When advising on employment issues in Romania we are often presented with a situation where a non – resident foreign company want to employ a person in Romania. One of the first questions that is raised is the question of taxation.
The Romanian Fiscal legislation provides that when an employment agreement is concluded between a company that is not registered in Romania, nor has a branch or a fiscal residence in Romania and an employee resident in Romania, then either the employee or the employer shall declare the income and pay the applicable taxes.
There are two situations regarding the payment of the taxes which need to be identified:
• Where an agreement is concluded between the employer and employee that the employee will be paying the applicable taxes to the country where he is resident.
• Where an agreement is not concluded between the employer and employee in respect of applicable monthly fiscal and social security taxes.
In the first situation, where an agreement was signed between the employer and employee stating that the employee will pay the applicable monthly taxes, the employee will have to first register with the competent fiscal authority.
The registration must be made with the competent fiscal authority within 30 days from when the employment agreement is signed together with an Agreement signed by the employee and the employer and stating that applicable taxes will be paid by the employee.
This can be sent either to the Fiscal Authorities directly by the employer or by the employee when submitting the Registration application. In this case this will be submitted by the employee and he or she must be specifically empowered by the employer to submit this Agreement.
The Agreement concluded between the employer and the employee should provide sufficient information for the applicable taxes to be established, such as the CAEN Code – referring to the main object of activity of the employer, work conditions etc. The employment agreement must also state the length of time that the agreement will be in force.
The employee must submit the form each month as a declaration regarding the income obtained in the previous month on the base of which the social contributions will be calculated.
In the second scenario, where the employer is not registered in Romania nor does have a registered office or a subsidiary registered in Romania, nor an agreement was put in place between employer and employee stating that the employee will pay the taxes, then these taxes will have to be paid by the employer. In these circumstances, the employer is under an obligation to register with the Fiscal Authorities in Romania. This can be either done directly or by a person authorised by the employer.
If the employer decides to appoint a specific person (“Fiscal Representative”) to perform this registration on its behalf, then the employer will have to request the registration through this person. The Fiscal Authority with whom the registration is made will be the one where the Fiscal Representative has its residence.
If the employer decides to register directly and not use a Fiscal Representative, then the registration will be performed with the Fiscal Authority for non-resident companies functioning at the General Fiscal Authority in Bucharest.
Dealing with this issue on employment in Romania in our view the preferable route for the for the foreign company is to have an Agreement in place with the employee in respect of taxes due to the Romanian Fiscal Authorities.
As employment lawyers in Romania we will we think to see this issue arise more and more especially as COVID is restricting travel and Brexit has triggered more demand for Romanian workers.