Taxes on the renumeration of administrators in Romania in 2012 - a tax friendly system

Romania offers a tax friendly renumeration system for administrators. They can be Romanian citizens , European citizens or any other nationality. The law changed in 2011 and we present a calculation model for 2012.

Tax regime after G.E.O. no. 125/2011

According to the provisions of Fiscal code in force, after the issue of G.E.O. no. 125/2011, the indemnity of designated administrators still represents an income assimilated to salaries. Tax treatment from a tax income point of view is the same, and legal basis, on these lines, remained the same [art. 55 paragraph (2) letter j) Fiscal code].

Regarding mandatory social contributions for these incomes, administrators' indemnity is still part of the computation basis of individual social contributions [art. 2964 paragraph 1letter e) Fiscal code] and of the computation basis of contributions due by the income payer (art. 2965 Fiscal code).

However, exemptions from payment of contributions provided by art. 29616 Fiscal code were modified. Indemnities paid to administrators are exempted from payment of:

- individual contribution to unemployment insurance budget and contribution due by the income payer to unemployment insurance budget [letter c1) Fiscal code];

- contribution for work accidents and professional disease insurance due by the income payer to state social security budget [letter d1) Fiscal code];

- contribution for salary claims payment to the Indemnification fund [letter f) Fiscal code];

In other words, after the issue of G.E.O. no. 125/2011, for these incomes, is due the following:

- individual social health insurance contribution;

- contribution due by the income payer to the Unique social health insurance fund budget;

- contribution for leave and social health insurance indemnities due by the income payer to the Unique social health insurance fund budget;

- individual social security contribution;

- contribution due by the income payer to state social security budget;

- tax income.

Regarding social security contribution, this is now also due for trading company administrators' remuneration. Computation basis of contribution to social security is limited, both for individual contribution (to the amount of 5 times the average gross earnings) and for contribution due by the income payer (to the amount of product between the number of insured persons for whom differential contribution is due by the employer according to work conditions, starting with the month when this contribution due to state social insurance budget is calculated and the amount corresponding to 5 times the average gross earnings).

Conclusions

Indemnities paid to trading company administrators are not subject to exemptions from payment of individual social contributions and social contributions due by the income payers. Administrators' remuneration is now subject to CAS, and the impact of these modifications will be felt both by trading company administrators, who are remunerated like this, and companies which pay these incomes.

Even if the computation basis of these contributions is limited according to the amount of the average gross earnings, the impact is a significant one, from a financial point of view.

Thus, we take as example an administrator who obtains monthly earnings of 12.000 lei.

Trading company administrators' remuneration

After G.E.O. no. 125/2011




Gross income

12.000

Individual contributions

CAS - 10,5%

-1.111

CASS - 5,5%

-660

UNEMPLOYMENT - 0,5%

n/a

Income payer contributions

CAS - 20,8%

-2.202

CASS - 5,2%

-624

UNEMPLOYMENT - 0,5%

n/a

FAMBP - 0,15%-0,85%

n/a

CCI - 0,85%

-71

Indemnification fund - 0,25%

n/a

Deduction

0

Tax income - 16%

-1.173

Net income

9.056

Employer additional cost

2.205

Total cost

14.897

Limitation CCI basis

8.400

Limitation CAS basis

10.585

The calculation is for reference only, since, at least from a contribution due by the income payer point of view, the limitation of the computation basis takes into consideration incomes realized by all employees of the company. The impact is reflected in the fact that net income has decreased by 581 lei (approximately 6%), and employer (income payer) cost increased by 2.205 lei (almost 4 times).

Implications are more unfavorable in case the company pays remuneration equal to 5 times more than the average gross earnings to the administrator, but at the same time, it also has other employees with salaries under the amount of 5 times the average gross earnings. In that event, employer's contribution increases, because the incomes of the other employees, which are situated under that ceiling, are compensated with the income of the administrator which exceeds that ceiling.

Modifications of application norms of the Fiscal code brought by G.D. no. 52/2012 also confirm arguments presented above.



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Source: Courierul fiscal februarie 2012