Individual taxation

Simplify the complexities

Organisations are increasingly complex, with businesses in multiple territories, navigating interactions among various stakeholders and the myriad of different country and regional legislation and taxation regimes.

Additionally, new business models and an increasingly non-traditional workforce mix, bringing together employees and a vast array of different contractual arrangements, ‘gig’ talent and other contingent workers dramatically increase the difficulty and risks around workforce.

PwC's network of individual tax specialists globally has extensive knowledge to navigate the various challenges of meeting employment tax obligations, but also proactively managing employment tax costs.

In Romania, personal income and the related tax liabilities continue to be an area of increased focus for both individuals and tax authorities. The complexity of regulations and practice in the area of personal income tax and social contributions lead to the need for regular monitoring of legislation and knowledge updates to correctly report and settle personal income tax and social contributions liabilities.

The issue of income taxation related to working under various forms (e.g. employment, self-employment, lease of personnel, management agreements) is often complex. Also, recent trends to work remotely from abroad increase further the complexity of the tax assessment due to the applicability of international law (such as double tax treaties and social security agreements) and the rules of the country of work.

The significant employee tax burden leads entrepreneurs to pay more and more attention to issues related to managing the benefits granted to their employees by taking the advantage of current income tax and social contribution incentives while also ensuring compliance with the legislative requirements. 

Shareholders looking for setting up or restructuring businesses need to focus on the personal tax situation of their business by conducting tax reviews and due diligence assessments to eliminate potential tax risks.

Moreover, diversity of income sources and benefits derived in various jurisdictions by tax resident individuals, along with the complexity of personal circumstances and of the applicable regulations, could all lead to improper reporting of income, and consequently to the risk of incorrect tax self-assessments.

How can we help?

Reward and equity compensation tax consulting and cost saving

For any organisation personnel costs are an important driver to focus on. While any employer wants to be competitive in terms of remuneration packages granted to its employees, attention should be given to the proper tax treatment applied to benefits in cash or in kind by also considering the market’s trends or practice. Rewarding employees and being compliant with the tax legislation can be easily met with proper planning and budgeting. Our team can pro-actively assist your business in implementing new rewards, benefits and equity schemes for your employees and align them with the latest tax regulatory requirements.

Set up, implementation and monitoring of employment tax incentives

Our dedicated team can assist you in assessing the impact of applying different personal tax facilities available for the salary income granted to your employees (e.g. IT, R&D, Constructions, Food & Agriculture, Seasonal Workers) PwC provides setting up assistance, step-by-step implementation of both the tax facility and the internal procedures to be used, as well as monitoring services by conducting regular reviews at agreed time intervals to assess the correctness of your company applying the personal tax incentives.

Employment taxes reviews and due diligence

For running regular personal tax health-checks - Our professionals may help you to assess your company’s compliance with a ‘tax health check’, either focused on taxation of individual income or part of a larger package (full tax reviews which include corporate tax, value added tax, customs and excise tax, local  taxes etc.). Under such reviews we take an issues-driven approach focusing on your company’s key risk areas for the purpose of identifying solutions to eliminate/ mitigate the risks and opportunities to increase the cost efficiency.

For selling / buying a business - If you envisage entering into a significant transaction, either if you are a buyer or a seller of a company/ a division of a company or want to enter into a new partnership as an investor you might want to have a look at the salary related costs which might turn into huge costs for your business if not properly dealt with in the past. Our dedicated team on employment tax issues, together with other experienced professionals may help you  run a full screening of your target/ partner’s business.

Employment vs freelancer structures and tax cost assessments

Our team can assist you in assessing the proper forms of collaborating with individuals based on a substance approach based analysis, which shall take into consideration the provisions of the Romanian tax and employment legislations and the needs of  your organisation. Also, we can run cost estimates for engaging with individuals such as employment, self-employment, mandate agreements etc.

Assistance during tax inspections

If you are a company - We can assist you during any tax audit related to remuneration received by individuals that your company is collaborating with (e.g. employees, freelancers, individuals as clients, managers and directors). We may also assist you in running parallel assessments with the ones prepared by the tax authorities, prepare/ guide you how to prepare written argumentation where needed, attend to meetings set up by the audit team during their checks. Together with our experienced lawyers from D&B David și Baias, the associated law firm of PwC Romania, we can further assist you in the challenge process and court representations, should the case might be.

If you are an individual - We can assist you if your personal situation is subject to a verification run by the tax authorities,  during regular tax audits of the Romanian tax authorities or during the inspections run as a consequence of an internationational automatic exchange of information.

Virtual and remote work consulting

Flexible work has become increasingly popular during the last few years and there are signs that flexibility remains one of the top priorities for employers and employees. As remote work in foreign jurisdictions may trigger legal, income tax, social security and corporate tax consequences, we advise companies on implications they should consider for the employees carrying out their work abroad. We also assist our clients in designing and implementing flexible work policies and procedures aiming to minimise tax risks and manage legal and tax compliance obligations which may arise for companies and their employees in Romania and abroad.

Executives tax structures

The legal relationship between the parties (employment or management contract) and the way the executives remuneration is structured (cash and equity payments) may have significant tax impact both for the company and the executive. Moreover, in case of non-resident executives carrying out activities in several jurisdictions, the provisions of the relevant double tax treaties and social security agreements must be considered to ensure that executive’s remuneration and private income such as capital gains are not subject to double taxation.

We are available to advise clients on income tax and social security consequences for their executives carrying out activities in Romania and/or in a foreign jurisdiction and to assist with the structuring of the executives’ compensation by considering the tax effects at company and executive level. 

Individual tax compliance and advisory services for Private Clients including high net worth individuals

Personal tax compliance has become crucial in view of the strengthened system for exchanging tax information between EU countries and the increased focus of the Romanian tax authorities on the level of tax compliance of high net worth individuals.

Our Private Clients team provides full assistance in meeting personal tax obligations starting with the formal procedures for the determination of the Romanian tax residence position, the assessment of the Romanian income tax and social security obligations for the Romanian and foreign sourced income, the reporting and settlement of the personal tax liabilities and continuous support in answering the requests coming from the Romanian tax authorities either on an ad hoc basis or during more formal individual tax audits.

Employment Taxes Help Desk

Tax legislation covering personal income tax and social contributions liabilities is in constant change;as such, staying ahead of the latest personal tax changes is essential to ensure the tax compliance of your company. Moreover, the implementation of the personal tax rules is often complex due to existing close links between the personal tax legislation and other areas of the legislation such as the labour law, social security or the immigration rules. In particular, payments made to foreign or non-resident individuals give rise to additional complexity in view of the double tax treaties and social security agreements that must be considered. 

Our personal tax and legal experts are available to provide answers to day-to-day questions raised by your HR and Tax team so that your company understands personal tax implications and quickly decides on further steps to consider. Our services include advising companies on latest or foreseen legislation changes in the personal tax area, tax treatment applicable on employee benefits and payments made to other individuals (e.g. contractors, clients). 

Our Employment Tax and Payroll practice has vast experience to support businesses on all of these points, share insights and deliver optimal outcomes for your organisation.

Contact us

Daniel Anghel

Daniel Anghel

Partner, Tax, Legal and People Services Leader, PwC Romania

Bogdan Carpa-veche

Bogdan Carpa-veche

Director, Workforce Risks & Compliance, PwC Romania

Ruxandra Popescu

Ruxandra Popescu

Director, Workforce Risks & Compliance, PwC Romania

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