Topic 3 Key players in the taxation system
- For the work done based on the individual employment contract, each employee has the right to a salary.
- Any discrimination based on gender, sexual orientation, genetic traits, age, nationality, ethnicity, religion, political options, social origin, disability, family situation or responsibility, trade union membership or activity is forbidden when establishing and granting a salary.
The salary includes the base salary, indemnities, bonuses and other additional amounts, and it has to be paid before any other payment that the employer has to make. An employer cannot negotiate and establish, under the individual employment contract, base salaries that are lower than the minimum salary guaranteed at national level.
- The salary stipulated in the individual employment contract is most of the times the gross salary, which is the employment or the base salary. At the established date (as stipulated in the contract), you will receive the net salary, which is the amount of money that the employee receives after the subtraction of social insurance contributions, salary tax etc. which are obligations stipulated by law.
- Usually, the employer communicates you the net salary before you get employed, but it is better to check whether the amount you expect to get in cash or in your bank account is the same with the one you were told about. Besides the salary, you can receive an individual food allowance, in the form of meal tickets, fully paid by the employer.
IMPORTANT:
If you have an employment contract, you do not have to personally pay for health insurance; the employer must pay the necessary contribution to the health insurance house. Proof of health insurance is any certificate of employment issued by the employer, certifying that contributions to the public health insurance system are paid.
- If you are self-employed and you are registered as an authorized natural person (PFA), or have registered a family association, you must also get registered with the Public Finance Administration to get a fiscal identity code and for your income tax to be calculated. You can choose the office to get registered at depending on your domicile or the place where you will carry out your activity.
- In Romania, the Personal Income Tax Rate is a tax collected from individuals and is imposed on different sources of income like labour, pensions, interest and dividends. Revenues from the Personal Income Taxes are important sources of income for the national budget. Romania applies a flat income tax rate of 16 percent since 2005.
- The Personal Income Tax Rate in Romania stands at 10 percent.Read more here:National Agency for Fiscal Administration (ANAF)
- Benefits, allowances and other forms of special support for mothers, child raising, care for ill children etc. are not taxable (Art. 42).
- Also, there are local taxes and fees (on buildings, land, means of transportation, certificates, licenses and authorizations etc.), profit taxes, special taxes on vehicles, excises – on tobacco, alcohol, fuels, coffee etc.) and others.
- If you are an employee, your employers must retain the income tax, on a monthly basis, from your salary and turn it over to the state budget (fiscal authority).
- In Romania, the fiscal authority is called ANAF- National Agency of Fiscal Administration.
- In Romania, the Corporate Income tax rate is a tax collected from companies. Its amount is based on the net profit companies obtain while exercising their business activity, normally during one business year. The benchmark we use refers to the highest rate for Corporate Income. Revenues from the Corporate Tax Rate are an important source of income for the national budget.
- In Romania, the Social Security Rate is a tax related with labour income, charged to both companies and employees. Revenues from the Social Security Rate are an important source of income for the national budget (source for social programs including welfare, health care, pensions, and many other benefits).
- In Romania, the sales tax rate is a tax charged to consumers based on the purchase price of certain goods and services. The benchmark we use for the sales tax rate refers to the highest rate. Revenues from the Sales Tax Rate are an important source of income for the government of Romania.
- Both Romanian nationals and Romanian companies must pay tax on any income obtained in Romania and any income from outside of Romania. Non-residents that are declared Romanian fiscal residents are required to pay tax on their total income, the income obtained in Romania and the income obtained abroad.
- For tax purposes, an individual who resides in Romania for more than 183 days within a 12-month period, should submit to the local taxation authority the “questionnaire to establish the fiscal residence of an individual upon arrival in Romania”. Following the submission and the review of the file, the taxation authority will issue a notification regarding the fiscal residence of the individual (the individual will be declared fiscal resident in Romania, or he/she will remain tax resident in the country of origin/residence).
- An individual does not have to be present in Romania for 183 consecutive days, but the total number of days must not exceed 183 in any 12 consecutive months.
- The taxation system in Romania is a great incentive for expats wishing to relocate to Romania, having a flat tax-rate of 10% on individual income and 16% on corporate profit. Smaller companies, such as the microenterprises, pay smaller taxes. A tax rate of 1% is paid if the company has just one full-time employee, with a contract agreement for unlimited period or for at least 12 months. If the company has no employees, the tax rate is 3% of the annual turnover.
- The employee can pay contributions to voluntary pension funds and private health insurance authorized by the Romanian Financial Supervisory Authority, up to the equivalent of €400 per year each.
- Food rights are granted by employers to employees, where specific legislation prohibits employees from bringing their own food to the premises.
- Personal deductions are available for an income of up to RON 3600 per month, if the taxpayer has dependents the amount will increase.