Tax alert 14 – Emergency Ordinance no. 18/2018

Emergency Ordinance no. 18/2018 regarding the simplification of the reporting obligations for individuals

The new mechanism for reporting and paying the income tax and social charges due from individuals.

Purpose of the ordinance

This mechanism aims to simplify the reporting obligations by introducing a single statement which will replace the following current statements:

  • Form 200 – income from Romania;
  • Form 201 – income from abroad;
  • Form 220 – estimated income/income quota;
  • Form 221 – income quota – agriculture;
  • Form 600 – base income for social insurance contribution;
  • Form 604 – determining the health fund contribution for individuals with no income;
  • Form 605 – canceling the obligation of health fund contribution for individuals with no income.

Deadlines and means of submission

The ordinance provides a single deadline for submitting the statement during a fiscal year:

  • For 2018 – 15 July 2018 (reconciliation of tax year 2017 and estimation for 2018);
  • Starting 2019 – 15 March of the current year (finalization of the previous tax year and estimation for the current fiscal year); amendment to the deadline provided by the draft project of the ordinance (31 March current year).

The statement will be submitted by means of:

  • Hard-copy (only for 2018);
  • Electronic transmission systems – “SPV” (user and password identification system is used);
  • E-România portal (electronic signature based on qualified certificate).

The proposal provides a single payment deadline of 15 March of the following year when the income was earned, which will replace the deadlines imposed by the previous legal provisions.

Taxpayers will be able to make advance payments for income tax, social insurance contribution and health fund contribution during the year, due for the estimated income of the current year, before 15 March of the following year.

In addition, the emergency ordinance provides a payment system based on bonuses for taxpayers who pay in advance their tax liabilities during 2018.

As regards the reporting obligations in relation to the income earned in 2017, the authorities will issue tax decisions after the filing of the annual statement. Starting with the income related to 2018, the system based on tax decisions issued by the tax authorities is waived, taxpayers setting their tax obligations by submitting the annual statement.

Income subject to social insurance and health fund contributions

The new mechanism envisages the assessment of the social insurance contribution and health fund contribution considering the estimated income for the current year, independent of the income earned in the previous year.

The taxpayers who submit the statement regarding the estimated income for the current year for the health fund contribution computation purposes, in case the total earnings are ultimately below the 12 minimum wages will owe health fund contribution considering a basis for the health fund contribution will be the equivalent of 6 minimum wage salaries, if the following cumulatively conditions are met:

  • Were not employed in the previous fiscal year;
  • Did not fall into the categories of exempted persons from the payment of health fund contribution.

Income from intellectual property rights and indepedent activities

The Ordinance provides the following amendments regarding the revenues derived from intellectual property rights, as follows:

  • They were excluded from the category of income from independent activities;
  • The definition of intellectual property rights income has been amended by including revenues from the creation of monumental art works;
  • The income tax due is computed by applying a 10% rate to the net income and is withheld by each taxpayer. The income tax withheld is final and the ordinance repeals the advanced income tax of 7%.
  • The following categories of individuals are exempt from the payment of health fund contribution due for the income from intellectual property rights:
    • individuals who earn salary income;
    • retirees;
    • individuals who are on medical leave.

Furthermore, the health fund contribution withholding mechanism for income earned from copyright, lease of agricultural goods and associations with legal entities is reintroduced.

Miscellaneous

  • The deadline for submitting the informative statements regarding the withholding tax for taxpayers was changed to 31st of January of the current year for the previous year;
  • As regards the social insurance agreements in the public pension system, the minimum threshold of the monthly computation basis will be the national gross minimum wage, as per the new amendments brought to Law no. 263/2010 on the public pension sector. The amendment will enter in force on 1 April 2018.

Author:

Corina Mindoiu – Senior Manager, People Advisory Services

 

For additional information, please contact: 

Alex Milcev, Partner – Head of Tax & Legal

Email: office@ro.ey.com

 

 



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