What has changed for companies and PFAs from 1 January 2023?

2022 was a year of many legislative changes impacting businesses. Some of these changes are effective from January 2023. Some of them have even been rolled back along the way and have either been modified or even completely repealed.

So we have reviewed all the remaining changes in force and put together a summary of the most important ones with an impact on companies or PFAs.

Payroll

• From 1 January 2023, according to GD no 1.447 of 08.12.2022, the minimum gross basic salary per country guaranteed in payment increased from 2.550 lei to 3.000 lei gross monthly.
• The minimum wage in agriculture and the food industry remains 3,000 lei.
• By GEO no. 168 of 08.12.2022 it was established the extension, with modifications, of the tax exemption facility for 200 lei of the minimum wage. Basically, 200 lei of the 3,000 lei will be tax-free (no income tax and social contributions are due) and applies if the employee is employed full-time at the place where the basic function is located, subject to certain conditions laid down by law. The 200 lei untaxed will be taken into account in calculating the employee’s pension.
• Minimum wage in construction: also from January 2023, according to GEO no. 168 of 08.12.2022, the minimum gross basic wage per country guaranteed in payment for the construction sector increased from 3,0000 lei to 4,000 lei gross per month.
• From January 2023, employers will have an alternative for granting meal vouchers. OG 16/2022 provides that the amount representing “the countervalue of the food provided by the employer for his employees, natural persons earning income from wages or assimilated to wages, up to the maximum amount, according to the law, of one meal voucher/person/day” will be exempt from both income tax and social contributions for pensions, health and labour.

Other changes relating to pay and employment relations:

• the average gross salary for 2023 was set at 6,789 lei;
• death grants will have the following values in 2023: in case of death of the insured or pensioner 6,789 lei; and in case of death of a family member of the insured or pensioner: 3,395 lei;
• increase the contribution payable by firms for people with disabilities as a result of the increase in the minimum wage;
• a new ceiling applies up to which 7 benefits can be granted tax-free, i.e. 33% of the basic salary corresponding to the job held;
• payroll will be archived for 5 years (previously it was 50 years);
• A quota of 100,000 foreign workers newly admitted to the Romanian labour market is established for 2023;
• the taxation of part-time contracts is maintained as established from August 2022;
• a new framework model individual employment contract shall be used from 9 December 2022;
• the period of parental leave for a parent who did not initially request this right has been extended from at least 1 month to at least 2 months of the total leave period, if both parents meet the legal conditions;
• persons on maternity leave are obliged to notify their employer of their intention to exercise this right at least 10 days before the end of their maternity leave or, as the case may be, the expected start date of their parental leave and by submitting an application specifying the expected period of parental leave;
• if an employee on parental leave returns to work, he/she is obliged to notify the employer in writing at least 30 days before his/her intention to resume the employment relationship;
• employers are obliged until the end of the parental leave to maintain the employment conditions and salary rights enjoyed by eligible persons at the beginning or during the leave;
• mobility allowances have been removed from the category of non-taxable income because they are included at certain levels with the daily allowance. From 2023, compared to the other 6 types of income, the maximum limit of the mobility allowance is 33% of the basic salary and only those within the maximum limit fall under tax-free income;
• a new profession has been introduced in the IT sector for which exemption from payroll tax is granted – software development engineer;
• the father of the newborn child is entitled to 10 working days of paid paternity leave (previously 5 working days) – in force from August 2022;
• Paternity leave allowance is paid from the employer’s salary fund and is equal to the salary for the corresponding period.

Regulations on the activity of a PFA:

The ceiling for the income rule is reduced from €100,000 to €25,000 from 2023 income.

The threshold for the payment of CAS to PFA is established as follows:

• if the PFA’s income is between 12 and 24 minimum wages, then the basis for calculating the CAS will be 12 minimum wages;
• if your income is more than 24 minimum wages, you pay CAS at the equivalent of 24 minimum wages.

The threshold for the payment of CASS to PFA is established as follows:

• if your income is below 6 minimum wages you will not be obliged to pay CASS;
• if your income is between 6 and 12 minimum wages, CASS is payable at the equivalent of 6 minimum wages;
• if your income is between 12 and 24 minimum wages, you must pay CASS at the equivalent of 12 minimum wages and if your income exceeds 24 minimum wages, you must pay CASS at the equivalent of 24 minimum wages.

As a reminder, from May 2022, seniority can be recognised for PFAs, under certain conditions.

ANAF has published the new model of the single tax return to be used in 2023 to declare income for 2022 and the estimated income for 2023.

The revenue rules for 2023 are to be updated on the ANAF website for each county.

What changes for micro-enterprises?

According to the provisions of OG 16/2022, art. 47 paragraph (1), letter c) a mi-cro-enterprise will be the Romanian legal person that meets the following cumulative conditions:

• has earned income not exceeding the equivalent in lei of 500,000 euros. The exchange rate for determining the euro equivalent is the exchange rate valid at the end of the financial year; the €500,000 ceiling will apply from 2023 income, which means that companies that exceeded €500,000 at the end of 2022, but did not exceed the old ceiling of €1,000,000, will be able to apply the micro-enterprise regime in 2023, if the other conditions are met;
• has made income, other than consultancy and/or management services, of more than 80% of total income; “other than consultancy and/or management services” means all such services with the exception of CAEN code: 6920-Accounting and auditing activities; tax consultancy;
• has associates/shareholders holding more than 25% of the value/number of equity securities or voting rights in no more than three Romanian legal entities eligible to apply the microenterprise income tax system, including the person verifying compliance with the conditions;
• has at least one employee;

Other important provisions:

• if the HORECA companies referred to in point 42 of GC 16 obtain during the year income from other activities than those corresponding to these CAEN codes mentioned above, for income from other activities they apply the system of declaration and payment of income tax if they exceed the threshold of 500,000 euros;
• companies in the following sectors: banking, insurance and reinsurance, capital market, including intermediation in these sectors, gambling, exploration, development, exploitation of oil and gas fields;
• the provisions relating to the inclusion of suspended contracts in the calculation of the number of employees are amended. If the employment relationship is suspended, the condition relating to the holding of an employee is deemed to be fulfilled if the period of suspension is less than 30 days and the situation is recorded for the first time in the tax year in question;
• The tax is 1% (the 3% tax rate has been eliminated)

It has also clarified the order in which micro-enterprises that sponsor and operate AMEFs deduct these amounts from the tax in order to apply the facilities under GEO 153/2020.

Declaration, withholding and payment of tax on dividends

Another important novelty brought by OG16/2022 concerns the increase of the dividend tax. According to these provisions, the dividend tax is determined by applying a tax rate of 8% on the gross dividend paid to a Romanian legal person.

The dividend tax is declared and paid to the state budget by the 25th of the month following the month in which the dividend is paid.

This provision (increase of the dividend tax from 5% to 8%) is valid for all companies, but in the case of micro-enterprises, which will in any case undergo other changes with a negative fiscal impact, it will probably have a more pronounced effect.

Changes in VAT rates

From 01.01.2023 the reduced rate of 9% will no longer apply to alcoholic and non-alcoholic beverages falling within CN codes 2202 10 00 and 2202 99. For these, the 19% rate will apply;

• A 9% VAT rate will be applied instead of 5% for hotel accommodation, restaurant services, catering;
• Chemical fertilisers and chemical pesticides of the type normally used in agriculture will be taxed at 9%;
• The VAT rate of 5% for firewood in logs, billets, twigs, branches or similar forms falling within CN codes 4401 11 00 and 4401 12 00 supplied to natural and legal persons will apply until 31 December 2029;
• Any natural person may purchase, as from 1 January 2023, individually or jointly with another natural person/other natural persons, a single dwelling whose value does not exceed 600,000 lei, excluding VAT, at a reduced rate of 5%;
• Restaurant and bar operators will have to reflect the tip on the receipt/invoice but it is not VAT-liable.