New Changes to the Romanian Fiscal Legislation

Government Decree no. 16/2022 for the amendment and completion of the Fiscal Code, the repeal of some normative acts and other financial-fiscal measures, which was published in the Official Gazette no. 716 of July 15, 2022 (“Government Decree no. 16/2022”) is coming with major news in all areas of taxation, including labor taxation.

Employment income taxation

Along with changes in different areas, such as essential changes on taxes on dividends, taxes on micro-enterprises or the introduction of a new way of calculating taxes on buildings, also the employment income taxation mechanism has suffered considerable adjustments.

While employment taxation centers around salary, national legislation currently defines the concept of “salary” generally as an income in cash and/or in kind received by resident or non-resident individuals, based on an individual employment agreement.

Furthermore, from a salary income tax perspective, the newly adopted legislation introduces amendments to the rules applicable to seasonal employees. More precisely, Government Decree no. 16/2022 repeals the exemption from paying the tax on salary income and salary-related income obtained by natural persons who carry out activities based on an individual employment contract concluded for a period of 12 months, with Romanian legal persons who carry out seasonal activities.

Modifications also focus on specific facilities applied to the construction, food, and agricultural industries. 

Primarily, for the construction sector, a limitation was introduced on the application of the facility regarding the exemption from the payment of income tax, for the incomes made from wages and assimilated to wages, for the activity carried out in Romania. Distinctly from the previous regulation, this facility will expressly apply only to those who have signed an individual employment agreement, a case in which such facility would apply as an exception and thus the possibility of granting it also for income obtained based on other contractual forms would be removed completely (i.e., internship, administration, management).

Moreover, the tax-free income that employers can grant will be capped within the monthly limit of 33% of the employee’s basic salary and under specific conditions listed by the law. Among others, such limitations imply, for example, that the sums granted for employees who carry out telework activities would be restricted at a monthly maximum amount of RON 400 corresponding to the number of days in the month in which the employee carries out telework activity.

Although Government Decree no. 16/2022 establishes different deadlines for the initiation of the applicability of each new rule, for those previously mentioned, it is specified that the initiation date is January 2023. Overall, it seems that these amendments pay particular attention to changes in personal income tax such as social security contributions or benefits paid to workers and are mainly aimed at most workers.