Income Tax Exemption for IT Employees in Romania

An income tax exemption for IT employees exists in Romania since 2004. The qualifying condition were unfortunately fairly hard to meet. But this is no longer the case, since the 1st of February 2017 it has become easier to benefit from this tax exemption. Here is why.

IT EMPLOYEES: EXEMPTED FROM INCOME TAX IN ROMANIA

The Official Journal of Romania ( no.22/09.01.2017) has recently published the common ordinance of the Ministry of Finance, Ministry of Communications, Labour Ministry, Ministry of Education and Scientific Research no. 2903/2016. This document brought about some new regulations regarding the income tax exemption for IT employees.

In fact, we are talking about a tax exemption applied ever since 2004. But the conditions were hard to meet especially for small companies. Unfortunately, the legislators didn’t take into account that some IT specialists had graduated from different universities (non-IT specialties or other than Mathematics, Informatics or Electronics etc.). There are indeed lots of IT specialists with a university degree in Geography, Economics, Graphic Design or even Philosophy. Gladly, this detail was amended in 2015 so that all university graduates, no matter their specialty, can benefit from the income tax exemption (if the other conditions were met).

As of February 1st, the day the Order 2903/2016 came into force, the authorities gave up on another condition : the one stipulating that the company should have had at least 10 000 USD of revenue during the previous year out of software creation, for each employee benefitting from the exemption.

UNDER WHICH CONDITIONS IS THE INCOME TAX EXEMPTION APPLIED?

How does an employer know if they meet all the legal criteria or not? First of all, they have to be informed regarding all the necessary conditions:

1. The activity of the company

As you already know from our previous articles, the codification of economic activities (CAEN) comes into play when establishing a company. It simply indicates the field in which it will activate. Practice showed that it’s a good idea to state more than just one activity when establishing the company. Besides this main one, no one keeps us from declaring other related activities, which might come in handy later on.

If among the stated CAEN codes there happens to be one of those mentioned below-and of course, the company actually performs this activity, then the first condition is met.

The accepted activities with their CAEN codes are (according to order 2903/2016):

5821 computer games creation
5829 software products editing
6201 client oriented software
6202 IT consulting
6209 other IT services

 

2. Employee’s position

In order to benefit from the tax exemption, the employee should occupy one of the following positions:

  • software designer
  • software programmer
  • software engineer
  • system engineer
  • analyst
  • data base administrator

3. These employees should be university graduates

4. The company should have a specific IT department (software creation department): to be specified in the organizational chart

5. The company’s balance sheet should distinctively show the incoming revenues from the software creation activity

If it’s a new company or one that simply didn’t have an IT department before, it can re-organize in this respect so that it complies with the criteria.

Still, the ordinance is somehow vague with respect to the so called “software creation activities”. Since it’s such a vast field, some people believe the given definitions are non-exhaustive.

The law stipulates also that it is mandatory to have a “final product” or a part of a final product sold by the company.

We kept some more good news for the very end: the government works on extending the area of potential benefiters to high-school graduates. As for the companies, to other related fields of activity. This extension is forecasted to come into force in January 2018.

For further information about our payroll and HR outsourcing services, don’t hesitate to contact us here or at +33 01 44 06 07 97.

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