TAX BENEFITS IN THE CONSTRUCTION, AGRICULTURE, AND FOOD SECTORS: PREDICTABLE CHANGES (PROJECT)

The income tax exemption (10%) granted to the employees in the constructions field, food and agriculture will be maintained for incomes under 10,000 Lei (around 2,000 euros) whereas the health insurance exemption (in Romanian CASS, 10%) will be removed, according to the law draft relating to measures on tax and budgetary expenditure cut tabled by the government for public debate.

If the law draft is enacted in this form, the tax exemption currently applicable to salary and salary related incomes paid to employees in the said activity fields irrespective of the number of employment contracts they are party to, will only benefit to one employer / taxpayer, as the case may be.

Furthermore, the exemption will only apply to salary and salary related gross revenues of maximum 10,000 lei included, under only one full time or part time employment contract. The choice of the incentivised employment contract at the employee’s discretion and will be formalised by a sworn statement submitted to the employer.

Revenues topping the 10,000 lei are not considered for tax exemption.

For the record, we remind that the procedure for granting this tax incentive in the constructions filed has already been subject to several modifications, in July 2023, regarding the calculation of the turnover of the eligible companies and the monthly income gained by the employees of these companies.

The granting of the tax incentive falls to the employer or the taxpayer, individual or legal entity, carrying out the activities under the CAEN Codes explicitly provided for under article 60, paragraph 5, letter a) of the Tax Code and cumulatively fulfilling the requirements to benefit therefor¹.

Consequently, in order to benefit from such tax incentives, at least 80% of the overall turnover of the employer must result from carrying out the hereinabove activities and other activities related to the construction field.

If this percentage is at least 80% of the overall turnover, the employees shall benefit of tax incentives during the current year provided that the condition under art.60 paragraph 5 letter a) of the Tax Code is complied with during the whole period when the tax incentive is granted.

For newly incorporated companies, the indicators pertaining to „the turnover resulting from the construction activity” and the „overall turnover” are calculated cumulatively from the registration date, including the month for which the exemption applies.

The 80% percentage is required to qualify for the tax incentives. For the record, according with the provisions of the article 60, point 5, letter b^1 of the Tax Code, as modified starting with December 23, 2022, under the Law 370/2022, the following indicators are used to determine the 80% percentage:

• the turnover resulting from the construction activity (includes only the revenues resulting from the construction activity carried out in the Romanian territory, including by posted employees);
• the overall turnover (includes the revenues resulting from the overall activity carried out in the Romanian territory).

Thus, the tax incentive is granted as following:

• For full time employment contracts: the gross monthly revenue is calculated based on a gross reference salary for 8 hours/ day of minimum 4,000 lei/month;
• For part-time employment contracts: the tax incentives are granted only if the gross monthly revenue from salary and salary-related revenues is calculated proportionally with the gross salary pertaining to full-time working program of 8 hours/day;
• If a natural person gains revenues from two or several individual employment contracts, in the same month, from the same employer, and if the gross revenue is calculated for a gross salary for 8 hours/day of minimum 4,000 lei, the revenues pertaining to these contracts are cumulated. In this case, the tax incentives are granted for salary and salary related revenues which cumulated do not top the threshold provided under article 60 point, 5 letter c) of the Tax Code.

Note

1. The tax incentives for the employees are: exemption from payment of the income tax (10%) and the CASS contribution (10%), reduction of the CAS (pension) contribution from 25% to 21,25%. The employees benefiting from such incentives who must pay the private pension contribution under the Law 411/2004 are exempted from the payment of this contribution of 3,75% within the limit of the percentage provided hereinabove. The employees, in their turn, benefit from a reduction of the labor contribution from 2,25% to 0,3375%. According to the legal provisions in force, such incentives are intended to be granted until December 31, 2028.