Planned changes in the tax law and non-taxable income in Romania

In relation to the discussed changes in the Romanian Fiscal Code, the finance minister Viorel Stefan has denied the possibility of implementing a progressive tax system. Furthermore, he expressed his opinion that it is possible to decrease the flat income tax rate from the current 16% to 10%. It is also planned to make any income below 2000 lei (440 euro) non-taxable. These are part of the changes, which are being discussed by the Ministry of Finance and which should be implemented on January 1st, 2018.

The finance minister also contemplates reorganizing the tax system by bringing back the global taxation of incomes. This is a system, which was active in Romania until 2005. Under it, all incomes of the individuals will be taxed despite their source, not only those received through an employment contract. This is necessary for the functioning of a tax relief system. That means that money, which is spent in certain sectors – for example in the private pension system, private health insurance, educational programs etc. – will be deducted from this tax. For this purpose, individuals must keep their invoices and receipts for their respective expenditure, which will be presented, along with their income statement, until April of next year. After that, there will be a recalculation in order to determine whether an additional payment will be required or whether the tax authorities should return part of the money to that individual.

Such a system of global taxation will function only if the citizens are being aided by tax consultants. They will be hired by the state and will provide their services to all individuals for free.

About Author: brcci