INCOME TAX EXEMPTION IN THE IT FIELD MAINTAINED UNTIL 2028 (PROJECT)

Under the law draft on tax measures for ensuring Romania’s long term financial sustainability tabled for public debate by the government, the income tax exemption on salaries and other salary-related income for employees in the IT field will be maintained only until December 31, 2028, and for revenues under 10,000 Lei.

The tax incentive in the IT field, as regulated in 2018, currently benefits to employees with an individual employment contract filling specific positions ¹ in the IT field if they are hired by a Romanian economic operator whose scope of business includes software development ².

We remind that the same incentive is benefiting also to foreign residents (non-EU residents) hired by Romanian companies to the extent that they get the equivalence or the recognition of their diplomas, and public service employees, for as long as they carry out software development activities.

At the same time, staff posted to a Romanian employer can benefit of such tax incentive as long as they fulfil the conditions regarding the position held and the training and the salary is paid by the Romanian employer.

The new law draft comes with the two limitations hereafter:

• the tax exemption applies to only one employer / payer, therefore, the individual can benefit of the incentive only for one employment contract, irrespective of the number of prior employment contracts for which the respective individual benefited of the tax incentive in the past;
• are subject to the exemption only the monthly gross revenues up to 10,000 lei from salaries and salary-related revenues obtained by an individual based only one employment contract, work report, delegation or posting document or of a special statute provided by the law.

The tax incentive does not apply to the monthly gross revenue over 10,000 lei.

The employee shall put his/her option in writing, under a sworn statement submitted to the employer / payer, as appropriate.

Conditions for benefiting of the income tax exemption

To qualify for benefitting of the income tax exemption on salaries and salary related revenues, an employee must fulfil several cumulative conditions:

a) fills one of the positions mentioned in the list of positions and activities hereinabove;

b) the position belongs to a structure specialising in information technology, duly indicated in the employer’s organizational chart, such as: service, unit, department, office or other alike;

c) holds a diploma issued at the end of a short-term or a long-term higher education course or a diploma issued at the end of undergraduate studies by an authorised higher education establishment, or a baccalaureate diploma followed by courses in an authorised higher education establishment and carries out one of the activities provided for in the annex;

d) during the previous fiscal year, the employer carried out software development activities intended for sale and recorded them as such in separate analytical accounting books;

e) the yearly turnover referred to at letter d) shall amount to at least the equivalent in Lei of 10,000 euros (calculated to the average exchange rate of the National Bank of Romania for each month of income) for each employee benefiting of the tax income exemption.

Please note that determining whether an employee qualifies for benefiting of such fiscal advantage and forming the underlying file for each employee concerned falls entirely to the employer.

Notes

1. Among the positions listed: data base administrator, analyst, IT systems engineer, software systems designer, IT project manager, developer, IT systems designer, etc.
2. CAEN Codes 5821, 5829, 6201, 6202, 6209