On Monday, December 21, 2020, Romanian authorities published Law no. 296/2020, which brings several changes to the Romanian Tax Code in what regards employee benefits. These are important tax law amendments that will apply starting with January 2021.
We describe below the 3 most important tax changes, and we will be analyzing all the other tax changes brought by this law, in future articles.
Employee use of company cars for personal purposes becomes non-taxable benefit in the case of companies qualifying under micro-enterprise tax regime
This amendment clarifies that in the case of companies qualifying under micro-enterprise tax regime, as well as companies that apply the specific tax, the benefits under the form of personal use of vehicles by employees is a non-taxable benefit. Thus, the company car use will be exempt from both salary income tax and mandatory social contributions due by employees. The tax exemption will apply starting with the month of January 2021, without other conditions applying.
Until now, due to the fact that the wording of the tax law provided for this exemption only in the case of employees of companies paying corporate tax (profit tax), for a safe approach, the micro-enterprises had to treat the private use of company cars as salary taxable benefit. Thus, they had to tax this benefit with both income tax and social contributions (CAS and CASS).
According to the provisions of the newly published Law 296/2020 amending the Romanian Tax Code, this exemption will apply starting with the salary income related to the month of January 2021 (which must be reported for tax purposes until February 25, 2021). As you may know, the obligation to withhold and pay payroll taxes rests exclusively with the employer.
This tax exemption will apply, as in the case of corporate taxpayers, only for cars of a maximum of 3,500 kg, and with a maximum of nine seats, including that of the driver.
Expenses with vaccination or testing of employees will be exempt from taxation, regardless of the state of emergency or alert
Employer expenses with epidemiological testing and vaccination of employees will be exempt from taxation at the level of employees regardless of their purpose (regardless of whether they will be for the purpose of preventing Coronavirus or other diseases).
Thus, the amendment brought by the new law provides for the exemption from taxation of costs of testing and vaccination in the case of all types of diseases that may endanger the health of employees, not only in the case of Coronavirus. It also extends this tax treatment beyond emergency or alert situations, as previously established in October by a Government Ordinance (Ordinance no. 181/2020).
In October, this exemption from taxation as employee benefit had been established only for tests performed for preventing Coronavirus, and only if this was during a state of alert or emergency. And the Ordinance did not provide for an exemption for vaccination expenses.
With this new provision, the exemption will cover any type of testing, not just testing for Coronavirus. At the same time, it will also include vaccination of employees. The new exemption applies for both income tax and mandatory social security contributions (CAS and CASS).
As in the case of the use of company cars, this provision will also apply effectively starting with the salary income related to January 2021.
Non-taxable allowance can be granted to employees who work remotely (e.g., from home)
This change practically provides for the possibility for employers to pay a non-taxable allowance to employees working remotely (e.g., from home). The purpose of the allowance will be to settle the expenses incurred by employees with: office equipment, utilities, internet subscriptions, office furniture.
This amendment provides for the granting of a monthly allowance of up to 400 Lei, which will be exempt from the payment of salary taxes. Thus, this advantage will be considered non-taxable at the level of the employee. It will be excluded from the income tax base, as well as from the employee social contributions calculation base.
The employers will have to keep the allowance within a maximum ceiling of 400 lei per month. The actual amount that the employee is entitled to receive will be calculated for the number of days in the month in which the employee actually works remotely.
This new provision will also be applicable as of January 1, 2021.