Ministry officials admit there are some issues with companies getting these incentives and that they are trying to issue enforcement guidelines that are as clear as possible but that there are some problems with the EU state aid legislation that need to be addressed first.
“Things became complicated with the profit tax step when we had to define what exactly research, development and innovation is, what activities can be considered that and there are also some problems due to the EU state aid restrictions,” said Ionut Misa, state secretary with the Public Finance Ministry.
“We delayed devising the enforcement guidelines because of that but we hope to have the state aid scheme in place by the end of the third quarter, as well as a clearly defined legislative framework, to avoid problems with tax inspectors saying some activities do not qualify.”
The income tax exemption will be given to the entire team involved in an R&D project not just to the researchers themselves, he added.
On the other hand, employers say that the R&D in companies is much more complex and an employee may work on several research projects at one time, so managing payrolls for each employee involved in research would be a bureaucratic process for which the companies do not have the necessary resources. Moreover, it could create income inequality.
“If a product requires changes after being put on the market – let’s say the type of fuel changes – the redesign and testing thereof will be done by engineers, one of whom working on the launch of the new product – therefore in the area that gets R&D incentives and one that does not. This means one will get the deduction, while the other will not, despite doing the same work,” said Niculae Boicea, innovation manager with Renault Technologie Roumanie, Renault’s engineering center that employs more than 2,400 engineers in Romania.
A very strict enforcement of the law may create problems, because the income of the employees in R&D may vary from month to month, depending on the number of hours spent working on each project and that will create uncertain about their future incomes, when a project they worked on ends, he added.
The representative of an automotive component in Romania said the R&D employees want to have the tax exemption applied so they could earn more money, but the employer cannot take such risks in case the tax inspectors see things differently.
“We have 11,000 employees in Romania and 900 of the work in R&D: 450 of them do software development and already got the income tax exemption, while 450 do mechanical product development and they should get it if we were to apply the law issued last August. We have 300 R&D projects every year, which means that if we get the tax incentives we have to check 300 projects and how much work at least 300 employees did on them. The employees are pressuring us to get these tax incentives, but the business decision was not to risk it because no one wants to swallow some costs in the event the interpretation of the law proves incorrect,” the HR representative of the automotive component manufacturer said. She asked the authorities what to tell the 450 people waiting for an answer on the mater.
Finance Ministry’s Ionut Misa told her that once the enforcement guidelines completed, “we will provide the comfort of no longer having problems with the tax authority.”
(English version by Loredana Fratila-Cristescu)