A bill that was debated and approved on Wednesday in a Government meeting, states that the income from independent activities carried out after the 1st of January 2009 and up to the 1st of June 2015 cannot be reclassified as dependent activities with the recalculation of the related taxes.
Moreover, according to the bill, the debts established by tax decision issued by ANAF are written off, whether they were paid or not.
Contexpert presents the detailed provisions of the bill.
According to art. 46 of the Tax Code, independent activities comprise of commercial activities, liberal professions and copyrights. A series of inspections made by the National Tax Administration Agency since the summer of 2014 had as effect the reclassification of some of the income from independent activities as income from dependent activities. The reclassification was made based on art. 7 of the Tax Code. Thus, tax decisions were issued, through which income tax and social contributions were imposed on natural persons, just like in the case of salaries, together with late payment penalties for the verified timeframe.
The established differences are substantial: the effective taxation for independent activities is around 26%, while taxation for salaries is more than 75% (both the employee’s and the employer’s part). Thelate payment penalties, meaning interest and late penalties, are now 18,25%/year. Taking into account the fact that most of the tax decisions were issued for the entire prescription period, the main duties and accessories were calculated for the past five years.
The main novelties of the bill:
Income from independent activities carried out after the 1st of January 2009 will no longer be reclassified, if:
1. The natural person complies, since the 1st of June 2015, with the applicable criteria for independent activities mentioned in the new Tax Code that will come into force in 2016* or
2. The natural person signs, by the 31st of May 2015, an individual work contract with the payer of the income, or any other form of contract allowed by the law applicable to the respective activity, for carrying on dependent activities** or
3. The natural person does not carry out the respective activities for the income payer anymore, by the 31st of May 2015.
*According to the Tax Code bill that is currently being debated in the Parliament and is to come in force on the 1st of January 2016, an independent activity is any type of activity conducted by a natural person with the purpose of obtaining income, which meets the majority of the following criteria (meaning 3 out of 5 criteria):
• The natural person has the liberty to choose how to conduct their activity, where they do it and also the working hours;
• The activity can be performed for one or more clients;
• The risks of the activity are assumed by the tax payer;
• The activity can be conducted by mainly using the client’s assets, their intellectual capacity and/or physical performance, depending on the nature of the activity;
• The activity is performed directly or by using personnel employed according to the law.”
** The person will be able to carry out the activity by concluding an individual work contract, according to law 53/2003 regarding the Labour Code or any other form of contract allowed by the law applicable to the respective activity, for conducting dependent activities, according to law 571/2003 regarding the Tax Code and Government Decision no. 44/2004 which approves the norms for applying the Tax Code, with all following changes and addendums.
Writting off the debt for income tax and social contributions
The bill offers solutions for all the cases that may appear on the matter. Thus:
1. The issue of new tax decisions is stopped
No more tax decisions will be issued until the 1st of June 2015, for establishing tax duties and/or late payment penalties for income tax or social contributions, for the income payer or the income receiver, for reclassifying independent activities as dependent ones.
2. Issued decisions are no longer sent to the tax payers
If prior to this bill coming into force, any tax decision was issued through which additional taxes were established, they will no longer be sent out and the main taxes and the late payment penalties which occured will be written off from the tax records of the taxpayer, based on a specific document.
3. The issued and sent decision are canceled
If any tax decision or any other tax paper was issued and sent by the date this bill comes into force, decisions for cancellation will be issued ex officio and sent to the taxpayer and/or, may the case be, to the income payer, no matter if the issued tax decisions were contested or not.
4. The paid amounts are reimbursed
If tax decisions were issued and sent and the tax duties and late payment penalties were paid, the amounts are reimbursed.
VAT write off
The bill also mentions that natural persons with income from indepenendent activities who did not register for VAT, as the Tax Code states in the case of exceeding the 65.000 euro VAT threshold (or 220.000 lei) will not pay differences in taxes and/or penalties if, by the 31st of May, these persons:
• Will register for VAT or
• Will sign an individual work contract or any other type of contract allowed by the law applicable to the respective activity, for performing dependent activities.
According to the current Tax Code, any activity can be reclassified as dependent, if it meets at least one of the following criteria:
• The income beneficiary is subordinated to the income payer, or to the management members of the income payer and respects the working conditions imposed by the latter, such as: their attributions and manner in which these are carried out, the place of activity, working hours;
• When carrying out the activity, the income beneficiary uses exclusively the income payer’s material base, meaning spaces with adequate facilities, special working equipment, protection equipment, working tools and others alike, and contributes with physical performance or intelectual capacity, not with their own capital.
• For the activity to be performed, the income payer pays for travelling expenses of the income beneficiary, such as detachment or delegation allowance inside the country or abroad, as well as other expenses of this type.
• The income payer pays for the income beneficiary the vacation allowance and for the temporary invalidity allowance.
In the case one independent activity is reclassified as dependent, the compulsory income tax and social contributions, established according to the law, will be re-calculated and sent, being jointly owned by the income payer and beneficiary. In this case, the rules for determining income tax for salary for the non-principal job is applied.
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