Newsletter 11/2017 - Changes to the Tax Code - Income tax and SSC

Income tax

• The general tax rate on personal income tax is reduced from 16% to 10%.
• In case of tax prepayments withheld by income payers (e.g. for copyright income), the rate drops from 10% to 7%.
• The amounts of personal deductions will change and they will apply for gross earnings of up to 3,600 lei (previously 3,000 lei).
• For income from unidentified sources, the tax remains 16%.

Social Security Contribution (SSC)

• The contribution currently paid by the employee / taxpayer at a rate of 10.5% and by the employer at 15.8%, is moved from 2018 entirely to the employee / taxpayer at a rate of 25%, for normal work conditions. Employer's contribution remains as a rate of 4% for particular work conditions and 8% for special work conditions.
• In case of wages or similar types of income, the SSC applies to the gross income.
• The computation and withholding of the SSC will continue to be the responsibility of the employer, and the related tax return remains D112.
• For the income from independent activities, the monthly SSC applies to the income chosen by the taxpayer, which cannot be less than the gross minimum wage in force in that month (which in 2018 is expected to be 1,900 lei).
• Individuals who derive income from independent activities are required to submit, by January 31 of each year or within 30 days of the receipt of income, a statement for the chosen income for which SSC is due. The contribution will be determined by the tax authorities through a tax notification, and the payment will be made quarterly by the 25^th of the last month of the quarter.

Health Social Security Contribution (HSSC)

• The contribution which is currently paid by the employee / taxpayer at a 5.5% rate and by the employer at 5.2%, is moved from 2018 entirely to the employee / taxpayer at a rate of 10%.
• In the case of income from wages or similar, the rate applies to the gross income.
• The obligation to compute and withhold HSSC remains with the employer, and the related tax return remains D112.
• In the case of categories of income other than wages (independent activities, investment, rental, other sources, agricultural activities), HSSC is due if, during a tax year, the total income from these categories has a value of at least 12 gross minimum wages.
• The HSSC's monthly tax base for non-wage earnings is the country's gross minimum wage.
• The individuals who exceed the above limit, as per the earnings made in the previous year, are required to file a statement in this respect by January 31^st of each year or in 30 days after the receipt of income. The contribution will be computed by the tax authorities through a tax notification, and the payment will be made quarterly by the 25^th of the last month of the quarter.

Work Assurance Contribution (WAC)

• Work Assurance Contribution is a new contribution that aims to replace several low-value contributions: contribution for holidays and health benefits, unemployment contribution, labor accident contribution and guarantee fund for wage claims.
• WAC is due exclusively by the employer for wages and similar income at a 2.25% rate.
• It applies to gross wage earnings.
• The computation and payment of the contribution are to be made by the employer and the tax return will be D112.
• Please note that the disability fund provided at art. 78 of Law 448/2006 it is not included in the WAC, as this fund is not regulated by the Tax Code. Thus, there are no legislative changes to the disability fund which is due in addition to the WAC.

The requirement to negotiate the employment contracts

• GEO 82/2017 published on 16.11.2017 in the Official Gazette no. 902 provides a requirement to negotiate the employment contracts for the implementation of GEO 79/2017.
• Thus, for the organizations where there is no collective labor contract it is required to initiate collective negotiations.
• At organizations where a collective labor contract exists, it is required for collective negotiations of the addendums to the employment contracts and the collective agreements to take place.
• These negotiations will take place between November 20 and December 20, 2017.

Assistance Boscolo&

Partners

• Our offices are available to make wage simulations and comparable computations, to help you get a better understanding of the impact these legislative changes have on your business.