Legislative newsletter 19th of October 2015




• Law no. 227/2015

Law no. 227/2015

Law no. 227 of 08.09.2015, published in the Official Gazette Part I no. 688 of 09.10.2015, regarding the Fiscal Code, and brings the following remarks:

Comment: This code establishes: the legal framework regarding the taxes and compulsory social contributions, which represent revenues of the state budget, local budgets, social security state budget, state budget of the National Social Security Health Insurance Fund, budget for unemployment and guarantee fund for salary payment, taxpayers who are required to pay these taxes and social contributions, calculation method and payment thereof, the modification procedure regarding these taxes and social contributions.

This Code shall enter into force on January 1, 2016. Upon the entry into force of this Code, Law no. 571/2003 regarding the Fiscal Code is repealed.

Among the most significant amendments made by this law, we mention the following:

1. Are introduced definitions for:
a. withholding tax also called retention tax at source and taxes – method of collection of taxes and compulsory social security contributions through which income payers are required by law to calculate, withhold, declare and pay;
b. taxes and compulsory social security contributions withheld or retained at source – those taxes and social security contributions covered in this Code for which income payers have the obligation to apply the method regarding withholding at source or retention at source.

2. Personal exemptions: Income tax from salaries will remain the same, 16%, but personal exemptions for employees are amended. The new Fiscal Code states that the personal exemption is granted to individuals who have a gross monthly income of up to 1,500 lei, inclusive (up to 1,000 lei, inclusive – at present), as follows:

a. for taxpayers who do not have dependents – 300 lei (250 lei at present);
b. for taxpayers with one dependent – 400 lei (350 lei at present);
c. for taxpayers with two dependents – 500 lei (450 lei at present);
d. for taxpayers with three dependents – 600 lei (550 lei at present);
e. for taxpayers with four or more dependents – 800 lei (650 lei at present);

For taxpayers with gross monthly incomes from salaries between 1,501 lei and 3,000 lei, inclusive, personal exemptions are diminishing from those mentioned above and are established by the Order of the Minister of Public Finance.

3. Social expenditures: The share of social expenditures increases from 2%, at present, to a share of 5% of the amount incurred for staff salaries expenses, according with the Labour Code.

4. Daily allowance – It is introduced the possibility to grant the daily allowance also for administrators as provided in the articles of incorporation, administration / mandate contract, directors who work under the mandate contract, in accordance with the law, members of the directorate of the companies managed in two-tier system and of the supervisory board, in accordance with the law, and for managers who carry out their work under the management contract.

5. Gifts, including gift vouchers provided by employers to their employees, and those offered for the benefit of their minor children, for Easter, June 1st, Christmas and similar holidays of other religions, as well as gifts, including gift vouchers , granted to female employees on the occasion of March 8 are non-taxable (within the meaning of income tax), to the extent that their value for each person, given in any occasion listed above, does not exceed 150 lei

6. Contributions to an optional pension fund, according with Law no. 204/2006 and the voluntary health insurance premiums according with Law no. 95/2006, republished, incurred by the employer for the employees, are non-taxable, within the meaning of the income tax, in the limit of 400 euros a year/person.

7. Contributions to an optional pension fund, according with Law no. 204/2006 and the voluntary health insurance premiums according with Law no. 95/2006, republished, incurred by the employees, are deductible from income tax within the limit of 400 euros a year.

8. Costs incurred on behalf of an employee for optional pension plans and costs incurred for voluntary health insurance premiums are deductible for the company within the limit of 400 euro / participant / year for each of the two expenses, and the amounts that exceed this limit are considered salary income

9. The deadline for declaring the start / termination of business – natural, legal person or any other entity for which taxpayers who carry out their activity in Romania and who obtain incomes from salaries and methods similary to salaries from abroad, is obliged to provide information to the relevant fiscal body when the taxpayer starts or terminates the activity, within 30 days from the date of the event (in the current legislation the deadline is within 15 days).

10. PFA (authorized natural person) – It is introduced the compulsory individual contribution to the pension fund in a percentage of 10,5% from the net income of a person. This contribution is capped at an annual threshold of 5 times the average salary or 12 months. This contribution is to be paid even if the authorized natural person is an employee working for an employer.

To qualify for full pension, optionally the authorized natural person can also pay the contribution of 15.8%, which represents the contribution of the employer.

11. VAT – Starting January 1, 2016 the generally applicable quota is of 20%.

Reduced VAT quotas shall apply as follows:
– 9% for medicines, accommodation in the hotel sector, food, restaurant and catering services.
– 5% for books, schoolbooks, magazines and access to cultural or sporting events, access to museums, memorial houses, fairs and exhibitions.

12. The increase of the non-taxable threshold for pension incomes from 1.000 lei to 1.050 lei, and in the next 3 years shall increase with 50 lei/year until reaching the threshold of 1.200 lei;

13. For individuals with incomes from pensions, the monthly calculation base of the CASS ( health insurance contribution) is represented only by the income that exceeds the pension-point value established for the respective fiscal year, eliminating thus the previous threshold of 740 lei;

14. Individuals who do not obtain any income and do not fall within the category of individuals exempted from CASS, owe CASS monthly and must request registration to the competent fiscal authority;

Other amendments made by this Law regard income from property rental, dividend tax, local duties and taxes (taxes on buildings).

Finally, we mention that the current Tax Code brings some changes which shall come into force starting January 2017.