child up to the age of 18, if the child is enrolled in an educational establishment, to a parent who earns income from wages, regardless of the level of such income.
3. In the case of income from the transfer of the use of property, other than rental income and income from the letting for tourist purposes of rooms situated in personally owned dwellings, gross income is taxable income.

New: the 40% deduction on gross income is eliminated.

11. The tax rate on dividends earned by individuals is increased from 5% to 8%.

Income in the form of dividends, including gains from the holding of units in undertakings for collective investment as defined by the relevant legislation, is taxed at a rate of 8% of the amount of the dividend, the tax being final.

12. Income from gambling is taxed by withholding tax. The tax due shall be determined on each payment by applying the following scale of taxation to each gross income received by a participant from an organiser or payer of gaming income:

13. Real estate transfer tax

On the transfer of the right of ownership and its dismemberments, by inter vivos legal acts on buildings of any kind and land related to them, as well as on land of any kind without buildings, taxpayers owe a tax which is calculated on the value of the transaction by applying the following rates:

a) 3% on buildings of any kind and land relating thereto, and on land of any kind without buildings, held for a period of up to and including 3 years;

b) 1% for buildings described in point a) held for more than 3 years.

The rental contract must be registered with the tax authorities

Taxpayers who obtain income from the transfer of the use of their personal property, other than rental income and income from the letting of rooms in their own dwellings for tourism purposes, are obliged to register the contract concluded between the parties, as well as any subsequent changes, with the competent tax authority within 30 days of its conclusion/change.

In the case of tenancy agreements in force on 1 January 2023, the registration of the agreement concluded between the parties and any subsequent changes shall be made with the competent tax authority within 90 days of the date on which the obligation to register arose.

Tax on non-residents’ income

The tax rate on dividend income is 8%.

Some conditions for the application of tax exemptions for dividends paid by a resident to a legal person resident in another Member State of the European Union are also amended.

Source: https://ceccar.ro/ro/