A few weeks ago, we started explaining the idiosyncrasies of hiring a Romanian citizen as a non-resident company (from an EU country). After differentiating between the possible situations and placing them within the EU legal framework, our intention was to depict the hiring procedure for foreign companies as clearly as possible. In this sense, we adopted a step-by-step approach, which we are following also today into a greater detail.
HOW TO DECLARE A NEW CONTRACT WITH THE LOCAL AUTHORITIES
Every new labour contract has to be declared with the Territorial Labour Authority. As already mentioned in the previous article, this requires filling out a specific form and submitting an electronic registration into the REVISAL system (an online platform that registers all Romanian employees). The hiring company will receive its own access codes to this platform (user name + password), which it will further on use for any reporting / tax declarations.
Concerning the declaring obligations of a foreign companies, the procedures to be followed are fairly different than the usual ones, for local companies. First of all, income tax and social contributions are not to be reported all together via the usual D112 form. Non-resident companies can use the habitual D112 form only for social contributions, while income tax is to be reported via the 224 form. Moreover, the two declarations have to be submitted to two different authorities:
- the D112 form – to the fiscal authority for non-residents (The Public Finances General Directorate of Bucharest)
- the 224 form – to the fiscal authority of the employee’s domicile
Furthermore, before submitting the 224 form (stating the monthly income tax), the company is obliged to produce yet another form – the 222. This one is practically announcing the fiscal authorities that an employee concluded a working contract with a non-resident company and therefore he/she will be obtaining revenues from outside the country.
PAYMENT PROCEDURE: INCOME TAX AND SOCIAL CONTRIBUTIONS
Once declared, taxes and contributions are due to the respective authorities on a monthly basis. These payments have to be performed by using pre-defined state budget forms. There are only two specific accounts to be used: one for the income tax, the other one for social contributions.
A question is raised now: where and how to pay these taxes to the state budget? As mentioned above, it is customary in Romania to execute payments for the state or local budget via specific forms. Therefore, it is not possible for a foreign company to pay its due contributions directly from their bank accounts from outside Romania to the Treasury accounts in Romania. It is necessary that the company’s bank sends the money to a correspondent bank in Romania, which will then be instructed of where and how to pay (via the already famous forms).
If you are a foreign company hiring in Romania, we advise that, after the monthly payments are made, your accountant verifies once again their correct allocation. The reason for this is simple: tax payment allocation is unfortunately still done manually for non-residents (unlike the automatic procedure implemented for local companies), which can imply a certain processing delay. The only upside would be that this delay doesn’t however conduct to penalties for late payment.