Following the evaluations made by the analysts of Coface Romania, through the service Companies Evaluation and Business Information, and by The Chamber of Commerce and Industry Bucharest, the company Ensight Finance is one of the most performant companies in the local market.
As a result, Ensight Finance received the Certificate Excellent Small and Medium Enterprises.
In Romania, only 20% of the companies register low risk, qualifying for the Certificate Excellent SME.
The Fiscal Code was amended again in the last 2 weeks by Law no. 30/2019 regarding the approval of the Government Emergency Ordinance no. 25/2018 (Law 30/2019 was published in the Official Gazette 44 / 17.01.2019). We hereby present below the most important points.
1. From January 1, 2019, the interest deductibility limitshave been increased for corporate income tax purposes. Thus, the excess costsof indebtedness (the difference between borrowing costs and interest revenues)are deductible if they are less than EUR 1,000,000 (instead of EUR 200,000, theold limit), RON equivalent.
The amount exceeding the EUR 1,000,000 ceiling may bededucted up to 30% (instead of 10%) of the following computation basis:revenues minus expenses minus non-taxable revenues plus profit tax, plus theexcess costs of indebtedness, plus tax depreciation.
The non-deductible interest expenses can be carried forwardalso by companies involved in merger or spin-off processes or the successors ofthese companies.
2. Starting April 1, 2019, corporate income tax payers ormicroenterprise tax payers can use the sponsorship tax credit only forsponsorships made to non-profit entities who are listed in a register ofentities for which tax deductions are granted, register organized by ANAF (thenational tax authorities).
3. The above register can contain only the non-profitentities who operate in the area for which they have been set up, who fulfilledtheir declaratory tax obligations, who have no outstanding tax obligationsolder than 90 days, who filed in annual financial statements, who were notdeclared inactive.
4. As of January 20, 2019, the taxation of the income earnedby individuals from transfers of virtual currency was regulated by consideringthe profits from these transactions to be subject to the 10% income tax rate.
5. As from 1 January 2019, in the case where the performeddeliveries cannot be cashed due to the bankruptcy of the beneficiary or as aresult of a reorganization plan, the VAT base may be adjusted from the date ofthe sentence or of the closing judgement regarding the beginning of thebankruptcy procedure.
6. Also with the same date, the VAT rate of 5% can beapplied for the delivery of dwellings in the case of the purchase of severaldwellings by the same individual (so far, the 5% VAT rate was possible only forthe first delivery to an individual).
Starting with January 2019, Government Emergency Ordinance 114/2018 has brought several amendments to the Fiscal Code, out of which the most important concern the construction companies and the treatment of value tickets.
1. Changes regarding the taxation of construction companies
The following fiscal incentives are valid for the period2019-2028 for employees of construction companies / such companies:
– salary tax exemption
– reduced social contribution from 25% to 21.25% (thepublished legislation does not mention explicitly the reduction, so arectification should be expected)
– exemption from health contribution – the employees areinsured for health services without the payment of the contribution
– the employers are exempted for social contribution forparticular working conditions, respectively special working conditions
– reduced work insurance contribution from 2.25% to 0.3375%.
The conditions to be fulfilled by these employees /employers for the application of the incentives are:
a) the employers carry out activities in the constructionsector which include:
(i) construction activity definedby NACE code 41.42.43 – section F – Construction;
(ii) production of buildingmaterials, defined by the following NACE codes: 2312 – Processing and shapingof flat glass; 2331 – Manufacture of ceramic tiles and slabs; 2332 –Manufacture of bricks, tiles and other construction products of burned clay;2361 – Manufacture of concrete products for construction; 2362 – Manufacture ofplaster products for construction; 2363 – Manufacture of concrete; 2364 –Manufacture of mortar; 2369 – Manufacture of other articles of concrete, cementand plaster; 2370 – Cutting, shaping and finishing of stone; 2223 – Manufactureof articles of plastics for construction; 1623 – Manufacture of other builders’carpentry; 2512 – Manufacture of metal doors and windows; 2511 – Manufacture ofmetal structures and parts of metal structures; 0811 – Extraction of ornamentaland building stone, extraction of limestone, gypsum, chalk and slate; 0812 –Gravel and sand extraction; 711 – Architectural, engineering and technicalconsultancy services;
b) the employers achieve the turnover from the aboveactivities within the limit of at least 80% of the total turnover, calculatedcumulatively from the beginning of the year, including the month in which theexemption applies;
c) the salary monthly gross incomes are between 3,000 and30,000 lei per month inclusive and are obtained on the basis of the individuallabor agreement;
d) the exemption is applicable on the basis of furtherinstructions (to be issued) and Declaration 112 represents a declaration on ownresponsibility for the fulfillment of the above conditions.
Separately, for the period 01.01 – 31.12.2019, the minimumgross monthly salary for construction workers (for the above-mentioned areas ofactivity) is of RON 3,000, regardless of the positions held by the respectiveemployees (e.g. accountant or secretary), the new legislation making norestrictions in this regard.
2. The taxation of value tickets
The fiscal treatment of the value tickets granted toemployees has been unified, so that gift tickets, meal tickets, holidayvouchers, nursery vouchers and cultural vouchers are subject to 10% income tax,but they are not included in the computation of social contributions.
3. Extension of the validity of VAT simplification measures
The application of VAT simplification measures was extendeduntil June 30, 2022 for certain operations (such as cereal delivery), as thesupplier issues the invoice without VAT, whereas the buyer registers the VATthrough the reverse charge mechanism.
4. Separately from the above modifications of the FiscalCode, the electrical energy license holders will owe a contribution of 2% fromtheir turnover.
5. Also in addition to the fiscal modifications, the bankinginstitutions will owe a tax on their financial assets in case thequarterly ROBOR (Romanian inter-banking interest rate) will exceed 2%. The taxon the financial assets will be computed by applying quarterly a rate to thefinancial assets of the banking institution as follows: a rate of 0.1 % if thequarterly ROBOR is between 2% and 2.5%; a rate of 0.2 % if the quarterly ROBORis between 2.5% and 3%; a rate of 0.3 % if the quarterly ROBOR is between 3%and 3.5%; a rate of 0.4 % if the quarterly ROBOR is between 3.5% and 4%; a rateof 0.5 % if the quarterly ROBOR is above 4%.
Florin Gherghel, Manager Tax Services of Ensight Finance, the fiscal and financial consulting company of Ensight
The migration of the workforce raises serious problems for the Romanian economy, exacerbating the difficulties recorded in several industries. On the long term, the decrease of the number of employees and the reduction of the taxpayers will generate significant constraints to the social insurance budget. While waiting for a national strategy, a short-term solution to cover the shortage of personnel is represented by foreign workers from outside the EU, especially from Asia. In the last two years, the annual quota approved by the Government for permanent or posted workers has increased steadily.
|
Types of work permits |
2016 |
2017 |
2018 |
|
Permanent workers |
3 500 |
3 500 |
4 000 |
|
Internship workers |
200 |
200 |
100 |
|
Seasonal workers |
200 |
200 |
400 |
|
Cross-border workers |
100 |
100 |
100 |
|
Highly skilled workers |
800 |
800 |
500 |
|
Seconded workers |
700 |
700 |
1 200 |
|
People transferred within the same company (ICT) |
– |
– |
700 |
|
TOTAL |
5 500 |
5 500 |
7 000 |
According to the data published by the Labor Inspection, in August 2018, 17,089 employees were employed by non-EU-EEA foreign citizens (European Economic Area), most of them being from:
• Turkey – 3,627
• China – 2,120
• Moldova – 1,787
• and Vietnam – 1,554.
The main areas of activity in which they work are as follows: restaurants, shipbuilding and floating structures, wholesale, clothing and footwear and construction works for residential and non-residential buildings.
In the first half of this year, the number of issued work permits increased by 50% compared to the same period of 2017, and those issued specifically for permanent employees doubled. Thus, for this period 4,395 employment / secondment notices were issued, most for citizens from:
• Vietnam – 1,520
• Turkey – 568
• Nepal – 358
• Serbia – 275
• Sri Lanka – 261
• China – 253
• and Moldova – 181
In July, the annual quota of permits was used. For the period remaining until the end of 2018, the Government approved its increase with 8,000: 4,000 permanent foreign employees and 4,000 seconded.
More bureaucracy and higher costs with foreign workers
The process of obtaining the work permit obliges the employer to a wide bureaucratic process. The employer must effectively carry out the activity for which it is requested to issue the employment notice, must have paid the obligations to the state budget and have not been sanctioned for undeclared work or illegal employment in the last 6 months prior to the application for permanent workers / seasoned / trainees / cross-border / highly qualified, respectively in 3 years prior to the submission of the application in the case of seconded workers and ICT (persons transferred within the same company). Also, the future employee must fulfill the special conditions of professional training, experience in activity and authorization, be medically fit, carry out the respective activity and have no criminal record that is incompatible with the activity that he will carry out on Romania’s territory.
To these are added a number of other procedures and costs, such as the obligation to pay the taxes necessary to obtain the right to stay and the right to work (eg 100 EUR tax for obtaining the work permit for permanent, seconded, cross-border workers, trainees; 25 EUR for seasonal workers; 120 EUR long stay visa for work / posting purposes; 259 RON residence permit; 120 EUR consular fee for obtaining / prolonging the residence permit), travel costs and accommodation of foreign employees.
Until the beginning of November 2018 the minimum wage costs imposed by the legislation were higher than in the case of hiring a Romanian employee because the salary registered in the individual employment contract for a permanent worker had to be at the level of the average gross salary per economy, respectively 4,162 RON for year 2018. At the beginning of November 2018, however, the authorities amended the legislation in the field, so that the minimum gross wage that employers are obliged to enter in the individual employment contract for a permanent worker will no longer be reported at the level of the average gross wage on the economy, but at the level of the gross minimum wage, respectively 1,900 RON in November 2018. Employers are willing to accept a higher employment cost (actual wage costs and adjacent monthly expenses with foreign workers), provided they offer stability, predictability, learning and adaptability fast and constant against the standards of quality imposed.
From the moment the employment contract is concluded with a local employer, the workers are treated like any Romanian employee. Therefore, the wage tax and social contributions related to the wages of Asian workers will be calculated, declared and paid by the Romanian employer.
In the case of the seconded workers and of the persons transferred within the same company (ICT) it is to be analyzed whether the respective worker can be exempted from the payment of social contributions in Romania: in general, for periods higher than 6 months, the income tax must be paid and is need for an analysis of the Double Tax Treaty between Romania and the country of residence of the employee. Such analyzes are performed in the case of seconded workers / ICT, as these types of missions have a limited scope, and the respective persons continue to remain insured in the social security systems in the country of origin.
Romania is part of the European Regulations for the coordination of social security systems, but it has concluded some bilateral agreements in the field of social security and with some non-EU states (eg Israel, Canada, Albania, Korea, Macedonia, Moldova and Turkey). However Romania has not concluded such treaties with countries in mainland Southeast Asia, such as Vietnam, Cambodia, Laos, Thailand, Malaysia and Burma. In these cases, Asian workers detached from these countries cannot benefit from exemptions from the payment of social contributions in Romania.
