Decree Law 79/2017 published on November 10, 2017 provides some important changes to the Tax Code, Law 227/2015.
The most significant change concerns the compulsory employee contribution effective January 1, 2018; specifically, the government not only reduced the contribution level by 2 percentage points, from the current 39.25 percent to 37.25 percent in effect for 2018, but also decreed that part of the contribution hitherto borne by the employer will be mandatorily transferred to the employee (20 percent of the total employer contribution).
Accordingly, as of January 1, 2018, the new contribution will be allocated as follows:
– pension contribution (CAS 25%) – borne by the employee;
– Health care contribution (CASS 10%) – borne by the employee;
– Employment insurance contribution (2.25 percent)-paid by the employer.
Other changes at a glance effective January 1, 2018:
The decree law also reduces the rate of taxation from 16 percent to 10 percent on income from employment, pension, authorized individuals, copyright and professional income, rents, interest, etc. Income determined by the receipt of dividends is taxed at the (unchanged) rate of 5%.
For companies whose business purpose is the production of software, there are special regulations for the purpose of taxation of employment income.
Considerations:
The legislation under commentary by effectively shifting the mandatory contribution solely to the employee while not changing the labor costs of businesses introduces a very important critical issue. In fact, employee contracts normally provide for gross wages, and as a result, if the employer does not change the gross wage by Dec. 31, 2017, the employee will have the net wages received in 2018 reduced.
As a result, it is very important to urgently arrange to adjust the individual employment contracts for each employee, increasing the gross salary in order to keep the net salary received in 2018 by each employee unchanged.
We remain available for any clarifications and recommend that you contact our HR manager for modification of employment contracts (any other clarifications can be found in the newsletter regarding employee management).
