Amendments to the Fiscal Code and Healthcare Reform Law

04/04/18

In brief

Government Emergency Ordinance no. 18/2018 (GEO 18/2018) has been published, amending Law 227/2015 on the Fiscal Code (“Fiscal Code”) and Law 95/2006 on Healthcare Reform (“Healthcare Law”).

The Ordinance relates to the adoption of fiscal-budgetary measures, modification and completion of the tax legislation, the mechanism for establishing, declaring and paying personal income tax and mandatory social contributions due by the individuals, and insured status in the mandatory health insurance system.

In detail

Fiscal Code amendments

The Single Statement

A new form has been introduced, the Single Statement, regarding the tax income and social insurance contributions due by individuals (the Unique return). The format of the form is to be approved by Order of the president of National Agency for Tax Administration, within 30 days as of the entry into force of GEO 18/2018.

The Single Statement replaces seven existing forms (200, 201, 220, 221, 600, 604 and 605) and it has to be filed by individuals deriving the following types of income:

  • Income from independent activities;
  • Income from intellectual property rights;
  • Income from partnership with a legal entity;
  • Income from agricultural activities, forestry and fishery activities;
  • Income from investments;
  • Income from other sources.

The filing deadline for the Single Statement is:

  • 30 days as of the start of the activity / obtaining income during the fiscal year;
  • 30 days as of the date of the temporary suspension / end of activity or as of qualifying in the category of individuals exempted from paying pension contributions;
  • 15 March of the year the income is derived, in order to establish the estimated annual income and the pension contribution;
  • 15 March of the year following that in which the income was derived, in order to finalise the annual income tax and health insurance contribution for the previous year;
  • 15 March of the year following that in which the income was derived in the case of activity starting during December of the previous year.

For income derived during 2018 and for finalising 2017, the filing deadline of the Single Statement is 15 July 2018.

In 2018, the Single Statement is not to be filed by taxpayers who, by the time of entry into force of GEO 18/2018, have already filed the annual tax returns (Forms 200 and 201) for the income derived in 2017, from Romania or from abroad.

Taxpayers who filed in 2018:

  • Form 220 for the “estimated income / income norms”,
  • Form 221 “regarding income from agricultural activities imposed based on income quotas,”
  • Form 600 “regarding income on which social insurance contributions are due and for qualifying under the minimum cap for establishing social health insurance contributions”, have to file the Single Statement by 15 July 2018.

Taxpayers do not file the Single Statement if they have already filed, by the date of entry into force of GEO 18/2018, Form 604 “for establishing the health insurance liabilities due by individuals without income or other categories of individuals stipulated by article 80, from Law no. 227/2015 including the subsequent amendments and additions” and maintain their option to remain insured in the public health system. If the option is not maintained, the Single Statement has to be filed.

The Single Statement is generally to be filed online. By way of exception, in 2018, it can be also filed in paper format at the competent tax authority.

Taxpayers assess the tax and social contribution liabilities due for income derived starting with 2018 by applying the rates for income tax / social contributions on the calculation bases stipulated by Fiscal Code.

The payment deadline for income tax, pension contributions and health insurance contributions due on income derived starting with 2018 is 15 March of the year following that in which the income was derived.

For the pre-payment of the estimated income tax and social contributions, a liability reduction is granted, with the level and pre-payment deadlines regulated through the annual State Budget Law.

For 2018, the following reductions are granted:                                                                                                                          

  • 5% of the liabilities related to 2018 fully paid by 15 March 2019 if the Single Statement is filed online by 15 July 2018;
  • 5% of the liabilities related to 2018 for full pre-payment by 15 December 2018.

Income derived in 2017 and not declared by the date of entry into force of GEO 18/2018 has to be declared through the Single Statement by 15 July 2018. The annual income tax due and the social insurance contributions are established by the competent fiscal authority, according to the provisions in force for the period to which the income relates.

Individuals who estimate cumulated annual income under the cap of 12 national minimum gross salaries and who file the Single Statement by the legal filing deadline use a calculation base of the national minimum gross salary multiplied by the number of the months left until the next Single Statement filing deadline to pay health insurance contributions.

Individuals who do not derive any income may pay the health insurance contribution using a calculation base equal to the value of six national minimum gross salaries.

The pension contribution paid is not reimbursed in the case of individuals who estimated that they would obtain income over 12 national minimum gross salaries, but whose net annual realised income was below that level. The health contribution due is calculated in reference to six national minimum gross salaries.

Income from intellectual property rights

Income from intellectual property rights and that from independent activities are now regulated under separate tax regimes. The payer of the income (legal entity or other entity obliged to keep accounting records) is obliged to calculate, declare, withhold and pay the tax authorities the following:

  • income tax of 10% on a calculation base determined by deducting a flat rate of 40% from the gross salary;
  • pension contributions and health contributions if the estimated level of income is at least equal to 12 national minimum gross salaries. This obligation exists for income derived from a single income payer or for income derived from multiple income payers, with the income obtained from at least one of those being over the above-mentioned level; the taxpayer designates by contract the income payer obliged to calculate, withhold and pay the social contributions.

The filing and payment deadline for income tax and social contributions is the twenty-fifth of the month following that to which the income relates.

Individuals who derive intellectual property rights income from payers other than those mentioned above and individuals who chose to determine their net income in the real system have to calculate, declare and pay the income tax and the social contributions, as appropriate.

Retired people and individuals who derive salary income or income treated as such are exempt from paying social contributions on income obtained from intellectual property rights.

Individuals exempted from the payment of health insurance contribution

PhD students who perform educational activities, under a doctoral studies contract, of four to six conventional educational hours per week are exempt from paying health insurance contributions.

Obligations of intermediaries and payers of income for which income tax is withheld at source

Payers of income for which income tax is withheld at source have to file a form regarding the calculation and withholding of income tax for every beneficiary at the competent tax authority by 31 January for the previous year. Payers of salary income and other income treated as such, payers of intellectual property rights income, rental income or from partnership with a legal entity are exempt from filing such a declaration.

Intermediaries, investment administration companies and self-administered investment companies have to send to each taxpayer information related to the total gain / loss for the transactions performed and file an informative statement with the competent tax authorities regarding the same information, by 31 January for the previous year.

Transfer of 2% from the salary income tax

By 15 March of the year following that in which income was derived, taxpayers can contribute 2% of the income tax due on the taxable annual net income to non-profit organisations, established according to the law, religious organisations and for private scholarships. The obligation to calculate and pay this amount rests with the competent tax authority.

By exception, taxpayers who derive income from salary and income treated as such or income from intellectual property rights may opt for the above amounts to be calculated, withheld and transferred when the income is paid.  To exercise this option, the taxpayer should notify the income payer in writing. Once so exercised, this option remains valid for a period of a maximum of two consecutive fiscal years.

Healthcare Law amendments

Insured status in the social health insurance system

The following people have insured status in the health insurance system and have the right to the basic package as of the date of filing the Single Statement:

  • Individuals who derive income other than salary over 12 national minimum gross salaries (e.g. income from independent activities, income from intellectual property rights, income from investments) and,
  • Individuals who estimate cumulated annual income below 12 national minimum gross salaries but opt to pay health insurance contributions.

If such individuals do not file a new Single Statement for the next period, their insured status lapses on the last day of the period for which they submitted the previous Single Statement.

Individuals who do not derive income and who are not included in the category of the individuals exempted from the payment of the health social insurance contributions achieve insured status in the health social insurance system and have the right to the basic package as of the date of filing the Single Statement. As their insurance status lapses 12 months after submitting the Single Statement, they need to submit another one for the next period in order to maintain their insured status.

In 2018, individuals who derive income other than salary income are insured in the social health insurance system and have the right to the basic package until 15 July 2018 inclusive.

The provisions of EGO no. 18/2018 come into force on the date of publication in the Official Gazette, which is 23 March 2018.

[Source:  EGO no. 18/2018 regarding the adoption of fiscal-budgetary measures and for modifying and completion of some regulations, published in the Official Gazette no. 260/23 March 2018]
 

The takeaway

Fiscal Code amendments

The Single Statement has been introduced for income tax and social insurance contributions due by individuals.

The Single Statement replaces seven existing forms (200, 201, 220, 221, 600, 604 and 605). Its filing deadline is:

  • 30 days as of the start of the activity / obtaining income during the fiscal year;
  • 30 days as of the date of the temporary suspension / end of activity or as of qualifying in the category of individuals exempted from paying pension contributions;
  • 15 March of the year the income is derived, in order to establish the estimated annual income and the pension contribution;
  • 15 March of year following that in which the income was derived, in order to finalise the annual income tax and health insurance contribution for the previous year;
  • 15 March of the year following that in which the income was derived in the case of the activity starting during December of the previous year.

For income derived during 2018 and for finalising 2017, the filing deadline of the Single Statement is 15 July 2018.

The filing deadline for income tax and social insurance contributions due on income derived starting with 2018 is 15 March of the year following that in which the income was derived. For the pre-payment of liabilities due for income derived starting with 2018, a reduction of liabilities is granted, for which the level and pre-payment deadlines are regulated by the annual State Budget Law.

Healthcare Law amendments

The terms have been established under which individuals who derive income other than salary income become insured under the social health insurance system

 

Contact us

Mihaela Mitroi

Partner, Tax Services, Romania

Tel: +40 21 225 3672

Ionuț Simion

Country Managing Partner, Romania

Tel: +40 21 225 3708

Daniel Anghel

Tax and Legal Services Leader, Romania

Tel: +40 21 225.3794

Diana Coroabă

Partner, Tax Services

Tel: +40 21 225 37 94

Ionuţ Sas

Partner, Tax Services, Romania

Tel: +40 21 225 3741

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