This GMS Flash Alert reports that the current Romanian Fiscal Code will be revised with new provisions that include changes to the rules on taxing worldwide income and the tax treatment of allowances paid to Board members.
Starting 1 January 2016, the current Romanian Fiscal Code will be revised with new provisions that include changes to the rules on taxing worldwide income, the tax treatment of allowances paid to Board members, and the list of benefits-in-kind that are not subject to tax.1
The new provisions generally enter into force on 1 January 2016, although some of the changes will be effective as of 1 January 2017.
The changes to the Fiscal Code bring additional clarity to the expatriate taxation regime in Romania. On one hand, the new rules eliminate an important exception regarding worldwide taxation of Romanian tax residents; on the other hand, they lighten the tax burden for certain categories of individuals.
Further, companies offering equity-based compensation plans should take note of the new parameters around the new stock option taxation regime so that their equity plans continue to qualify for beneficial tax treatment.
Careful analysis of the changes should help determine the correct liabilities and compliance obligations with respect to affected international assignees.
Previous legislation allowed for an exception for foreign individuals who become residents of Romania to be exempt from tax on their worldwide income until the second consecutive year in which they meet the residency test. This change eliminates this important exception according to which the above-mentioned foreign individuals will now be subject to tax in the year they establish residency in Romania.
Given the above, the KPMG International member firm in Romania recommends companies undertake a thorough analysis of their equity-based plans to determine whether the plan qualifies as a stock option plan within the meaning of the new legislation – and consequently can benefit from favorable tax treatment.
Individuals who have no income or whose income is lower than the national minimum gross wage (currently RON 1,050, or approximately EUR 240) will continue to be required to pay health insurance contributions, calculated at the value of the minimum gross wage.
1 Law no. 227/2015 regarding the Fiscal Code (“herein after the “New Fiscal Code”) has been published in Monitorul Oficial (Official Journal of Romania), no. 688 of 10 September 2015. For the published laws and other statutory instruments of Romania (in Romanian), see the Web site for Monitorul Oficial at: http://www.monitoruloficial.ro/.
2 Informative form regarding the start/end of Romanian assignment (code 222).
For further information or assistance, please contact your local GMS professional or Madalina Racovitan (tel. +40 372 377 782 or e-mail: firstname.lastname@example.org), GMS country leader with the KPMG International member firm in Romania.
The information contained in this newsletter was submitted by the KPMG International member firm in Romania.
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