TAX REFORM: DECREASE OF EMPLOYERS 'EXPENSES AS OF 1 JANUARY 2018

Romania has been subject to numerous tax reforms in recent weeks and one of them has been particularly controversial with employers and employees. It is about the transfer of social security contributions of employers to the gross salary. This tax reform will be applicable as of 1 January 2018, in accordance with Emergency Ordinance of the Government no. 79/2017, published in the Official Gazette from 10 November.

This measure is beneficial for companies established in Romania the contributions of which as employers are significantly reduced, from 35% to 2.25%.

In exchange, this tax reform has as an immediate effect the decrease of the net salary by about 20%, as the main social security contributions will now be owed by employees. In order to maintain the current net salary level, the gross salary should increase by 20% starting with January.

For employees in the information and technology (IT) industry, who remain exempt from salary tax, the situation is still a bit confusing, as in their case, the cost of the employer will increase by approximately 5% in order to maintain the same amount of the net salary. Measures will be soon discussed to neutralize these additional costs.

The share of social security contributions incumbent on employees actually switches from 16.5% to 35%.

To see this more clearly, here are two summary tables of employers 'and employees' expenses before and after the tax reform.

A significant decrease in employers’ contributions:

And a significant increase in social security contributions for employees :

Emergency Ordinance of the Government no. 79/2017 also increases the minim salary from Romania and modifies the tax on the turnover of micro-enterprises.