The Order of the Minister of Finance (MF) no.1528 on the establishment of the procedure for granting tax facilities in the field of construction was published in the Official Gazette (Part I) no.661 of 1 July 2022.
We mention that the provisions of the normative act apply starting with the revenues related to June 2022.
Thus, according to the new regulations, individuals who earn income from salaries and similar to salaries provided for in Article 76 paragraph (1) – (3) of Law no.227/2015 on the Tax Code (salaries, income similar to salaries, benefits of a salary nature), in the construction sector, benefit from tax exemption if the conditions provided for in Article 60 paragraph 5 of the Tax Code are cumulatively met.
The tax facilities for the construction sector are the following:
a) exemption from income tax on income from wages and salaries;
b) reduction of the social security contribution rate, for income from salaries and assimilated to salaries;
c) exemption from the payment of the social security contribution for income from wages and salaries;
d) reduction of the labour insurance contribution to the level of the contribution that is paid to the Guarantee Fund for the payment of salary claims established under Law no.200/2006 on the establishment and use of the Guarantee Fund for the payment of salary claims, as subsequently amended;
e) exemption from the payment of social security contributions due by employers, in the case of special working conditions or special working conditions.
Individuals earning income from wages and salaries from employers engaged in construction activities who meet the conditions set out in Article 60 point 5 of the Tax Code may opt for the payment of the 3.75% contribution due to the privately administered pension fund.
The option is submitted in writing to the employer, who withholds the corresponding contribution according to the legal provisions starting with the income of the month following the month in which the option is registered.
It is important to specify that the tax facilities are granted for the activity carried out in Romania, including individuals seconded on the territory of Romania, if the income payer to whom they are seconded carries out activities in the construction sector and meets the conditions provided for in Article 60 point 5 of the Tax Code.
Tax facilities are not granted to individuals who are seconded outside Romania.
Condition regarding the share of turnover:
In order to apply the tax facilities, employers of natural persons must achieve turnover from the activities mentioned in Article 60 point 5 letter a) of the Tax Code and other activities specific to the construction sector within the limit of at least 80% of the total turnover.
We remind you of the specific activities in the field of construction, provided for in article 60 point 5 letter a) of the Fiscal Code:
- construction activity defined in CAEN code 41.42.43 – section F – Construction;
- the fields of production of building materials, defined by the following CAEN codes:
2312 – Processing and shaping of flat glass;
2331 – Manufacture of ceramic tiles and flags;
2332 – Manufacture of bricks, tiles and other baked clay building products;
2361 – Manufacture of concrete construction products;
2362 – Manufacture of plaster products for construction purposes;
2363 – Manufacture of concrete;
2364 – Manufacture of mortar;
2369 – Manufacture of other articles of concrete, cement and plaster;
2370 – Cutting, shaping and finishing of stone;
2223 – Manufacture of plastic building products;
1623 – Manufacture of other carpentry and joinery products;
2512 – Manufacture of metal doors and windows;
2511 – Manufacture of structural metalwork and parts thereof;
0811 – Quarrying of ornamental and building stone, limestone, gypsum, chalk and slate;
0812 – Quarrying of gravel and sand;
2351 – Manufacture of cement;
2352 – Manufacture of lime and plaster;
2399 – Manufacture of other non-metallic mineral products n.e.c.;
- 711 – Architectural, engineering and technical consulting activities;
Construction-specific activities include routine and/or periodic road maintenance works, as defined in the Regulation on maintenance and repair of public roads Ind AND 554-2002.
In the case of newly established employers, i.e. registered in the trade register/tax registered since January of the current year, the turnover from the activities referred to in Article 60 point 5 letter a) of the Tax Code and other activities specific to the construction sector, as well as the total turnover is calculated cumulatively from the beginning of the year or from the month of establishment, as the case may be, up to and including the month in which the exemption applies, hereinafter referred to as the principle of newly established employers.
As regards employers existing on 1 January of each year, the basis for calculating the turnover of the activities referred to in Article 60 point 5 letter a) of the Tax Code and other activities specific to the construction sector, as well as the total turnover, cumulated for the previous tax year, are considered. If the minimum limit of 80% is not achieved, the principle of newly established employers provided for in paragraph (3) shall apply.
To determine the percentage of 80% of the total turnover, the indicators “Total turnover” and “Turnover actually achieved from construction activity” are calculated as follows:
1. The “Total turnover” achieved cumulatively since the beginning of the year, including the reporting month, shall be completed by the sum of the cumulative revenue from the beginning of the year to the end of the reporting month, achieved from the sale of products and the provision of services, to which:
a) add, cumulatively from the beginning of the year up to and including the reporting month, the amounts representing:
(i) income from operating subsidies related to net turnover, registered in the accounts;
(ii) the monthly credit balances before transfer to the profit and loss account of income relating to the cost of stocks of goods and services in the course of completion, registered in the accounts at the end of the reporting months in which the credit balance is registered ;
(iii) income from the production of tangible fixed assets and the production of investment property, registered in the accounts;
b) deduct, cumulatively from the beginning of the year up to and including the reporting month, the amounts representing the monthly debit balances before the transfer to the profit and loss account of income relating to the cost of stocks of goods and services in the course of completion, registered in the accounts at the end of the reporting months in which the debit balance is registered .
2. “Turnover actually generated from construction activity” shall be completed by companies carrying out one or more activities classified under the CAEN codes referred to in Article 60 point 5 letter a) of the Tax Code, with the turnover actually generated from the activities carried out under the CAEN codes referred to in Article 60 point 5 letter a) of the Tax Code, respectively with the sum of the cumulative income from the beginning of the year to the end of the reporting month, from the sale of products and the provision of services, without taking into account, cumulatively from the beginning of the year to the end of the reporting month, the income from royalties, management leases and rents, of which:
- a) add, cumulatively from the beginning of the year up to and including the reporting month, the amounts representing:
(i) income from operating subsidies related to net turnover, registered in the accounts;
(ii) the monthly credit balances before transfer to the profit and loss account of income relating to the cost of stocks of goods and services in the course of completion, registered in the accounts at the end of the reporting months in which the credit balance is registered ;
(iii) income from the production of tangible fixed assets and the production of investment property, registered in the accounts;
b) deduct, cumulatively from the beginning of the year up to and including the reporting month, the amounts representing the monthly debit balances before the transfer to the profit and loss account of income relating to the cost of stocks of goods and services in the course of completion, registered in the accounts at the end of the reporting months in which the debit balance is registered .
3. When determining the turnover actually achieved from the construction activity according to Article 60 point 5 of the Tax Code, for determining the income from the sale of products, the income from the sale of finished products, semi-finished products, residual products and goods, which are obtained from own production, shall be taken into account. Income from the sale of products purchased for resale is not taken into account.
4. The turnover taken into account for the application of the facilities is the turnover achieved on the basis of a contract or order, from activities falling under the CAEN codes provided for in Article 60 point 5 letter a) of the Fiscal Code, and covers, in the case of execution contracts, labour, materials, machinery, transport, equipment, equipment and other necessary ancillary activities. Turnover includes production carried out and not invoiced.
1. The turnover taken into account for the application of the facilities may also refer to other types of contracts and specific activities intended for the construction sector, such as service and supply contracts.
2. In determining the “Total turnover” and the “Turnover actually achieved from construction activity”, account shall be taken of revenue registered in the accounts in accordance with the applicable accounting regulations.
The share of the turnover from the activities referred to in Article 60 point 5 of the Tax Code in the total turnover is calculated as the ratio between the amount resulting from the calculation made for the determination of the indicator “Turnover actually achieved from construction activity” and the amount resulting from the calculation made for the determination of the indicator “Total turnover”, multiplied by 100.
To determine the percentage of at least 80% of the total turnover, which is a condition for granting tax relief in the construction sector, the reference is made to the calendar year.
The calculation of the indicator “Turnover actually achieved from construction activity” is carried out for the entire activity carried out by the employer on the territory of Romania from the activities referred to in Article 60 point 5 of the Tax Code, including from the employer’s branches, subsidiaries or working points in Romania.
For determining the percentage of 80% of the total turnover, when calculating the turnover actually achieved from the construction activity, the employers take into account only the income from the activity carried out on the territory of Romania. Revenues from construction activity outside the territory of Romania shall be taken into account only for the calculation of the total turnover from the entire activity.
Turnover is calculated, in the reporting month, under the conditions that employers carrying out one or more activities classified under the CAEN codes provided for in Article 60 point 5 of the Fiscal Code actually carry out activities related to the CAEN codes provided for in Article 60 point 5 of the Fiscal Code.
For the application of tax facilities in the field of construction, employers carrying out activities related to at least one of the CAEN codes provided for in Article 60 point 5 letter a) of the Tax Code shall proceed as follows:
In the case of employers existing on 1 January of each year:
a) the ratio of “Turnover actually achieved from construction activity” to “Total turnover” for the previous year is calculated;
b) if the percentage resulting from the calculation of the ratio in point a) is at least 80% of the “Total turnover”, the tax relief shall be granted for the duration of the current year in compliance with the condition laid down in Article 60 point 5 a) of the Tax Code for the entire period of application of the tax relief;
c) if the percentage resulting from the calculation of the ratio in point a) is up to 80% of the “Total turnover”, the indicators “Turnover actually achieved from construction activity” and “Total turnover” shall be determined for the current year, according to the principle of newly established employers;
d) in order to benefit from the tax facilities, in the case of c), the ratio between the “Turnover actually achieved from construction activity” and the “Total turnover” must be at least 80%.
In the case of newly established employers:
a) the indicators “Turnover actually derived from construction activity” and “Total turnover” shall be calculated cumulatively from the beginning of the year or from the month of establishment, as the case may be, up to and including the month in which the exemption applies;
b) in order to benefit from the tax relief, the ratio between the “Turnover actually achieved from construction activity” and the “Total turnover” must be at least 80%.
With regard to the activities related to CAEN code 711, the income taken into account in determining the indicator “Turnover from construction activity” is that obtained from the activities that fall within the fields provided for in the CAEN codes listed in Article 60 point 5 letter a) of the Fiscal Code.
Gross salary condition:
According to Order 1528/2022, the condition provided for in Article 60 point 5 letter c) of the Fiscal Code, regarding the gross salary, is considered fulfilled as follows:
a) in the case of individual full-time employment contracts, concluded according to the law, the gross monthly income from salaries and assimilated salaries is calculated at a gross salary for 8 working hours/day of at least 3,000 lei per month. The minimum gross national wage of 3,000 lei per month is set in proportion to the gross basic earnings for an average working time of 167,333 hours per month. For employees who have part-time employment contracts concluded in accordance with the law, tax relief is granted only if the gross basic earnings are set in proportion to the gross basic earnings for a normal working day of 8 hours/day;
b) in the case of legal relationships generating income from wages and salaries, other than individual employment contracts, i.e. management contracts, agency contracts and others, concluded in accordance with the law, for which the gross monthly income is not calculated at a gross salary for 8 hours of work/day of at least 3,000 lei per month, tax benefits are granted only if the gross monthly income is at least equal to 3,000 lei;
c) in the case of internship contracts, concluded according to the Law no.176/2018 on internship, with subsequent completions, the tax facilities are granted only if the internship allowance is established proportionally to a gross salary for 8 hours of work/day of at least 3,000 lei per month;
d) in the case of apprenticeship contracts, concluded according to the law, the tax facilities are granted only if the basic monthly salary, provided for in the apprenticeship contract, is established proportionally to a gross salary for 8 working hours/day of at least 3,000 lei per month;
e) if an individual earns income on the basis of more than one legal relationship generating income from wages and similar to wages, such as individual employment contract, mandate contract, management contract and the like, concluded according to the law, in the same month, with the same employer, in order to grant tax benefits, it is first verified whether each legal relationship complies with the condition provided for in Article 60 point 5 letter c) first sentence of the Tax Code, namely whether the gross income is calculated at a gross salary for 8 hours of work/day of at least 3. 000 lei per month, in the case of individual employment contracts, or if the gross monthly income is at least equal to 3,000 lei, in the case of other types of contracts. For the granting of tax relief, income from legal relationships that meet the 3,000 lei reporting condition is cumulated. In this case, the tax benefits are granted for income from salaries and similar salaries that do not exceed the threshold provided for in Article 60 point 5 letter c) of the Tax Code. For the part that exceeds this ceiling, tax benefits are not granted.
It is important to note that, for monthly income from salaries and assimilated salaries, made under an individual employment contract, less than 3,000 lei/month, tax benefits are granted only if the minimum gross basic salary per country guaranteed in payment, not including allowances, bonuses and other allowances, is at least 3,000 lei per month, for an average work schedule of 167,333 hours per month.
Legal basis:
-MF Order 1528/2022 on the establishment of the procedure for granting tax relief in the field of construction;
-Fiscal Code (approved by Law no.227/2015, published in MO no.688 of 10.09.2015), as amended and supplemented;
-Methodological Norms for the application of the Tax Code (approved by HG no.1/2016).