The main modified taxes and fees for companies and PFA and individuals in Romania for 2018
The Government and Parliament have operated in 2017 a series of changes to corporate tax and taxes, which apply in 2018. Some were adopted by the Government and modified by the Parliament on the last one hundred meters, while others have not yet succeeded exchanged by senators and deputies in due time, so that they can be applied from 1 January 2018 today all measures are implemented.
Value added tax remains 19% in 2018. Instead, there are changes to the payment of this tax by VAT paying companies.
The deductible VAT payment mechanism was optionally introduced by the Government in October 2018, with the mandatory application of all VAT paying companies from 1 January 2018.
Finally, Parliament amended the mandatory system and limited it to certain categories of companies: those in bankruptcy and those with certain payment arrears, which must separately open at least one VAT account.
VAT companies that are not subject to the VAT split, VAT system may optionally switch to paid VAT. In 2018, they will benefit from a 5% reduction in the corporate income tax (or micro-enterprise income).
Companies that have a company that applies VAT Split as a supplier have to pay them in separate accounts.
New gross salary 2018: Income Tax and Social Contributions
By Government Emergency Ordinance 79/2017, since 1 January 2018, the Government has moved most of the social contributions from employers to employees, fundamentally changing the structure of gross wages.
Thus, the new fees for employees' salaries will be the following from 1 January 2018:
On the company side:
-Investment insurance for 2.25% work due by natural and legal persons who are or are assimilated to employers.
On the employee's side:
- Social security contribution (CAS) in quota of:
a) 25% due by the natural persons who are employees and by the natural persons for whom there is the obligation to pay the social security contribution, according to the Fiscal Code;
b) 4% due in the case of special working conditions by natural and legal persons who are or are assimilated to employers;
c) 8% due to special conditions of work and other working conditions as provided by Law no. 263/2010 on the unitary pension system, as subsequently amended and supplemented by natural and legal persons who are or are assimilated to employers.
- The Social Insurance Contribution (CASS) in the 10% quota due by natural persons who are employed or for whom there is the obligation to pay the social insurance contribution, according to the Tax Code.
- Income tax - 10% of gross salary.
This reduces the total share of mandatory social contributions by 2 percentage points, from 39.25% to 37.25% and income tax from 16% to 10%. These cuts were introduced by the government to offset the application of the tax to a higher taxable base (gross wage) so that employees do not lose the net, and employers do not pay more for the whole wage.
In this case, firms should increase gross employee wages by about 20% to keep net salaries the same, with approximately the same wage costs through additional labor contracts.
Employees in the IT sector (certain categories), from research and those with disabilities will benefit further from zero tax on the income. This means that the compensatory measure will not be fully covered, and in this case the net salary will decrease by several percentage points if the employers do not increase the wage costs.
Within these contributions, the share for Pillar II pensions is reduced from 5.1% to 3.75%.
Contributions and withholding taxes are withheld and paid to the state by employers.
REVISAL 2018 procedures
By GD no. 905/2017 on the General Register of Employees' Evidence, the Government set the period that employers will have at their disposal to transmit the change in the gross monthly salary in the context of the CAS and CASS relocation from employer to employee starting in 2018.
The document sets as an exception, in the context of the CAS and CASS relocation to the employee, that employers will be able to transmit by 31 March 2018 any change in the gross monthly basic salary, indemnities, bonuses and other supplements produces from the date of entry into force of the Government Decision and until 31 March 2018.
Following March 31, 2018, as a rule, employers will still be required to submit REVISAL changes to the gross monthly gross salary, allowances, bonuses, and other benefits under the individual employment contract or, as the case may be, the collective labor agreement, within 20 working days from the date of its production - the Government underlined.
In the case of newly concluded contracts, they must be forwarded to the REVISAL Registry one day before the employee starts his activity.
The transfer of contributions from the employer to the employee is made on 1 January 2018 in accordance with the new Fiscal Code, the deadline being extended only as regards the obligation to transmit data to REVISAL. The return of the tax burden was not postponed, but only the obligation to communicate it to the Labor Inspectorate.
Minimum wage 2018
Gross national gross salary rose from 1,450 lei to 1,900 lei, from 1 January 2018.
This increase in gross is mainly due to the transfer of social contributions from the employer to the employee, but also by an increase in the net, which implies an increase of the total salary for the company, from 1,783 lei per month in 2017 1,943 lei in 2018, for each minimum salary.
Such a minimum gross salary for 2018 is equivalent to 1,550 lei per month under the conditions of the social installment in 2017, rising to 1,450 lei as a minimum gross salary in 2017.
By raising the gross minimum wage, a whole series of fines are also cited, such as road fines, where a fine increased from 145 lei to 190 lei in 2018 (10% of the minimum wage crude).
Micro-enterprises and tax
The ceiling for taxing the micro-enterprise income tax is increased, from EUR 500,000 to EUR 1 million, turnover. Thus, in 2018, the turnover is 4,659,700 lei for the transfer to the income tax of the micro-enterprise.
Firms falling within this ceiling will pay instead of 16% levy tax a tax on income, 1% if they have at least one employee, and 3% if they have no employees.
Companies with consultancy and management revenue, regardless of their weight in total revenue, have also been introduced into this system. Similarly, firms engaged in gambling, insurance, banking, land use can also enter here if they fall to the EUR 1 million turnover threshold.
In the Senate, by bill, it was proposed that Emergency Ordinance 79/2017 should be amended so that companies with social capital of at least 45,000 lei and at least 2 employees could choose for a 16% profit tax change. The draft is at the Chamber of Deputies, which did not make a decision by the end of 2017. In order to amend the Emergency Ordinance, the bill needs to be adopted by the Chamber. Until then, we have only Government Emergency Ordinance 79/2017, in the form decided by the Government.
Other business changes:
Taxpayers will continue to transfer contributions to pensions, health and unemployment into an account, and VAT, income tax, and income tax on another account. The payment of contributions to pensions, health and unemployment, VAT and income tax and income on the same Treasury account was postponed until July 1, 2018.
Taxpayers will electronically file tax returns for January.
Expenses with interest on loans from associated companies are deductible for amounts up to EUR 200,000. When the loan expense exceeds 200,000 euros, 10% of the difference between income and expenses is deducted. This is where non-taxable earnings are deducted and tax expense, surplus borrowing costs and deductible amounts of tax depreciation are added.
As local taxes, for freight cars with a total authorized weight of at least 12 tonnes, the local tax increases (by approximately 7%).
A number of other local taxes in some localities were announced to be increased for 2018.
Taxation of dividends 2018
The dividend remains 5%.
In addition, another 10% applied to the Gross Minimum Wage Health Benefit (CASS) will be paid if the amount of income from independent and investment activities exceeded 12 minimum wages in the previous year.
For the year 2018, to see if we are in the 12 minimum wage with the value of the dividends, we have to sum up all revenues from independent activities + dividends + rent + other sources obtained "in the previous fiscal year" as stated in paragraph 3 of Art. 170 of the amended Tax Code.
PFA on 2018 and other independent activities
In principle, those who are both employed and earn income as PFA will pay their contribution to pensions (CAS) and health (CASS) and pay as well as income as PFA. Contributions are not, however, calculated on the total PFA income, but only on the minimum wage, diffrent than the salary, where it applies at full value.
PFA, PFI, individual enterprises, liberal professions, agricultural workers, etc. will pay contributions if they obtained in the previous year cumulative net revenues from these activities of at least 12 minimum gross salaries in economy (22,800 lei), as follows:
The pension contribution (PAS) for PFA will be 25%, applied to an income chosen by the taxpayer at least equal to the gross national gross wage (1,900 lei),
Health Contribution (CASS) for PFA will be 10% for the minimum wage (1,900 lei)
Income tax of 10%, regardless of value, is paid for the entire amount.
More specifically, under OUG 79/2017, the monthly basis for calculating the social security contribution for self-employed persons is the income chosen by the taxpayer, which can not be lower than the minimum basic salary in force in the month for which the contribution is due.
Individuals who earn income from self-employed activities from one or more sources of income owe their social security contribution if the following conditions are met, as appropriate:
a) the net income realized in the previous year, excluding social security contributions, based on the number of months of activity during the year, is at least equal to the country's minimum basic salary in force in January of the year for which determines the contribution;
b) the estimated net monthly income to be achieved is at least equal to the minimum gross national salary in force in the month in which they start their activity or the country's minimum basic salary in force in January of the year for which establishes the contribution for those that go from determining the annual net income on the basis of annual income rules to the establishment of annual net income.
c) the monthly value of the income rules obtained by reporting the annual income tax to the number of months of activity during the year following the corrections is at least equal to the country's minimum basic salary in force in January of the year for which establishes the contribution in the case of taxpayers who in the current fiscal year carry out activities imposed on the basis of income rules;
d) the monthly net income realized in the previous year, after deducting from the gross income of the deductible expenses, in relation to the number of months of activity during the year, is at least equal to the level of the minimum gross national salary in force in January of the year for which the contribution is established in the case of taxpayers who derive income from intellectual property rights.
Taxation of rents
Individuals who earn rental income pay a 10% tax from 2018 on a 60% basis of the rent.
A social security contribution (CASS) of 10% applied to the gross minimum wage in economy (means 190 lei per month) is also paid if it has achieved net annual incomes from aggregated self-employment of at least 12 gross minimum wages.
In the case of rents, under the ceiling of 12 gross minimum wages, net rental income is taken into account, means those for which the 40% deduction of the rent has been applied.