In addition to the basic salary, employers are increasingly adopting various strategies to motivate employees. These may be in the form of benefits such as the settlement of meals, the payment of transport tickets, the settlement of subscriptions to sports gyms, the granting of voluntary health insurance premiums, etc.

When granting these benefits, employers need to pay more attention to their tax treatment, as mismanagement can generate additional income tax and mandatory social contributions as well as interest and delay penalties.

Legal Provisions

From the point of view of the corporate tax, Article 25, paragraph (2) of Law 227/2015 on the Tax Code provides that “expenses with wages and thoses assimilated to wages are deductible“.

Therefore, all expenses with wages and thoses assimilated to wages, that is, those that are subject to the same tax rules as salary rights, are tax deductible at company level.

From the perspective of income tax, according to the provisions of Article 76, paragraph (1) of the Tax Code, “all income in monies and / or in kind obtained by a resident or non-resident individual carrying on an activity under an individual employment contract shall be considered to be income from salaries…“.

In addition, paragraph 3 of Article 76 of the Tax Code lists some types of benefits that are considered as salary benefits, and section 12 of the Decision no. 1/2016 on Methodological Rules for the Application of the Law 227/2015 on the Tax Code expressly specifies certain categories of goods and services.

By way of example, we mention the following categories of goods and services that are, according to the Tax Code, wage-like advantages that are subject to the rules of income tax and compulsory social contributions:

  • accommodation, food, clothing and other goods or services offered free of charge by the employer to its employees;
  • non-reimbursable loans;
  • subscriptions and cost of phone calls, including personal phone cards, for personal purposes;
  • travel permits on any means of transport used for personal purposes;
  • insurance premiums paid by the employer for its own employees or other beneficiary of salary income or income assimilated to salaries other than compulsory insurance and those provided by law as non-taxable under certain conditions, etc.

As regards insurance premiums, under certain conditions, these are not taxable from the perspective of income tax according to Article 76, paragraph (4), section t) Tax Code: “voluntary health insurance premiums under Law 95/2006, republished, incurred by the employer for its own employees within the limit of 400 Euro per year for each person are not considered taxable income“.

Also, when determining the tax on salary income and on income assimilated to salaries, the expenses with the voluntary health insurance premiums according to the Law no. 95/2006, republished, suportate de angajați, astfel încât la nivelul anului să nu depășească echivalentul în lei a 400 de euro.

Începând cu anul 2017, la determinarea impozitului lunar pe veniturile din salarii și asimilate salariilor, alături de primele de asigurare voluntară de sănătate, paid by the employees, are deductible at the level of the employee, so that at the level of the year they do not exceed the equivalent in RON of 400 EUR.
Starting with 2017, the medical services provided in the form of a subscription, defined in accordance with the Law no. 95/2006, paid by the employees, according to the ceiling stipulated in the Tax Code of 400 Euro / year are also deductible when determining the monthly tax on salary income and income assimilated to salaries.

Practical Aspects

In practice, it is necessary to analyze which benefits granted to employees should be taxed as wage benefits and which should not.

Employers often grant some benefits to their own employees, considering the expenses with these benefits as non-deductible expenses when calculating the taxable profit and not taxing such benefits as salary advantage.

We draw attention to the fact that, in general, the recording of expenditure with salary advantages by the company as non-deductible in the calculation of the corporate tax does not exclude the risk that in the event of a tax audit, these costs will be taxed at the level of employees as salary benefits (subject to income tax, individual social contributions and social contributions due by the employer). Also, at the moment of taxation as salaries, the value of the salary benefits will be the net value, and the tax will be achieved by the reverse percentage calculation method (the benefit is considered to be the net income earned by the employee).

In the specific case of the voluntary health insurance premiums borne by the employer increased attention should be paid, since not all the insurance premiums offered by the market suppliers meet the conditions of the Law no. 95/2006 in order to be considered deductible in the calculation of the income tax within the limit of 400 Euro per year.

Some packages marketed by providers of such services may represent, in whole or in part, medical services in the form of voluntary health insurance and these are salary benefits subject to income tax and compulsory social contributions.
Article published firstly on Avocatnet.ro.