One of the many tax measures established last summer is that certain employer-provided benefits have preferential tax treatment only if, in total, they do not exceed a monthly ceiling of 33% of the basic salary. Now, several months after the application of the measure, specialists have identified certain problems that the authorities should consider for possible legislative optimizations, but also a positive aspect.
Specifically, certain employee benefits have preferential tax treatment only if, in total, they do not exceed that 33% monthly ceiling. The preferential tax treatment is represented by a limited exemption from salary taxes related to the benefits (income tax and social contributions).

The measure was introduced by OG 16/2022 and has been in force since January 2023. As more than six months have passed since its operationalization, our editorial staff spoke with Cabot specialists to find out what problems have arisen in practice for employers and whether there are positive or negative spillovers. Here’s what we found out.

1. What are the practical difficulties in implementing the total monthly ceiling of 33% for non-taxable benefits granted to employees?

Cristina Săulescu, Partner at Cabot Transfer Pricing: “There are difficulties – in particular, with those benefits that already have annual ceilings. In order to ensure the correct inclusion in both ceilings, the employer must perform the calculation in two stages: the inclusion of the benefit in the annual ceiling, and then the amount already divided by 12 months (or the number of months in which the employee obtains salary income) should be included in the monthly ceiling.”

2. What uncertainties related to the 33% ceiling should be clarified by the tax authorities?

Cristina Săulescu: “It is about the counter value of tourist services and/or treatment. The question is how should the 33% ceiling be checked? In the month in which the expense / value of the services was borne, in full, or is this benefit also divided by the number of months worked in the respective year and the amount thus obtained must fall within the monthly ceiling?

Given the fact that the employer cannot know from the beginning of the year either which employees will want to benefit from such benefits (perhaps some do not go on vacation or cannot bring documents justifying the expenses), nor the amount of these services (it is only known the annual ceiling, but the expenses may be lower), we can only consider that the entire amount representing such expenses will be subject to both ceilings in the month/months in which the employee is actually on vacation and the expenses are incurred. Considering the double cap, we believe that there will be very few employees who will be able to really benefit from this facility, having only one leave to bring documents to justify the expenses. Those employees who divide their leave in fractions seem to be at an advantage, thus being able to benefit from a higher non-taxable amount.

However, to be on the safe side — and especially considering that the Legislature’s intent was to truly expand the scope of real, non-taxable employee benefits — we believe a confirmation of our understanding would be welcome — either by – a clarification from the tax authorities, or even by the modification and updating of the rules of application of the Fiscal Code, where there could even be concrete examples.”

3. Have you noticed any indirect effects after the implementation of the 33% cap?

Cristina Săulescu: “Even if there are some practical difficulties or some employers still have some doubts, as I stated before, for now we have not identified any employers who would reduce the benefits granted. On the contrary, from the discussions we had with our clients, the new legal provisions regarding the capping of benefits, as well as the expansion of the list of these benefits (partially from January and partially from February – n. ed.), represent a plus. Now they feel they have a more powerful employee motivation tool that they can use to both attract new employees and increase retention of existing employees.”

Article published in Avocatnet.ro