the expansion of facilities, only for IT-ists employed by the state

Under the signature of several ministries, including that of Digitization and Labor, the government published in the Official Gazette an Order by which the tax facilities in IT, which were for employees who develop software, are extended to state employees. Practically, according to the new legislation, IT professionals from IT companies and IT professionals from the state no longer pay income tax. At the same time, the facility did not extend to IT professionals working in other companies.

For example, the position of database administrator, which is among the positions eligible for tax exemption, can be in a bank, and in the state, and in an IT company. If a government or IT database administrator gets exemptions, i.e. a raise, why wouldn’t a bank employee get the same exemptions?

“The exemption of employees in the private sector from the payment of income tax on salaries and salary-related income started from the premise that the creation of know-how/production must be encouraged, strictly in the IT field. This can be evaluated objectively only in relation to CAEN. The purpose of a company is to obtain profit, relative to the object of activity described by CAEN. The state does not operate on CAEN codes, nor does it aim to make a profit, but provides public services for citizens. That’s why the hypothesis or the conditions for which the tax exemption is applied to the private sector cannot be compared with the hypothesis of its application to the state, because the activities are fundamentally different”, answers, for ZF, the minister of digitization Sebastian Burduja.

The order comes as a bonus for IT employees from the state, according to Emilian Duca, tax consultant: “It is a temporary situation because there are problems with securing the funds and they found a way to give a salary increase to those who work in the field at the state.”

On the other hand, the new regulation for the expansion of fiscal facilities in IT and in the public sector opens doors so that other employees in the private sector in IT, who did not benefit from these facilities until now, can be exempted from paying the profit tax, says Mitel Spataru, tax partner, Crowe Romania.

“The new normative act brings a broadening of the scope of application of the facilities. On the one hand, by the express enumeration of all the current fields that concern information technology, digitalization, including the digitalization and modernization of public authorities (ANAF, e-government services). On the other hand, by completing and clarifying the possibility of granting facilities and employees to public institutions involved in IT&C activities.”

About 100,000 IT professionals in Romania currently benefit from the non-payment of income tax, introduced by the Adrian Năstase government, this being one of the oldest fiscal facilities. At this moment, IT, with all related services, has come to make up about 12% of GDP, that is half of the entire industry. Whether it grew more due to tax facilities or more due to market inertia and global trends, no one can give an exact answer, but it is certain that Romanian IT has grown by double digits every year for the last 15 years.

But now Romania’s budget is in a situation of needing money and one of the most recommended measures by economists is the elimination of fiscal facilities from different sectors. Moreover, the elimination of these IT and construction facilities is included in the National Recovery and Resilience Plan (PNRR) and failure to meet this target leads to the loss of some European money.

“It will be interesting to watch how the application of these facilities will evolve in the context of the recent debates in the public space regarding the change in the income tax system and the recommendations coming from the World Bank, the IMF, the EU via PNRR related to the rethinking or even the elimination of the facilities at the level taxation of natural persons”, says Mitel Spătaru.

The fiscal impact of the measure has not been published. Asked by ZF, the digitization minister said that: “There are many variables, which must be individualized at the level of the institution. Only those who have a task of creating computer programs provided for in the job description or in another legal act that gives rise to service obligations are exempt. This mission varies from one day to another or from one month to another, depending on each institution”, said Sebastian Burduja.