In the fiscal world of Romania, terms like “employment certificate” and “social contributions” are commonplace, and changes in tax legislation can have a significant impact on taxpayers. An important aspect of this tax law is the provision of non-taxable salary benefits, which bring numerous advantages to both employees and employers.
Non-taxable salary benefits represent additional income for workers and can help motivate them. These benefits can take the form of social assistance, cash or in-kind gifts, or reimbursements for specific services such as vacations or private health insurance.
Social Assistance: Support in Difficult Times
Social assistance is an example of this kind of salary benefit and represents non-taxable income for both employees and other individuals according to employment contracts or special laws. These can be granted in various situations, such as for funerals, serious and incurable illnesses, medical devices, or childbirth/adoption.
Additionally, employers can provide additional employee benefits in the form of social assistance as stipulated in individual employment contracts or internal regulations, but these are included in the calculation of social contributions and are subject to income tax.
Cash and/or in-kind gifts, including gift vouchers, are another type of non-taxable salary benefit. These are exempt from taxes and taxes to the extent that their value for each individual does not exceed 300 lei. They can be given on special occasions such as Easter, Christmas, International Women’s Day (March 8), or Children’s Day.
Furthermore, there are other fringe benefits considered non-taxable, provided that certain limits are respected. These include additional benefits received by workers based on mobility clauses, the value of meals provided by employers who do not provide meal vouchers, accommodation and rental value for housing provided by employers, contributions to optional pension funds supported by employers, voluntary health insurance premiums, medical services in the form of subscriptions, and others.
Limitations and Tax Obligations of Employers
It is important to note that the non-taxable benefits listed above must adhere to certain limits and rules. For example, additional benefits based on mobility clauses are limited to 2.5 times the legal level established for delegation/secondment allowances.
Regarding meals provided by employers, these must not exceed the maximum value of a meal voucher per day. Accommodation and rental value for housing must fall within a monthly limit of 20% of the minimum gross monthly wage guaranteed in the country, and there are certain conditions for employees to be eligible for this benefit.
Contributions to optional pension funds and optional pension schemes must be borne by employers within the annual limits established. Premiums for voluntary health insurance and medical services provided in the form of subscriptions must not exceed the equivalent in Romanian lei of 400 euros per person per year.
Here is a list of the main categories of non-taxable salary benefits according to Romanian tax legislation:
1. Additional benefits received by workers based on mobility clauses
An important aspect of non-taxable salary benefits is the additional benefits received by employees based on mobility clauses. These are granted according to the law and can include various facilities or compensation for workers in cases where they are required to travel or work in a location other than their usual one. In Romania, these benefits can enjoy preferential tax treatment, being exempt from income tax and social contributions.
2. Value of meals provided by employers who do not provide meal vouchers at the workplace
Another important benefit is the value of meals provided by employers for their employees. This benefit is non-taxable, provided that employers do not also provide meal vouchers at the workplace. The maximum limit for this benefit is set at the maximum value of a meal voucher per day according to Romanian tax legislation.
3. Accommodation and rental value for housing/living spaces provided to employees
Employers can also offer benefits related to accommodation and rent for their workers. These benefits are considered non-taxable if they meet certain conditions, such as the worker and/or their family not owning a property in the locality where they work, and the accommodation space is provided to employees in accordance with the employment contract or internal regulations. The limit for this benefit is 20% of the minimum gross wage guaranteed in the country per month per person.
4. Value of tourist and/or treatment services, including transportation, during vacations
Another important non-taxable benefit is provided by employers in the form of tourist or treatment services, including transportation, for employees and their families during vacations. These benefits can be exempt from income tax and social contributions but are subject to an annual cap, representing the level of the average gross salary used for the state social insurance budget for the year in which they were granted.
5. Contributions to optional pension funds by employers for their employees
Employers can contribute to optional pension funds for their employees, and these contributions are considered non-taxable within the limits set by tax legislation. The annual limit for this benefit is 400 euros per person.
6. Premiums for voluntary health insurance or medical services provided in the form of subscriptions, supported by employers for their workers
To improve healthcare for employees, employers can cover premiums for voluntary health insurance or offer medical services in the form of subscriptions. These non-taxable benefits can be exempt from income tax and social contributions, provided that they do not exceed the equivalent in Romanian lei of 400 euros per person per year.
7. Amounts granted to employees working remotely to support utility expenses at their remote workplace
In the context of increased remote work, employers can provide allowances to support utility expenses at the remote workplaces of their employees. These amounts can be considered non-taxable benefits, with a monthly cap of 400 lei per person, corresponding to the number of days the individual works remotely.
8. Value of subscriptions for the use of sports facilities for sports and physical education
To promote a healthy lifestyle, employers can cover the cost of subscriptions for the use of sports facilities for sports and physical education. These benefits can be non-taxable, provided that providers of such facilities are classified under certain CAEN codes and adhere to the limits set by legislation.
Employers are responsible for verifying compliance with the conditions for granting these benefits based on supporting documents.
Recent Changes in Tax Legislation Starting in January 2023, certain benefits provided by employers benefit from preferential tax treatment, provided that the total value of these benefits does not exceed 33% of the base salary corresponding to the job position. These non-taxable benefits include the value of meals, accommodation and rent for housing, additional benefits received under mobility clauses, contributions to optional pension funds, premiums for voluntary health insurance, amounts granted to employees working remotely, and others.
For the mentioned benefits, the employer must first consider the individual cap for each benefit, and then the 33% cap of the base salary, which is the salary specified in the individual employment contract. Only these benefits, when combined, are subject to this non-taxable 33% limit, and the employer decides the order in which these benefits are included in the cap.
Non-taxable salary benefits represent a significant advantage for both employees and employers in Romania. They provide an additional incentive for worker and can contribute to increasing their motivation and satisfaction. At the same time, they can help employers retain and motivate their workforce.
However, it is essential for employers to strictly adhere to the limits and rules imposed by tax legislation for these benefits to avoid potential negative tax consequences. With a clear understanding of non-taxable salary benefits and their associated tax obligations, employees and employers can efficiently benefit from these tax incentives, thus contributing to a healthier and more productive work environment in Romania.
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