Over the past ten years, Romania has become an important IT & C center, with strong growth from one year to the next. The high degree of attractiveness generated by the quality of work provided by Romanian IT & C specialists has led some foreign companies, which do not have a presence on the local market, to use their expertise, giving them a competitive income and the opportunity to work from home.
In relation to the foreign company for which they provide professional services, these people are usually either employed or collaborating with authorized PFAs. However, the fact that the employer / contractor company is not established in Romania does not mean that there are no taxes here when the activity of the individual is carried out from the territory of our country.
Each of these two modes of collaboration generates tax liabilities in Romania, which can often be difficult to fulfill. In the case of employees, the reporting process in Romania of earnings earned abroad and the payment of related taxes is complex, on a monthly basis, with responsibilities from the employee or employers in some cases.
These obligations must be taken into account by individuals when they conclude a work contract with a foreign company - whatever its form, even for example a "gentleman's agreement" - because they will have an impact on their salary will remain in your hands after paying the taxes.
For earnings earned abroad, 10% income tax and 37.25% contributions are due: 35% individual social contributions (25% pension contribution, 10% health contribution) and 2.25% insurance contribution for work. It's about the same taxes paid by an employee of a Romanian company. In this structure, the employee must take into account that he can not benefit from the income tax exemption applicable to IT specialists employed by companies registered in Romania.
Because it is possible for tax obligations to occur in the company's home state, the employee should find out from the employer who they are and to what extent they will affect their net salary.
In the case of a PFA, the relationship with the foreign company can function legally only if there is a relationship of independence between the two parties (according to the provisions of the Fiscal Code, at least four of the seven criteria must be fulfilled, among which: the person has the freedom to carry out activity for more clients, choice of place and mode of work, and work schedule).
The reporting obligations of income earned abroad are borne by the individual and are made through the unique income tax and social contributions statement. In case the tax is realized in a real system, a rate of 10% is applied for the income tax, while for the taxation by the income norm, the value of the tax is obtained by applying the 10% rate to the norm income.
The person also owes the 25% pension contribution applicable to a chosen income (so the taxable base can not be less than 12 x 2,080 lei = 24,960 lei for the year 2019) and the 10% health contribution applicable to the said minimum base above, both due if it expects to receive in the current year revenues equal to at least 24,960 lei.
For example, at a gross monthly income of 10,000 lei, the fees due for one employee are 4,375 lei, while one PFA owes 1,728 lei, in a real system, without taking into account deductible expenses and taking into account a minimum basis for social security contribution.
The tax implications presented above are also applicable to individuals working from home for foreign companies and other areas. In addition, in the case of employees, the specific legal aspects regarding the way of doing business in such a regime should be followed, such as: what must include the employment contract, the rights and obligations of the employee, the obligations of the employer, etc.
We would like to remind you that the single income tax and social contributions due by individuals for 2018 must be deposited by March 15, 2019, which is also the deadline for payment of tax and social contributions due.