The increasing of the ceiling based on which an entity should pay the income tax on small entities, the reorganization of the social contributions, the income tax obtained by individuals of 10%, the increase of gross minimum wage and the mechanism of VAT split payment are some of the most important fiscal changes adopted by Government and Parliament and applicable starting with the 1st of January 2018.
Please find below, the most important measures which have entered into force this year, starting with the 1st of January:
Income tax on small entities for companies with revenues under 1 mil. Euro
Starting with the 1st of January 2018, the ceiling based on which a company should apply income tax on small entities has been doubled, from 500.000 Euro to 1 mil. Euro, equivalent of 4.659.700 RON using the exchange rate valid for 31st of December 2017.
Therefore, the companies which registered, by the end of the year 2017, incomes between half of million Euro and 1 million Euro, starting with the 1st of January will not pay corporate tax of 16% but will pay income tax on small entities, applying 1% if the company has at least 1 employee or 3% if the company has no employee.
Furthermore, also the companies having as a domain of activity banking, insurance, capital market or gambling and registered less than 1 million Euro will apply the income tax for small entities. Also, starting with this year, the mechanism of small entities became mandatory for the companies that obtain incomes from consultancy or management, as far as the total incomes are under 1 million Euro.
Also, starting with this year there was eliminated the option which allowed the companies to apply profit tax in the case that the entities had a minimum social capital in amount of 45.000 RON, which means the entities that are in a period of investment and registered losses or those ones that have a profitability less than approx. 6% from the turnover will not have any possibility to avoid paying the income tax on small entities.
The parliamentarians could, however, reintroduce through a law project adopted by the Senate and being now under the analysis of the Chamber of Deputy, the alternative for companies with a social capital higher or equal to 45.000 RON and at least 2 employees to apply corporate income tax.
Reorganization of the social contributions and the transfer of CAS and CASS to employee
Starting with the 1st of January 2018 there are only 3 social contributions, from which 2 are in the charge of the employee, as follows:
In the same time, the employer will pay one single contribution, namely the insurance contribution for work applying a quota of 2,25% which includes the other 4 contributions cancelled at the end of the year 2017, as follows: the contribution for unemployment, the contribution for medical leave, the contribution for occupational risks and the contribution for wage claims.
Decrease of income tax for individuals from 16% to 10%
The package related to the transfer of the social contributions also includes income tax decrease from 16% to 10% for revenues from independent activities (PFA, liberal professions, copyright, etc.), salaries and assimilated to salaries, rents, investments (such as income from interest, sale of shares, except dividend incomes for which will be applicable 5% quota), pensions, agricultural activities, forestry and fish farming, awards and other sources.
The change was meant to counterbalance the increase of social contributions which have been transferred into employee’s charge, such that the value of the net amount shouldn’t be significantly influenced. However, for the employees who are exempted from paying income tax, as the employees from IT domain or those who work for R&D projects, the employers have to find resources to increase the gross wages, in order not to decrease the net amounts.
Pay attention! Any change related to the gross minimum wages in this period will have to be reported in Revisal until the 31st of March, 2018. After this date, the employers are obliged to submit the changes of gross monthly salaries in Revisal within 20 working days from the date of its occurrence.
The gross minimum salary increased to 1.900 RON
The beginning of the year brought the increase of the minimum wage with 450 RON, from 1,450 to 1,900 RON. However, it should be taken into account that a significant part of the increase in the gross wage is justified by the transfer of CAS and CASS to the employee, so that the gross salary of 1,900 RON is the equivalent of a gross amount of 1,550 RON on the system in 2017.
Related to the growth of the net salary for an employee paid with the minimum wage, we are considering an increase of 97 RON. Thus, if an employee paid with the minimum salary, without dependents, received in the year 2017 a net of 1,065 RON (corresponding to a gross of 1,450 RON), he receives in 2018 a net salary of 1,162 RON, (corresponding to a gross of 1,900 RON).
The mechanism of VAT split payment was modified through law by the Parliament at the end of 2017, so that the applicability of the system was restricted only to taxable persons registered for VAT purposes with debts related to VAT and insolvency companies, which must have at least one special account dedicated to VAT.
Practically, there will be obliged to apply the VAT split system, the companies which:
The taxable persons registered for VAT purposes which do not have the obligation to apply VAT split payment system could opt for the mechanism. Those entities will benefit of a reduction with 5% of the income tax on small entities/ corporate income tax during the period they are applying the system.
The taxable persons registered for VAT purposes in Romania entering in commercial relationship with taxable person applying the VAT split payment system, are obliged to pay the VAT related to the acquisitions, separately into the VAT bank account of the supplier; if the payments have been operated incorrectly, the fiscal authorities will apply penalties of 0.06% from the total value of VAT which has been paid incorrectly.
More information about mechanism of VAT split payment getting in force starting with January 2018 could be find on the following link: http://www.contexpert.ro/en/ultimele-stiri/sistemul-split-tva-obligatoriu-din-2018-doar-pentru-firmele-cu-intarzieri-la-plata-tva-si-cele-in-insolventa – VAT split system – mandatory from 2018 only for companies with delays related to paying VAT and companies under insolvency proceedings.
Decrease of the taxable base for social contributions to be paid by self-employers (PFA), liberal professions
The individuals obtaining incomes from independent activities (PFA, owners of individual/family business) and liberal professions owe for the year 2018 CAS and CASS applied to the new minimum wage in amount of 1,900 RON, as follows:
Given the fact that most individuals will choose to pay CAS at the minimum level, the monthly contribution will be 665 RON, i.e. 475 RON for pension and 190 RON for health. However, they will be due only by the persons who earn at least 12 gross salaries in a year, or 22.800 RON
Thus, if the revenues obtained in 2017 do not exceed the cumulative annual incomes of at least 12 minimum gross wages per country, the PFA will not owe the social contributions in 2018 and will not be obliged to submit the 600 statement, paying only the income tax of 10%.
The ceiling for registration for VAT purposes has remained at 220.000 RON
In October 2017, the Government obtained a derogation from the European Commission for raising the ceiling for VAT registration from 220,000 to 300,000 RON.
However, the parliamentarians have failed to legislate the measure until the end of 2017, so that the new ceiling to be applied from the 1st of January 2018. In this respect, the Finance Ministry has announced that the ceiling for VAT registration will remain at 220,000 RON at the beginning of 2018 and it will be applied until the 300,000 RON ceiling will be introduced by law.
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