Situation: A Romanian company, paying income tax on microenterprises, paying VAT, intends to pay to its 3 employees a subscription for medical rehabilitation in a specialized clinic. What is the tax and accounting treatment of these expenses?
Solution:
Due to the amendments made to the Tax Code by OG 16/2022, as of January 1, 2023, according to the provisions of Article 76, paragraph (4^1) of the Tax Code, a cumulative monthly non-taxable limit of 33% of the employee’s basic salary is introduced for the following income that employers may grant:
- a) additional benefits received by employees under the mobility clause according to the law, other than those referred to in paragraph (2) letter k), within the limit of 2.5 times the legal level established for the delegation/removal allowance, by Government decision, for the staff of public authorities and institutions;
- b) the value of the food provided by the employer for its own employees, natural persons earning income from wages or equivalent to wages, in situations other than that provided for in paragraph (4) letter c), 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 in which the natural person works as a teleworker or home worker or is on rest/medical/leave of absence is not taken into account when establishing the monthly non-taxable level . Food means food prepared in 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 rent for accommodation/living quarters made available by employers to their employees, individuals who earn income from wages or equivalent to wages, as provided for in the employment contract or internal regulations, up to a non-taxable level of 20% of the basic gross national minimum wage guaranteed in payment/month/person, under the following conditions:
(i) the employee or his/her spouse does not own or use a dwelling in the locality where he/she works;
(ii) the accommodation/living space is located in the employee’s own premises, including hotels or in a building rented for this purpose from a third party by the employer;
(iii) the rental contract between the employer and the third party is concluded in accordance with the law;
(iv) the non-taxable level 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 own declaration.
When determining the level of 20% of the gross minimum basic salary per country guaranteed in payment, the lowest value of the gross minimum salary per country, in force in the month for which the advantages are granted, is taken into account. The verification of the fulfillment of the conditions is carried out on the basis of the supporting documents and is the responsibility of the employer;
- d) the consideration of tourist and/or treatment services, including transport, during the leave period, for own employees and their family members, granted by the employer, as stipulated in the employment contract, the internal regulations, or received on the basis of certain laws special and/or financed from the budget, within the limit of an annual level , for each employee, representing the level of an average gross salary used to base the state social insurance budget for the year in which they were granted;
- e) contributions to an optional pension fund according to Law no. 204/2006, with subsequent amendments and additions, and those representing contributions to optional pension schemes, qualified as such in accordance with the legislation on optional pensions by the Financial Supervisory Authority, administered by authorized entities established in member states of the European Union or belonging of the European Economic Area, borne by the employer for its own employees, within the limit of 400 euros per year for each person;
- f) voluntary health insurance premiums, as well as medical services provided in the form of a subscription, borne by the employer for its own employees, so that the annual equivalent in lei of 400 euros for each person is not exceeded;
- g) the sums granted to employees who carry out teleworking activities to support utility expenses at the place where the employees carry out their activity, such as electricity, heating, water and data subscriptions, and the purchase of office furniture and equipment, within the limits established by employer through the employment contract or the internal regulation, within the limit of a monthly level of 400 lei corresponding to the number of days in the month in which the natural person carries out telework activity. The amounts are granted without the need to present supporting documents.
- h) the value of subscriptions for the use of sports facilities in order to practice sports and physical education for maintenance, prophylactic or therapeutic purposes offered by suppliers whose activities are included in CAEN codes 9311, 9312 or 9313, as well as the value of subscriptions, offered by the same supplier that acts in its own name or as an intermediary, which includes both medical services and the right to use the sports facilities, in order to practice sports and physical education for maintenance, prophylactic or therapeutic purposes, supported by the employer for its own employees, within the limit the equivalent in lei of 400 euros annually for each person.
The order in which the incomes referred to in Article 76 paragraph (4^1) letter a)-h) are included in the monthly level of not more than 33% of the basic salary corresponding to the job held shall be determined by the employer..
Thus, in view of the above, the company can pay for the employees’ medical rehabilitation subscription, which it pays for them to a specialized clinic.
Regarding the employee’s obligations, the non-taxable income is 400 euro per year and 33% of the basic salary, and anything above this limit is considered a salary benefit for which income tax and salary contributions are due.
If the medical subscription is borne by the employer, we have the following accounting records:
% = 401
6458 the amount to be settled (provided that the whole amount is not settled)
461 amount not settled
401 = 5121/5311 full payment of the invoice
5121/5311= 461 collection of the consideration from the employee
Legal basis:
– OMFP 1802/2014 approving the Accounting Regulations
– Fiscal Code (approved by Law no.227/2015, published in MO no.688 of 10.09.2015), with subsequent amendments and additions;
– Methodological Norms for the application of the Fiscal Code (approved by HG no.1/2016).