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EY Romania: Labor tax legislation leaves employers unequipped for freshly emerged practical issues
The freshly enforced labor tax legislation does not offer employers solutions to the issues arisen in practice, consider EY Romania representatives.
"The changes made by the government to the labor taxation in Romania are measures that greatly impact millions of employees across the country. Unfortunately, the legislation that came into force on January 1, 2018 does not offer employers solutions to the issues that have already arisen, such as those related to the transfer of social contributions from the employer to the employee," the tax experts told a specialist conference.
According to EY Romania consultants, not only wage earnings, but also incomes from freelance activities underwent substantial changes.
Beginning January 1, 2018, social contributions charged on incomes from freelance activities are disproportionately lower than those on wage earnings. This measure, say tax experts, may favor a questionable migration of the workforce from employment contracts to work under contributor contracts as self-employed service providers.
"Given that the private sector could not make timely preparations for these changes, I hope that in the next period we'll have fiscal clarity and stability because the private environment will need a longer time to implement these new measures," said Corina Mindoiu, senior manager with the EY Romania Tax and Income Tax Division.
Social security contributions switched from employers to employees starting January 1, 2018, according to a November 2017 Emergency Ordinance amending the Tax Code.
Of the total of 22.75 percent payable by the employer, 20 percentage points are transferred to the employee.
According to calculations by the Finance Ministry, 35 percent of the gross salary shall be contributions retained by the employer on behalf of the employee and the remaining contributions due by the employer decrease to 2.25 percent and will cover unemployment and workplace accident risks, sick leave, salary claims.
In the case of incomes from freelance activities, contributions are charged if the income exceeds 12 minimum national gross wages.