Sorin Istrate, managing partner at Contexpert, said it is highly unlikely that a multinational company will absorb, even partially, the financial shock of forgoing collaborations with authorized private individuals and will switch to labor contracts.
“With some exceptions, namely, several extraordinary experts, the net income will probably be lower due to the additional amounts paid by employers to the Romanian state,” said Istrate.
IT experts are constantly among the highest-paid and usually choose types of employment other than labor contracts, mainly due to taxation eroding income.
Currently, authorized private individuals in the IT sector pay 25.9% in net taxes, in real system, which grow up to 75% in case of labor contracts.
According to Contexpert, the fiscal amnesty granted to authorized private individuals actually obliges companies in the IT sector which use the services provided by these individuals either to cover the increase in taxes in order to keep their employees’ income unchanged or to cut their net income and thus risk losing the respective employees who may want to seek jobs abroad.
Authorized private individuals in Romania must pay a 16% income tax, social health insurance contributions of 5.5% of the net income and social security contributions of 26.3% of the income for which the insurance contract is concluded. In case of other salary income, possibly a part-time labor contract for which total taxes do not exceed RON110, authorized private individuals are exempted from paying pension contributions.
Therefore, according to Contexpert, authorities’ plan is to turn as many authorized private individuals into contract employees, under the threat of taking back the income they obtained during the last five years.