Crowe Analysis: One in six employees in Romania will have higher incomes, on paper, due to the new fiscal changes

Employers in three industries – construction, agri-food industry, and IT – must increase their personnel expenses by up to 18% due to the new fiscal changes that came into effect on November 1, 2023, according to an analysis by the fiscal consulting, accounting, and auditing company Crowe Romania. The new measures are immediately applicable in these sectors which together employ over 800,000 workers, which is 16% of the total number of employees in Romania.

Law no. 296/2023 fundamentally changes the way in which income is taxed in several key industries, and employers have to make difficult choices in the coming days, which will affect either their budgets and profitability or employee motivation. If in construction and the agri-food industry employers must fully assume the increase in costs, in IT employers can opt to transfer the new tax into the employees' "pockets".

Who is affected? The fiscal reform brings significant changes to the labor market in three sectors of activity:

• Construction: In the construction sector, where approximately 450,000 employees work, the degree of application of some fiscal facilities introduced in 2019 through a special regime meant to increase the attractiveness of candidates in a field strongly affected by external migration is reduced. Thus, from November 1, 2023, employers in this sector will pay health (CASS) and pension (CAS) contributions for special or special working conditions, contributions from which they were exempted since the beginning of 2019. Construction employees remain with the facility of not paying income tax, but those with salaries over 10,000 lei gross per month are excepted, as the part of the gross monthly income that exceeds 10,000 lei does not benefit from fiscal facilities. In addition to these measures, another change is set to add pressure on the salary budgets of construction companies: the increase in the minimum gross salary from November 2023 from 4,000 to 4,582 lei monthly, so that employees classified on this salary will receive the same net salary after the reduction of fiscal facilities.
• Agri-food industry: The facilities for employees in the agri-food industry, introduced in May 2022, have undergone progressive reductions, starting with the same year, similar to those in the construction industry. In these sectors, over 250,000 employees are active, according to the National Institute of Statistics. From November 1, employers in this sector will pay CASS and CAS for activities carried out under special conditions, special. Also, employees in this sector remain with the facility of not paying income tax if they have incomes of up to 10,000 lei gross per month, and those who exceed this value will pay income tax for the part of the gross monthly income that exceeds 10,000 lei. Also, the minimum wage in this sector will increase from 3,000 lei to 3,436 lei gross starting with the incomes for November 2023, so that employees classified on this salary will continue to receive the same net salary after the reduction of fiscal facilities.