New legislative changes for PFA’s in 2016!

Although it should be the simplest form of conducting business, the legislation underwent continuous changes for this segment.

Currently, there is a draft Fiscal Code pending approval, which also targets changes in the taxation of the income obtained from independent activities, some favourable, some less favourable.

Below are the main changes proposed in the draft of the new Fiscal Code:

CHANGE 1 (favourable) – CAS rates shall be reduced as of January 1, 2016.

  01.01.2015 01.01.2016 01.01.2017
CAS (normal work conditions)      
Full rate 26.30% 26.30% 21.00%
 
CHANGE 2 (unfavourable) – PFAs will owe CAS, even if employees
01.01.2015 01.01.2016
Self-employed individuals who earn income from independent activities do not owe contributions for such income if they also receive salary income.
The exception stating that self-employed individuals who earn income from independent activities do not owe contributions for such income if they also receive salary income is abrogated.
 
 
CHANGE 3 (unfavourable) – PFAs will owe CAS at the higher of the actual income and the floor limit, however not exceeding 5 times the average gross salary income.

01.01.2015 01.01.2016
Self-employed individuals who earn income from independent activities may get insured at the minimum level, representing 35% of the average gross salary income (for 2015: 2,415 RON x 35%= 845 RON ).
The option to choose the income level insured through the public pension system by self-employed individuals who earn income from independent activities is cancelled; currently, PFAs may get insured at the minimum level, representing 35% of the average gross salary income. For the PFAs whose earnings exceed the monthly floor limit, CAS shall be calculated based on the actual earnings, however not higher than 5 times the minimum level. 
 
 
CHANGE 4 (unfavourable) – The CAS advance payments are not reimbursed or adjusted.
01.01.2015 01.01.2016
                                                  -  
If the actual income, determined on net earnings basis, falls below the floor limit, the advance payments of social security contributions are not reimbursed, but shall be considered for calculation of the retirement contributions and the retirement score.
 
 
CHANGE 5 (favourable) – PFAs will not owe CAS if in the previous financial year their monthly income was below the floor limit.
 
01.01.2015 01.01.2016
                                                   -
Self-employed individuals whose income earned in the previous financial year was below the floor limit shall not file the form and shall not make advance payments as social security contributions.
 
 
CHANGE 6 (favourable) – The CASS calculation basis is capped to 5 times the average gross salary income. 

01.01.2015 01.01.2016
There was no upper limit for the CASS contribution, which was applied to the difference between receipts and payments or according to the fixed income basis. 
Since the health insurance contribution will have to be paid for the entire income earned by self-employed individuals, it is proposed to cap the monthly calculation basis for the individual health insurance contribution; therefore, the monthly calculation basis to which the individual contribution rate is applied cannot exceed 5 times the average gross salary income used to prepare the national health insurance budget. 
 
 
CHANGE 7 (favourable) – PFAs shall no longer pay CASS if they do not obtain income, and if their income is below the floor limit, CASS shall be calculated accordingly.

01.01.2015 01.01.2016
The floor limit for determining the monthly calculation basis of the health insurance contribution is the value of the national minimum wage.
The provision according to which the floor limit for determining the monthly calculation basis of the health insurance contribution is the value of the national minimum wage is cancelled. Thus, the individuals who do not earn income shall no longer be compelled to pay the contribution, and those whose earnings fall below the floor limit, shall pay the contribution according to their actual earnings.
 
 
CHANGE 8 (favourable) – CASS shall be adjusted on an annual basis

01.01.2015 01.01.2016
                                                 -
Another proposal is the introduction of annual CASS adjustment for all the income obtained by a self-employed individual organised as PFA. As such, in the following financial year, the fiscal agent shall determine the annual calculation basis, as sum of the annual calculation bases against which CASS is payable. Such annual basis cannot exceed the annual upper limit equating to 5 times the average gross annual income, multiplied by 12 months (annual upper limit for 2015: 144,900 RON).
 
 
For more information on this subject, please contact us.

A&I Consulting Team