Supplementary Tax Deduction for Incomes up to 3000 Lei

Another positive impact of the new Romanian Fiscal Code comes in the form of a supplementary tax deduction granted to the employees who are parents, if their gross salary is below the amount of 3000 lei (≈667 €). We further on elaborate on the specific conditions allowing such a tax deduction, as well as exemplify it for different income levels.

 

SUPPLEMENTARY TAX DEDUCTION: FOR WHOM IS IT INTENDED?

The general rule is that any employee receiving a gross salary below 3000 lei can benefit from a so called “personal deduction” when it comes to their income tax. The amount of the deduction is subtracted from the taxable income before applying the 16% tax rate. Therefore, under specific conditions, a part of the income is no longer subject to tax, leading to an overall increase of the net salary.

This advantage has been introduced by the new Romanian Fiscal Code starting January 2016. It is reserved for employees who have:

  • dependent children under the age of 18;
  • dependent children above the age of 18 without any personal income (ex.: students)
  • other dependent persons (ex. : parents with no/below limit pension)

Another good news from the New Fiscal Code is that starting 2016 the deduction will be granted to both parents. This wasn’t the case during previous years, when only one parent could benefit from this deduction, of the amount granted at that time.

 

THE AMOUNT OF THE NEW SUPPLEMENTARY TAX DEDUCTION

 The supplementary deduction is granted in different amounts, depending on the number of dependent children / persons.

For gross salaries smaller than 1500 lei (≈333 €), the deduction is granted in the following amounts:

  • for employees with no dependent persons – 300 lei (≈67  €);
  • for employees with 1 dependent person – 400 lei (≈89 €) ;
  • for employees with 2 dependent persons – 500 lei (≈111 €);
  • for employees with 3 dependent persons – 600 de lei (≈133 €);
  • for employees with 4 or more dependent persons – 800 de lei (≈178 €).

In the table below you can see the effects of the deduction on the net salary in some of these specific cases:

Lei

1 child 2 children 3 children
Gross salary 1.500 1.500 1.500
Pension contribution 10,5% 158 158 158
Unemployment ctb. 0,5% 8 8 8
Health ctb. 5,5% 83 83 83
  1.253 1.253 1.253
Personal deduction 400 500 600
Taxable income 853 753 653
Income tax 16% 136 120 104
Net salary (lei) 1.117 1.133 1.149

The same table looks like this if all values are exchanges into euros, for an exchange rate of 1 € = 4,5 lei :

Gross salary 333 333 333
Pension contribution 10,5% 35 35 35
Unemployment ctb. 0,5% 2 2 2
Health ctb. 5,5% 18 18 18
  278 278 278
Personal deduction 89 111 133
Taxable income 189 167 145
Income tax 16% 30 27 23
Net salary (lei) 249 253 256

 

Let’s have another example, for a different gross salary, observing the impact of the deduction with the increasing number of dependent persons :

Lei

1 child 2 children 3 children
Gross salary 2.500 2.500 2.500
Pension contribution 10,5% 263 263 263
Unemployment ctb. 0,5% 13 13 13
Health ctb. 5,5% 138 138 138
  2.088 2.088 2.088
Personal deduction 140 170 200
Taxable income 1.948 1.918 1.888
Income tax 16% 312 307 302
Net salary (lei) 1.776 1.781 1.786

And this is how the same thing looks when expressed in euros, at the same exchange rate as above :

Gross salary 556 556 556
Pension contribution 10,5% 58 58 58
Unemployment ctb. 0,5% 3 3 3
Health ctb. 5,5% 31 31 31
  464 464 464
Personal deduction 31 38 44
Taxable income 433 426 419
Income tax 16% 69 68 67
Net salary (lei) 395 396 397

 

Concluding, we notice that the impact on the net salary of those with more than 1 child is obviously very small, especially for salaries close to the superior limit of 3000 lei. The good thing is the measure leads at least to an increase and not to a decrease of incomes and it applies to both parents!

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