THE ADDITIONAL TAXATION OF HIGH WAGES - A ROBIN HOOD MEASURE Grindeanu, at war with the multinationals

Employees earning more than five monthly gross wages will be required to pay more to healthcare and pension contributions, starting with April, after the government decided, on Friday, through an emergency ordinance to eliminate the cap on these taxes.

The measure was bundled with the raise of the minimum wage to 1450 lei a month, starting with February 1st, as well as the elimination of social security contributions for earnings on interest rates and dividends.

The dropping of the cap on social security and healthcare contributions will affect 36,000 employees, which led to it being severely criticized on social networks, especially by corporate employees, who called it a "Robin Hood type measure". Multinationals will be the most affected, as they already have their budgets drawn up.

PM Sorin Grindeanu has already presented the measures adopted on Friday as a balancing of budget revenues and expenses: "The elimination of the healthcare contributions cap set at five median wages will apply to approximately 36,000 employees. Revenues will increase by 500 million lei, so we aren't just talking about expenses, that would cover up the elimination of the healthcare contributions payments on investment incomes and other activities, and also the increase of wages in the culture sector that we are passing today. 500 million in income on side, expenses decreasing".

Another example presented by the PM was the removal of the Social security contributions for the same category of employees: "Also, an increase of 1.4 billion through the removal of the cap on Social Security contributions by eliminating the CAS cap for those with wages that are five times higher, which would cover the increase of the minimum pension from 400 to 520 lei starting with March 1st, free railroad travel and more than doubling student allowances from 83 to 201 lei. 1.4 billion lei in additional revenues, going to these increases".

The emergency ordinance introduces the exception that the persons that earn income from investments and/or other sources do not owe social security contributions for these revenues if they also earn income from wages or similar types of revenues, pensions, revenues from freelance activities, income from the assignment of usage rights to various goods, income from partnerships with a legal entity or income from farming, forestry and fish farming.

According to the draft emergency ordinance, posted on the website of the Finance Ministry, taxpayers earning royalty income, with withholding tax or from rent, will owe healthcare contributions capped at five gross median wages.

• 1% tax for microenterprises

As for the "taxation of microenterprises' revenue", the emergency ordinance brings the following changes. First of all, it raises the limit of previous year revenues on December 31st of the previous fiscal year from 100,000 Euros to 500,000 Euros, thus changing one of the requirements that had to be met by Romanian legal entities in order to qualify as microenterprises, according to the press release of the government, which also states: "Also, in order to stimulate the creation of new jobs and in order to correctly distribute the fiscal burden for companies, a tax rate of 1% is set for microenterprises that have one or more employees and the current quota of 2% for microenterprises that have one employee will be abrogated".

Another measure consists of the elimination of income tax owed by individuals that earn salaries or similar income through seasonal activities, based on individual fixed-term employment contracts: "This proposed measure is intended to develop qualified human capital. It is also intended to increase stability among the domestic workforce, through the stability of the contractual work relations and by reducing the migration of qualified employees, which has a significant social impact".

Also changed is the method to set the amount of the tax owed on income from the transfer of rights of ownership and its dismemberments, as follows: "We are introducing a non-taxable cap on income earned through the transfer of ownership rights and of its dismemberments, on constructions of any kind and their afferent land, as well as on plots of land of any kind without constructions on top, amounting to 450,000 lei; - for any amount higher than that, the tax will be calculated by applying the 3% rate to the difference between the amount stated by the parties and the non-taxable amount of 450,000 lei.

The decision is intended to help stimulate the sale of buildings, which would allow the growth of the construction industry, which is focused on residential constructions".

At present, upon the transfer of the right of ownership and of its dismemberments, through legal deeds among the living concerning any types of constructions and the pertaining plots of land, as well as over plots of land without any constructions on them, taxpayers owe a tax that is calculated as follows: "For constructions of any type with their pertaining plots, as well as for plots of land of any kind, without constructions, acquired up to three years before, inclusively: - 3% of the amount of 200,000 lei inclusively; - over 200,000 lei, 6,000 lei + 2% calculated based on the amount that exceeds 200,000 lei inclusively; - For the buildings described above, acquired more than three years before: -2% up to 200,000 lei inclusively; - above 200,000 lei, 4,000 lei + 1% calculated based on the amount that exceeds 200,000 lei inclusively".

The government has also announced that another novelty is represented by the deduction of the price of subscription-based medical services from the calculation of salary and similar incomes, prepaid medical services provided directly to subscribers as oppose to those provided through insurers, outside of the services of the base medical packages of the public healthcare system, paid for by employees, aside from the voluntary healthcare insurance premiums (according to the Law no. 95/2006, republished), with the limit of the equivalent in lei of the amount of 400 Euros a year.