In the Official Gazette (Part I) no. 607 of 3 July 2023 was published the Order of the Ministry of Finance no. 2044/2023 amending and supplementing the Annex to the Order of the Minister of Finance no. 1528/2022 on establishing the procedure for granting tax relief in the field of construction, applicable from the date of publication.
Thus, the recently approved document brings some useful clarifications in the application of tax facilities in the field of construction.
According to the approval report that accompanied the order in its draft form, the following aspects are specified:
– clarifications are provided for situations in which, although the gross salary is at least equal to the minimum gross basic salary of 4,000 lei, the employee earns less than 4,000 lei per month from wages and salaries; thus, in situations in which the gross monthly income is less than 4,000 lei, the gross monthly income is less than 4,000 lei. 000 lei per month, it is stipulated that the facilities are granted only if the condition is met that they are calculated on a gross salary at least equal to the minimum gross basic salary in the country established in money, not including allowances, bonuses and other allowances, of at least 4,000 lei per month, for an average work schedule of 165,333 hours per month;
– is correlated with the changes made by Government Ordinance 16/2022 – granting the facilities only to individuals who obtain income from salaries and similar to salaries made under individual employment contracts; changing the limit of gross monthly income up to which the facilities are granted, namely from 30,000 lei monthly to 10. 000 lei per month; revision of the condition relating to the calculation of the turnover, in the sense that the reporting takes into account only information/data from the current year; modification of the method of determining the share of the turnover actually achieved from the construction activity in the total turnover, by referring, in the case of both indicators, to the activity carried out on the Romanian territory;
– correlates with the changes brought by the URGENT ORDINANCE 168/2022 – starting from 1 January 2023, for the construction sector, the minimum gross basic salary per country guaranteed in payment is 4,000 lei per month; the gross monthly income for which the exemption applies is calculated at a gross salary for eight hours of work/day of at least 4,000 lei per month.
More specifically, according to the new regulations, individuals, for income from salaries and similar salaries provided for in Article 76, paragraph (1)-(3) of Law no.227/2015 on the Tax Code, with subsequent amendments and additions, hereinafter referred to as the Tax Code, for the activity carried out in Romania, based on the individual employment contract, until 31 December 2028 inclusive, in the construction sector, benefit from tax facilities if the conditions provided for in Article 60, paragraph 5 of the Tax Code are cumulatively met.
For employers existing on January 1st of each year, the basis of calculation is considered to be 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, cumulatively achieved for the corresponding period of the current year, including the month in which the exemption applies.
For the purposes of Article 60, point 5 of the Tax Code, employer means the natural or legal person who carries out the activities corresponding to the CAEN codes referred to in Article 60, point 5, letter a) of the Tax Code, cumulatively fulfils the conditions for granting tax relief and may, according to the law, conclude individual employment contracts.
The new law specifies that the granting of tax relief is the responsibility of the employer/income payer.
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.
In order to determine the percentage of 80% of the total turnover, when calculating the turnover actually achieved from the construction activity, employers shall take into account only the income from the construction activity carried out on the territory of Romania. Income from the entire activity carried out on the territory of Romania will be taken into account for the calculation of the total turnover.
For the purposes of this procedure, the activity carried out on the territory of Romania means the activity actually carried out in Romania for the purpose of producing products and providing services, regardless of the residence status of the beneficiaries.
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 between the “Turnover actually achieved from construction activity” and the “Total turnover” determined in accordance with Article 4, cumulated for the corresponding period of the current year, including the month in which the exemption applies, shall be calculated;
b) if the percentage resulting from the calculation of the ratio in point a) is at least 80% of the “Total turnover” determined in accordance with Article 4 point 1, the tax relief shall be granted for the duration of the current year, subject to the condition laid down in Article 60 point 5 letter a) of the Tax Code for the entire period of application of the tax relief;
- in the case of newly established employers:
a) the indicators “Turnover actually derived from construction activity” and “Total turnover” determined in accordance with Article 4 shall be calculated cumulatively from the date of registration, 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” determined according to point a) must be at least 80%.”
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 4,000 lei per month.
The minimum gross national wage of 4,000 lei per month is set in proportion to the gross basic earnings for an average working time of 165,333 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 monthly income from wages and salaries is calculated in proportion to the gross basic wage for a normal working day of 8 hours/day;
b) in the case where a natural person earns income on the basis of two or more individual employment contracts, concluded in accordance with the law, in the same month, with the same employer, in order to grant tax benefits, it is first verified whether each individual employment contract complies with the condition laid down 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 minimum 4. 000 lei per month, in the case of a full-time individual employment contract, or if the gross monthly income is calculated in proportion to the gross salary for a normal work schedule of 8 hours/day, in the case of a part-time individual employment contract. For the granting of tax relief, income from individual employment contracts that meet the 4,000 lei reporting requirement is aggregated. 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 limit , tax benefits are not granted.
For gross monthly income from salaries and assimilated salaries, made on the basis of an individual employment contract, less than 4,000 lei/month, tax benefits are granted only if the condition is met that they are calculated on a gross salary at least equal to the minimum gross basic salary per country guaranteed in payment established in money, without including allowances, bonuses and other allowances, of at least 4,000 lei per month, for an average work schedule of 165.333 hours per month.
Legal basis:
– MF Order no. 2044/2023 amending and supplementing the Annex to the Order of the Minister of Finance no. 1528/2022 establishing 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.