Str. Av. Petre Cretu nr. 58, sector 1, Bucuresti, Romania

According to a draft Government Emergency Ordinance on some Fiscal-Budgetary Measures (hereinafter referred to as the “GEO”) from 6 February 2018, it is proposed to introduce a mechanism for compensating mandatory social contributions for the employers activating in IT sector.

Further to the transfer to the employee of the Pension contribution (10%) and Health (25%) contribution as per GEO 79/2017 and the income tax rate reduction at 10%, for employees activating in IT sector the net salary diminish.

Therefore, this new measure aims to ensure a unitary fiscal regime and maintain the existing facilities for this sector of activity.

  • In what consists the measure?

The State Budget will support part of the Health contribution (CASS) due to employees.

This part will be calculated by the employer and mentioned separately as a deduction in the 112 monthly statement.

  • Mandatory condition for application

The employee’s gross salary is increased by at least 20% compared to the gross salary of December 2017.

  • Health contribution calculation mode

Health contributionwithhold in the month of calculation = Gross salary2018 – Pension contributiondue in 2018 – Net salary December 2017.

Where:

  1. Health contributionwithhold = the Health contribution withhold by the employers/payers from the gross salary in the month, which can not be higher than the calculated contribution due according to the provisions of the Fiscal Code;
  2. Gross salary2018 = the health contribution base calculation as gross salary earned in 2018;
  3. Net salary2017 = the net salary obtained by deducting from the gross salary the mandatory social security contributions, according to the law, in December 2017, corresponding to the gross salary stipulated in the individual labor contract, in progress on 31 December 2017.
  • Calculation mode example, according to the draft Government Emergency Ordinance:

Gross salary – December 2017:                            10.000 lei

Empoyee’s mandatory social security

contributions:                                                           1.650 lei 

Pension contribution (10,5%)                                     1.050 lei

Health contribution (5,5%)                                            550 lei

Unemployment contribution (0,5%)                                50 lei

Net salary:                                                                 8.350 lei

 

Gross salary  2018 :                                                12.000 lei

[10.000 lei + 10.000 lei x 20% (gross salary 2017 increased by 20%)]

Empoyee’s mandatory social security

contributions, DUE:                                                   4.200 lei, out of which:

Pension contribution due (25%)                                   3.000 lei

Health contribution due (10%)                                      1.200 lei

Health WITHHOLD:                                                       650 lei

[12.000 lei – 3.000 lei – 8.350 lei = 650 lei (gross salary2018 – Pension contribution2018 – Net salaryDecember 2017)]

Health contribution difference deducted from State Budget: 550 lei                 

[1.200 lei – 650 lei (Health contribution due – Health contribution withhold)]

Net salary:                                                                     8.350 lei                   

  • Application applicability term

The measures proposed are applicable to income from salaries and assimilated to salaries obtained by the categories of individuals exempted from the payment of the income tax according to art. 60 of the Fiscal Code, for which the deadline of the payment obligation representing the Health contribution due by the employee and withhold by the employer comes after the entry into force of the ordinance for a period of 12 months.

For income obtained in 2018, in the previous periods of entering into force of the ordinance, the employer can adjust by submitting the amended statement by 31 December 2018.

Please note that the mechanism for compensating Health contribution will apply to all types of income tax-exempt salaries (i.e: IT, R & D staff).