From June 1, 2023, IT employees from local public institutions will enjoy, just like employees from central public institutions, the income tax exemption provided by the Fiscal Code in art. 60 point 2. Thus, employees of public institutions will be exempted from paying the tax for incomes made from wages and incomes assimilated to wages, as they are defined in art. 76 para. (1)-(3) of the Fiscal Code, as a result of carrying out the activity of creating computer programs.
This change occurs as a result of the fact that in December 2022, the Ministry of Finance announced that IT professionals within public institutions, as defined by art. 2 para. (1) point 30 of Law no. 500/2002, will benefit from the income tax exemption, starting from January 1, 2023.
Therefore, on 23.12.2022, Order no. 21813/6421/2246/4433/2022, was issued by the Ministry of Research, Innovation and Digitization, the Ministry of Education, the Ministry of Labor and Solidarity and also the Ministry of Finance. was published in the Official Gazette of Romania.
From a theoretical point of view, this order provided that the employees who carry out activity in the field of IT within the Parliament, the Presidential Administration and the ministries will benefit from the date of January 1, 2023 from the previously mentioned exemption. Also, this exemption also concerned employees in the IT field within other specialized bodies of the public administration and within public authorities, autonomous public institutions, as well as institutions under their subordination or coordination, financed from the budgets provided for in art. 1 paragraph (2) from Law no. 500/2002.
More than likely, this change, although welcome among the employees in the field of IT within the central public institutions, created a series of dissatisfactions of the IT-ists within the local public institutions, as they found themselves in the unpleasant situation in which the order published in the Official Gazette no. 1252/23.12.2022 did not concern them, the exemption not applying in their case either.
Thus, in order to standardize the application of a fiscal facility , through the new Order no. 1415/2023, published in the Official Gazette no. 370/2.05.2023, the Ministry of Research, Innovation and Digitization, the Ministry of Education, the Ministry of Labor and Solidarity and the Ministry of Finance have extended the effects of the order published last year in December to IT employees within local public institutions, as defined at Art. 2 para. (1) point 39 of Law no. 273/2006.
Therefore, under certain conditions, they will enjoy the exemption from paying income tax, including IT-scientists within local public institutions represented by communes, cities, municipalities, sectors of the municipality of Bucharest, counties, the municipality of Bucharest, institutions and public services under them, with legal personality, regardless of the way of financing their activity.
Both the order published in December 2022 and the new one provide that including the employees of economic operators operating on the territory of Romania, whose object of activity includes the creation of computer programs, benefit from the exemption from paying tax on income from salaries and assimilated to wages, of course, under certain conditions.
Considering the fact that the new order will enter into force starting from June 1, 2023, and it is current, the main conditions provided for by it will be presented in order to be exempted from the payment of tax on income from wages and wages assimilated to wages in the case of all IT -ists, both in the private sector and in the public sector.
Therefore, in the case of employees of economic operators, five CAEN codes related to the activities of creating computer programs are provided for the exemption from paying income tax, namely CAEN 5821 activities of editing computer games, CAEN 5829 activities of editing other software products, CAEN 6201 custom software development activities (customer oriented software), CAEN 6202 information technology consulting activities and CAEN 6209 other information technology service activities.
Another condition to benefit from this tax facility is that the positions employed by those in the private sector correspond to specific occupations and activities, which are mentioned in the annex of the aforementioned order, namely:
- database administrator, who carries out activities of providing specialized expertise and practical assistance in the management of database systems and in the use of computer data to meet the requirements of the computer system at any time of the life cycle, in accordance with defined quality criteria;
- analyst, who carries out analysis activities in order to define the specifications for the effective construction of IT systems, likely to respond to user requirements;
- system engineer in informatics, who carries out activities that combine analytical and design skills with adequate knowledge of software and hardware technology, in order to define, design, create, test, implement and modify computer systems that contain software as the main component;
- software system engineer, who carries out adaptation and/or harmonization activities of hardware solutions, software and operating systems, as well as existing or designed applications to the real or estimated needs of users, in order to fulfill the requirements regarding the satisfaction of the degree of request (response time);
- IT project manager, who performs development systems coordination activities specific to major IT applications, including staff coordination and tracking project requirements (required information/data, scheduling, analysis). Project managers develop, plan, analyze, estimate and establish the priorities related to the components to be realized, as well as the phases and deadlines of project execution;
- programmer, who carries out activities of creating computer programs, according to predefined specifications, and assembling them into coherent systems, including testing to ensure compliance with the specifications;
- computer systems designer, who carries out activities that combine analytical and design skills based on specialized knowledge with knowledge in the use of software tools or programming languages, in order to produce and implement functional solutions that meet predefined requirements or needs organizational;
- computer system programmer, who carries out activities that combine analytical and design skills with adequate knowledge of software and hardware technology, in order to define, design, create, test, implement and modify computer systems that contain software as the main component;
- programmer helper, who carries out technical support activities in the creation of computer programs, according to predefined specifications, and their assembly into coherent systems, including testing to ensure compliance with the specifications;
- analyst helper, who carries out activities to ensure technical support for carrying out the analysis in order to define the specifications for the actual construction of the IT systems, likely to meet the requirements of the users;
- software product development engineer, who performs requirements analysis and assessment activities for existing or new IT applications and operating systems: design, development, testing and maintenance of software solutions to meet these requirements.
The activity of creating computer programs involves the effective performance of at least one of the activities of creating computer programs, corresponding to the occupations listed and, as the case may be, individualized in the job description or in any other legal act that establishes the job duties.
These positions must necessarily be part of a department that has as its object of activity at least one of the following fields, which must be highlighted in the employer’s organization chart: information and communication technology (ICT), artificial intelligence (AI) and digital technologies emerging, tax administration and electronic format, databases, e-government services and digital transformation.
Another condition provided by the new order is that employees in the IT field must hold a bachelor’s degree obtained after completing a form of long or short-term higher education or after completing the first cycle of undergraduate university studies, issued by a accredited higher education institution. If this condition is not met, the new order stipulates that a baccalaureate degree is also sufficient, provided that you attend the courses of an accredited higher education institution and actually perform one of the previously mentioned activities.
The order published in the Official Gazette no. 370/2.05.2023 does not exempt employers from fulfilling certain conditions in order to apply the exemption among employees. Therefore, it is stipulated that the employer must have realized in the previous fiscal year and have separately recorded in the analytical balances revenues of at least 10,000 euros from the activity of creating computer programs intended for commercialization, for each employee who benefits from the tax facility . However, it must be stated that the granting of the facility is not conditional on the employee’s contribution to the achievement of this ceiling.
There are certain exceptions to this condition, which apply to companies that are established during the fiscal year, the condition not operating both in the year of establishment and in the following fiscal year. Also, another exception is represented by companies that have undergone a reorganization according to the law, they being exempted from fulfilling the condition for the year in which the reorganization operation took place.
Moving on to the relatively new element brought by the order in question, the presented fiscal facility is recognized including in the case of employees in public institutions, for the period in which they carry out activities of creating computer programs, according to the specific skills and attributions provided in the job description or in any other legal act that establishes the duties of the service, under certain conditions.
Some conditions laid down in the case of public sector employees are identical to those laid down in the case of those working in the private sector. Therefore, for informational purposes, it is necessary to mention the common conditions, but without analyzing them, since they were analyzed in the previous paragraphs.
Employees in public institutions must, in turn, hold a bachelor’s degree under the same conditions as employees in the private sector, with the exception of holding a baccalaureate degree and following higher education courses and performing an activity of those provided in the annex.
Further, public sector IT professionals must hold a position that encompasses the occupations and activities in the annex, which have been listed in the previous paragraphs. However, a new element is the fact that in the case of those in the public sector there is a derogation, namely the fact that the position assigned to the activity of creating computer programs can also be part of the category of those established outside the organization chart.
Finally, the positions assigned to the activity of creating computer programs are established by the head of the public institution through an administrative act. Also, the head of the institution is obliged to provide in the job description or in any other legal act that establishes the job duties at least one of the activities contained in the annex to the order.
Another important aspect to remember is the fact that in the case of employees in public institutions, the exemption from paying tax on income from wages and wages-related income is applied for the entire period in which they actually carry out the activity of creating computer programs, and in the situation in that the activity of creating computer programs is actually carried out for a fraction of the month, the exemption from paying the tax on income from wages and similar to wages is applied to the entire income from wages and assimilated to wages made in that month.
Moving on, to art. 4 of the new order provides the supporting documents that are considered for the inclusion of employees in the category of those exempt from paying the tax on income from wages and salaries. Considering the technicality of these provisions, the fact that some documents are common both in the case of those in the public sector and in the case of those in the private sector is relevant in the discussion. On the other hand, in the case of those in the public sector, the constitutive documents, the internal order approved by the competent management body of the employer, which attests the request to initiate the process of creating computer programs and the analytical balance in which the incomes are clearly reflected, will also be considered from the activity of creating computer programs.
Distinctly from the case of employees of economic operators, in the case of employees of public institutions, the documents certifying the initiation and duration of the process of creating computer programs, approved by the head of the institution, will be considered for the exemption from the payment of income tax public.
Another important aspect is the fact that the facility can also be granted to those who carry out activities in the IT field on the basis of a delegation or secondment act or a special status provided by law, not only in the case of those who carry out their activity on the basis of a contract individual employment or a service report, regardless of the time of employment of the person who benefits from the exemption.
Granting these exemptions is the responsibility of the employer or the income payer, in the case of employees of economic operators, and the responsibility of the head of the public institution, in the case of employees of public institutions.
In conclusion, the new changes brought by Order no. 1415/2023 regarding employment in the activity of creating computer programs make the exemption from paying tax on income from salaries and from incomes assimilated to salaries applicable, under certain conditions, both to IT professionals in the public sector and to those in the private sector.
Although for the most part the conditions to benefit from this facility are identical in the case of employees of public institutions and in the case of employees of economic operators, there are still some differences, which only simplify the method of granting the exemption for certain employees.
An aspect that confirms this certitude is the fact that in the situation where the activity of creating computer programs is actually carried out for a fraction of the month, the exemption from paying the tax on income from salaries and similar to salaries for employees in public institutions applies for the whole income from wages and assimilated to the wages earned in that month. Also, on the same note, is the fact that in the case of employees in the public sector, the post assigned to the activity of creating computer programs can also be part of the category of those established outside the organizational chart.
Considering the fact that these rules will come into force from June 1, 2023, there is a risk that for various reasons certain errors will be committed in the future that will violate the rights of IT professionals regarding the exemption from tax on income from wages or assimilated to salaries. For this reason, it is recommended to consult a lawyer in order to identify the errors and clarify the situation.
This article was drafted, for the Costaș, Negru & Asociații – Lawyers’ Civil Partnership blog, by Bogdan Ioan Mihai Șuta, lawyer, affiliated to the Cluj Bar Association.
Costaș, Negru & Asociații is a lawyers’ civil partnership with offices in Cluj-Napoca, Bucharest and Arad, providing legal assistance, representation and consultancy in a number of practice areas with a team composed of 17 lawyers and consultants. Details regarding legal services and the members of the team can be found on the website https://www.costas-negru.ro. All rights for the materials published on the company’s website and on social media belong to Costaș, Negru & Asociații, their reproduction being allowed only for information purposes and with the correct and complete disclosure of the source.