What news brings us 2009?

2009 started in Romania in force, with plenty of news.

Besides the economic crisis is being felt more and more, creating a turbulent economic environment, we have a new Government, which from the first steps took many decision, contested and generating multiple changes. Last but not least, from the 1st of January 2009 many legislative changes shall became effective, some already approved in previous years, but which take effect only after that date, others very fresh.

I will therefore try to review the main changes brought by the beginning of 2009 which are affecting the business environment.

2009 started in Romania in force, with plenty of news.

Besides the economic crisis is being felt more and more, creating a turbulent economic environment, we have a new Government, which from the first steps took many decision, contested and generating multiple changes. Last but not least, from the 1st of January 2009 many legislative changes shall became effective, some already approved in previous years, but which take effect only after that date, others very fresh.

I will therefore try to review the main changes brought by the beginning of 2009 which are affecting the business environment.

First, in 2009 became effective a series of changes in the Fiscal code, such as changes related to VAT and excises, increase of the deductibility limit from income for contributions to the voluntary pension system from 200 euros to 400 euros or increase of the deductibility limit for voluntary health insurance from 200 euros to 250 euros.

Another novelty refers to the Fiscal Code and concerns the recovery of tax losses of companies, which may in the future be deducted from the net profit for seven years and not for five years, as provided by law until now.

Same in the Fiscal Code appear some news regarding the increase of the tax rate for micro companies from 2.5% to 3%, measure which will impact on small companies, and some other news concerning the taxation of dividends of foreign shareholders holding less than 15% of the social capital of the company, the tax rate being unified at 10% for both Romanian and non-residents shareholders.

Secondly, starting with the 1st of January 2009 the gross minimum wage in the economy increased from 540 lei to 600 lei. This change is also increasing correspondently the value of the minimum salary for the qualified employees and for employees with University degree.

Another change that will impact the companies is the change regarding the amount of taxes and social contributions. Although the main changes with respect to these taxes are already applicable from the 1st of December 2008, and aimed at a reduction of the taxes and contributions amount with a total of 2.3%, however January comes with a new amendment, the Boc Government’s original contribution. This time we talk again of an increase with 0.5% of the amount of social security contributions owed by the employer. Even if the increase is not significant, it has in my opinion a negative effect from two perspectives: firstly because it gives a very negative signal to the business environment which is still burden by the multitude of taxes and contributions, and secondly because these monthly changes are completely disturbing the calculation of wages, generating confusion and errors on behalf of the employers. Not even to mention the fact that this increase was not explicitly announced by the Government but has been hidden in the text of an Emergency Ordinance by republishing the contributions already modified in December.

Also in the news series we note the cancellation of various tax incentives. Thus, the Government canceled at the end of December 2008 a previous norm, providing a series of tax incentives for investors in order to reduce the impact of economic crisis and stimulate the creation of new jobs. Among the canceled facilities we note the 5% bonus from the total value of taxes for the taxpayers who are paying them at least ten days before the payment deadline and also the 1,000 euros bonus to be paid to companies for each new job created by hiring an unemployed person.

There are still many unknown things in 2009. I have not seen up to now any concrete plan for the economy, aiming to counter balance the effects of the economic crisis. Although the reduction of public expenses became a leitmotiv of the last days, still the number of Ministries was increased. Although collection of taxes and those amounts will be a real problem in 2009, the Government encourages the use of civil conventions and intellectual property agreements for payment of salaries, thereby irresponsibly opening the Pandora box, and giving taxpayers the opportunity to evade the payment of contributions. The Romanian currency, Leu, massively depreciated in the last few days, reaching a historical minimum while the international climate is far from giving encouraging signs regarding the economic crisis …

So 2009 is prefiguring from the very beginning as a year of changes and controversies, a year of turbulences and confusions, and for some will be just a year of struggle for survival. Unfortunately, legislative changes that introduce us into the new year and Government decisions are far from helping us in any way … So, we go back to an old Romanian attitude and we say to ourselves … “if they don’t help us, at least they shouldn’t embroil us”…