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Gov't is to amend the Tax Code

During the Gov’t sitting from Thursday, October 26th, both minister of finance and minister of labour announced some measures to be implemented starting January 1st, 2018.

Gov’t is to amend the Tax Code through a GEO in one of the next sittings.

Income tax

  • Income tax to be clip from 16% to 10% for wages and other incomes: pensions, rents, interests, agricultural activity, independent income, copyright (including journalists).

Tax on turnover

  • Companies with a turnover below 1 million euros will pay a 1% tax on turnover instead of the current 16% tax on profit. The measure is to encourage the business environment (estimated 450,000 companies).

The minimum gross wage to be increased

  • It will increase from RON 1.450 to RON 1,900.

The social contributions will be reduced by 2% instead of 4%

  • The social contributions will decrease from 39.5% to 37.25%.

  • Of the overall 22.75% contributions paid by the employer, 20% will be transferred to the employee.

  • Out of the gross wage, 35% will be contributions paid by the employer for the employee.

Solidarity tax up to 2.25%

  • The employer will pay a solidarity tax, to be renamed “work-related assurance contribution” and to be increased to 2.25%.

  • After the transfer of 20%, the contributions to be paid by the employer fall to 2.25% and will cover the risk of unemployment, accident, sick leave, salary claims.

Cutting the number of contributions

  • The system will be simplified by cutting the number of contributions from 9 to 3: social security contribution for pension (CAS) paid by the employee, social security for health (CASS) paid by the employee and the work-related assurance contribution to be paid by the employer (2,25%).

  • For the people having independent activities, the level of CAS will be calculated at the level of the minimum wage.

Contributions for special work conditions

  • Pension contributions for special work conditions (CAS) to be clip from 31.3% to 29%.

  • CAS for extremely work conditions drops from 36.3% to 33%.

The tax on the multinational companies’ profit

  • The European directive to combat outsourcing of profits of multinational companies - EU Directive 1164/2016 is to be introduced.

  • A limited interest deduction will be granted, a tax will be introduced for amounts transferred outside the country to multinationals in an attempt to reduce their tax base.

  • Business group transfers to their tax haven subsidiaries will be prevented and no tax benefits will be provided through abusive business arrangements, according to officials.

The share to the pension Pillar II to be clip

  • The share of contributions to the Pensions Pillar II will be cut from 5.1% to 3.7%. The nominal value will not be influenced, according to the labor minister. More exactly, the amount of money paid to the Pension Pillar II will be the same next year, but the decrease as percentage is necessary following the increase of the gross wage by 20%.

New provision on fraud of the VAT

  • Companies will no longer be prosecuted for VAT fraud unless there is material evidence that the agent has come in contact with escapist firms. Now prosecution is started on the basis of a simple suspicion. Thus, it is eliminated the situation where VAT is not deductible because a company had a commercial relationship with the fourth or fifth company on a chain that had created a chain of tax evasion.

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