The Government on Wednesday passed a series of measures regarding the tax on SMEs, income tax and social security contributions by amending the Tax Code.
It says in a press statement that in the area of corporate taxation, the emergency ordinance adopted at its meeting on Wednesday revises taxes on microenterprises, which would be subjected to a 1-percent tax on real revenues, and so would do the SMEs deriving revenues of between 500,000 euros and 1,000,000 euros currently paying a 16-percent profit tax.
The ordinance is said to translate into Romania’s legislation the provisions of Directive 2016/1164/ EU combatting tax base erosion and profit shifting.
In the area of mandatory social security contributions, the amendments envisage both a cut in their aggregate shares by two percentage points, from 39.25 percent to 37.25 percent, as well as the reduction of the social security contributions from the nine to three, the pension contributions (CAS) paid for the employees; the healthcare contributions (CASS) paid for the employees, and the employment insurance contribution, paid for by employers.
The transfer of the tax burden on the mandatory social security contributions payable by employers for the employees in case of wage income and similar income is as follows: “CAS and CASS shall be due by individuals, namely employees, including in the case of individual full or part-time employment contracts on which CAS and CASS due may not be less than the level of the social security contributions related to the gross minimum wage in force in the month for which they are due, adjusted for the number of working days in the month in which the contract was active.”
An additional CAS rate of 4 percent and 8 percent, respectively, would be set for hard working conditions, special conditions or other work conditions defined by the law.
“Individuals whose legal capacity is employees under an obligation to pay social security contributions shall pay healthcare contributions (CASS) of 10 percent,” the statement says.
An employment insurance contribution is introduced to the tune of 2.25 percent of the gross pay incumbent on employers.
In the area of income tax, the ordinance provides for the reduction of the flat income tax from 16 percent to 10 percent.
There is an increase from a current 1,500 lei to 1,950 lei, in the future, in the cap on fixed-amount deductions according to the number of persons in care. Another decrease will be from a current 3,000 lei to 3,600 lei in the future in the cap on bracketed deductions.
The employees earning more than 3,600 lei in gross monthly wages would not qualify for personal deductions.
FinMin Misa: MNCs will have to pay taxes in Romania just like they do in other countries
The measures amending the Tax Code are beneficial for both companies and citizens, considering that they will lead to a drop in the share of social security contributions – from 39.25 to 37.25 percent –, to a drop in the number of contributions payable by the employer – from 9 to 3 –, and to the reduction of red tape, that the employer will be held criminally accountable in case he retains social contributions from the employee’s gross salary but does not pay them to the state, and that multinational companies will have to pay taxes in Romania just like they do in other countries, Finance Minister Ionut Misa stated in a press conference held at the end of the Government meeting.
The minister had a message for the multinational companies (MNCs) active in Romania, warning them that they will have to pay taxes just like they do in other countries.
“I’m telling the multinational companies that are trying to avoid the payment of taxes that they will have to respect Romania and pay these taxes just like they do in other countries,” Misa stated.
He emphasised that these measures are beneficial for both citizens and companies.
“These measures are beneficial for both citizens and companies. (…) A lowering of social security contributions from 39.25 percent today to 37.25 starting in 2018 is achieved,” Misa stated.
The Finance Minister emphasised that the number of social security contributions payable by the employer will drop from 9 to 3 in 2018. Misa said the contributions for Pension Pillar I will rise from RON 706 to RON 849 in the case of an average salary. Moreover, the introduction of a 1 percent turnover tax on companies with annual turnovers lower than EUR 1 million will reduce red tape.
“The switch from a 16 percent income tax to a turnover tax of 1 percent will considerably simplify the accounting side, that is why we’ve extended the measure to companies whose annual turnovers are lower than EUR 1 million,” Misa said.
At the same time, the minister warned that a new stipulation will be introduced, according to which the employer will be held criminally accountable in case he retains the social security contributions from the employee’s gross salary but does not pay them to the state.
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