Tax facilities in the field of construction remain a subject of concern for Romanian legislators. The incentives granted in the field of construction for the period 1 January 2019 – 31 December 2028 have created great discussions, as there are still taxpayers who have suffered from legislative loopholes and problems in the interpretation and application of legal texts.
We would like to draw the attention of taxpayers working in the construction sector to the fact that there is a new amendment to the provisions of Article 60, paragraph 5 of the Tax Code by Order No. 2044/2023 amending the Order on Establishing the Procedure for Granting Tax Facilities in the Construction Sector.
On the one hand, we recall that the legislation in force provides that employees working in the construction sector benefit from tax benefits in the sense that they are exempt from health contribution, exempt from income tax on wages and can choose to pay or not to pay the contribution to the 2nd pillar pension.
As it was known since the beginning of this year, the new conditions for granting tax facilities applicable from 1 January 2023 were to achieve 80% of the turnover in the construction sector, exclusively on the territory of Romania, i.e. the gross salary for a full-time job is a minimum of 4000 lei.
Order no. 2044/2023 establishes and clarifies as conditions that natural persons employed on the basis of an individual employment contract benefit from facilities in the field of construction for the activity carried out in Romania – Article 10 of the mentioned Order.
At the same time, in order to apply the tax relief, the ratio between the turnover actually achieved in the construction sector and the total turnover achieved cumulatively for the corresponding period of the current year, including the month in which the exemption applies, shall be calculated for employers existing on 1 January of each year.
It is very important to underline that for the determination of the percentage of 80% the turnover from construction activities actually carried out on the territory of Romania will be taken into account in the total turnover also actually carried out on the territory of Romania. We therefore note that the tax residence of the beneficiary will not be taken into account.
On the other hand, for newly established beneficiaries the turnover is calculated as having a turnover analysis period starting from the date of establishment until the end of the month when salaries are calculated and due.
Moreover, attention should also be paid to working hours, since the reference to the gross salary of 4,000 lei corresponds to an average working time of 165.33 hours per month.
In addition, for employees who have part-time employment contracts, concluded in accordance with the law, tax benefits are granted only if the gross monthly income from wages and salaries is calculated in proportion to the gross salary for a normal working day of 8 hours/day.
If the employee registers two individual employment contracts in the same month with the same employer, for the purpose of granting tax relief, it shall first be verified whether each individual employment contract complies with the condition laid down in Article 60(5)(a) of the Tax Code. c) first sentence of the Tax Code, i.e. if the gross income is calculated on the basis of a gross salary for 8 working hours/day of at least 4000 lei per month, in the case of a full-time individual employment contract, or if the income is granted in proportion to the gross salary for a normal working day of 8 hours/day.
If these incomes comply with the reporting condition of 4,000 lei, the facilities will be cumulated, without exceeding the ceiling provided for in Art. 60, item 5, lit. c) Tax Code.
Not less important is the provision according to which tax facilities are granted for amounts of gross monthly income up to and including 10,000 lei, obtained from salaries and related income. Therefore, the part of the gross monthly income exceeding 10,000 lei does not benefit from tax relief.
The Costaș, Negru & Asociații team is at the taxpayers’ disposal to help them to provide concrete solutions to block the system of abuses by the tax authorities.
This article was prepared for the blog of the law firm Costaș, Negru & Asociații by av. Larisa Mărginean of the Cluj Bar Association and av. Andrei Fătu of the Cluj Bar Association.
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