In recent years, Romania has represented and still represents a very good environment for IT industry development, and more and more foreign companies are moving their IT activities (programming activities, software production, etc.) in Romania.

According to a study by the Software and Services Industry Employers’ Association, the turnover of the software and IT services sector increased by 11.3% in 2016, compared to 2015 and for 2017 an overrun of the threshold of 4 billion Euro is expected.
The context of industry growth is also favoured by favourable tax provisions that target the tax regime for employees carrying out a number of IT activities.

Legal Provisions

According to the provisions of the Tax Code, individuals are exempted from paying the income tax for income from salaries or income assimilated to salaries, as a result of carrying out the activity of creating computer sofware.

The framing in the category of these types of activities in relation to which the income tax exemption is granted is the obligation of the employer, according to the regulations provided by a specific order detailing, from a practical perspective, what conditions must be met in order to benefit from the exemption.

The conditions for granting relief have been changed over time, but they mainly targeted and target the category of activities, people and the ceilings for which relief can be applied.

What is new since July 1, 2017 refers to the minimum income ceiling that the employer has to make per employee benefiting from the relief, namely a ceiling of 10,000 Euro (for example, according to Order 217/2015 the ceiling was 10,000 dollars, while Order 872/2016 did not provide a ceiling).

The novelty is also intended to define the activities envisaged, so that, starting with July 1, 2017, “software creation activity (…) is the actual provision of one of the computer program creation activities corresponding to the occupations” mentioned in the annex to Order 409 / 2016. Previously, the definition was supplemented with the phrase “for the purpose of making a finished product or a component of a finished product for marketing”

Next, the scope of the employer’s activity must be one of those with the NACE codes specifically provided by the applicable legislation, namely: NACE code 5821, 5829, 6201, 6202, 6209, while the list of eligible occupations remains unchanged.

Practical Aspects

In practice, in order to be able to apply the income tax relief governed by the Tax Code, in addition to fulfilling the eligibility conditions, the employer has the obligation to prepare the payroll for separately exempted employees and for each of them to prepare a file to include documents demonstrating the fulfillment of the conditions, documents such as:

  • the articles of incorporation – in the case of economic operators;
  • the organizational chart of the employer;
  • the job description;
  • the copy of the university studies with the “true copy” mention;
  • the copy of the individual employment contract with the “true copy” mention;
  • Payrolls drafted separately;
  • Internal command, approved by the employer’s authorized management body, to certify the process of creating computer software;
  • the analytical balance in which the income from computer software creation activity is reflected separately.

It is very important for each of the eligible situations to make sure that, on the one hand, the conditions set out in the specific order are met and, on the other hand, that the files in question are prepared for each employee benefiting from the relief.

In practice, in the event of a tax audit, the tax authorities may request that the files be analyzed in order to determine to what extent the conditions for the application of the relief are met.
Article published firstly on Avocatnet.ro.