New tax exemptions and VAT
rules in the Romanian fiscal environment
The principal changes entered into force through the Government Decree 114/2018, published into Official Gazette of Romania in 29.12.2018
1. Exemption regarding the income tax for the following industries (from January 1, 2019 to 31, December 2028):
a. constructions activities defined by the NACE code 41.42.43 – Section F CONSTRUCTIONS
b. production of building materials, defined by the following NACE codes:
2312 – Flat glass processing and shaping;
2331 – Manufacture of ceramic tiles and slabs;
2332 – Manufacture of bricks, tiles and other construction products from burnt clay;
2361 – Manufacture of concrete products for construction;
2362 – Manufacture of plaster products for construction;
2363 – Manufacture of concrete; Manufacture of mortar;
2369 – Manufacture of other articles of concrete, cement and plaster;
2370 – Cutting, shaping and finishing of stone;
2223 – Manufacture of plastic building products;
1623 – Manufacture of other carpentry and joinery for construction;
2512 – Manufacture of metal doors and windows; Manufacture of metal structures and parts of metal structures;
0811 – Extraction of ornamental and building stone, extraction of limestone, gypsum, chalk and slate;
0812 – Gravel and sand extraction;
711 – Architectural, engineering and technical consultancy services;
Conditions to apply the income tax exemption:
- employers achieve incomes from the aforementioned activities within the limit of at least 80% of the total incomes, calculated cumulatively from the beginning of the year, including the month in which the exemption applies;
- monthly gross earnings from salaries and amounts assimilated with salaries realised by the individuals for whom the exemption applies, are between 3,000 and 30,000 RON per month, and are realised on the basis of an individual labour contract;
- the exemption applies according to the instructions of the Minister of Public Finance, the Minister of Labour, Family, Social Protection and the Elderly and the Minister of Health; the Declaration regarding the social contributions, the income tax and the nominal record of the insured persons, will be a declaration on its own responsibility stating that the exemption requirements are met.
2. Value Added Tax
The reverse charge mechanism is extended until June 30, 2022 for grain and technical plants deliveries, transfer of greenhouse gas emission certificates, delivery of electricity to another taxable reseller, transfer of green certificates, supply of mobile phones, integrated circuit devices, game consoles, PC tablets and laptops.
There is no time limit for reverse charge with regards to the other operations subject to simplification measures (waste, wood supply, construction and land, investment gold).
3. Labour insurance contribution
For taxpayers employed in the construction field that qualify for income tax exemptions, between 1 January 2019 and 31 December 2028 inclusive, the share of the labour insurance contribution is reduced to the level of the income contribution to the Guarantee Fund. In practice, there is a reduction for the labour contribution in this sector, from 2.25% to 0.3755%.
4. Social Contributions
The social security rate is reduced by 3.75% during January 1, 2019-31 December 2028, for individuals who earn salary incomes and incomes assimilated to salaries based on individual employment contracts with employers who carry out construction activities and which fall under the conditions of exemption. In conclusion, for these taxpayers the applied social contribution rate will be 21.25%.
Also, these taxpayers will be exempted from the obligation to pay the health insurance, being insured automatically.
5. Labour Code
By way of derogation from the provisions of article 164 paragraph (1) of the Law 53/2003 – Labour Code, during January 1, 2019 – December 31, 2019, for the construction field, the minimum basic gross salary set in money, without including bonuses and other additions, will be 3,000 RON per month, for a normal work schedule averaging 167,333 hours per month, representing 17,928 lei / hour.