The Social Security System
In Romania, all employers and employees, as well as other categories of taxpayers, have to contribute to the state social, health and employment security system.
Coverage
Social and health security covers pensions, child benefits, temporary work disabilities, work accidents and professional illness risks, illness and other social care services.
Employment security covers, on one hand, minimal unemployment benefits and, on the other hand, grants aimed at generating employment.
Contributions
Social contributions are covered by the Fiscal Code and by other special laws.
According to the Fiscal Code, the contributors to the social security system are:
a) residents who receive income under an employment contract (or a work relationship or special status) as well as income treated as wages (directors’ incentives / single associate / director on mandate contract, etc.),
b) non-residents who receive income mentioned above, according to juridical arrangements (e.g. social security agreements) in which Romania takes part.
c) individuals who derive income from professional activities (copyrights and civil conventions).
d) retirees with pension incomes above RON 740 per month.
e) individuals and companies which act as employers and entities similar to employers;
f) public institutions;
g) any payer of salaries or revenue similar to salaries.
The percentages paid by employers and employees are applied to a certain computation base that is capped as provided by the Fiscal Code. These can be modified by the Social Security Contributions Law or by the State Budget Law. For 2011, the contribution rates are established as follows:
Employee Contributions:
- Social security contribution 10.5%
- Unemployment fund 0.5%
- Health fund 5.5%.
For 2011, out of the total rate of individual contribution, the rate automatically directed towards private pension funds has been established at 3%, which is 0.5% more than for the previous year.
The monthly assessment base is the gross income derived from dependent activities, in Romania and abroad, respecting international juridical arrangements in which Romania takes part.
Ceiling: the individual monthly pension contribution is capped at five times the average gross salary for each place of revenue gain; for 2011 the average gross salary is RON 2,022.
Employer Contributions:
Contribution to
- social security fund 20.8%; 25.8%; 30.8% depending on working conditions
- health fund 5.2%
- contribution for medical leave 0.85% (capped)
- guarantee Fund 0.25% of the salary fund
- unemployment fund 0.5%
- work accidents insurance fund 0.15% to 0.85%
The monthly assessment base is the amount of the gross revenue gained by individuals, resident and non-resident, based on a work contract (or a service report or special status) as well as revenues treated as salaries (directors’ incentives / single associate / director on mandate contract, etc.).
Ceiling: the monthly pension contribution is based on an amount capped at five average gross salaries multiplied by the number of insured individuals in the company.
The individual and employer health and unemployment fund contributions remain uncapped and are computed by reference to the relevant assessment bases stipulated by the Fiscal Code.
The monthly basis for calculating medical leave contributions due by employers is capped at 12 minimum gross salaries multiplied by the number of employees covered by this contribution (the current minimum gross salary for 2011 is RON 670).
The percentage contribution to the work accident insurance fund varies between 0.15% and 0.85%, depending on the risk category. The criteria for establishing risk categories were established by Government decision.
From 2011, a single tax return (Form 112) is introduced for social security and income tax liabilities and the name list of subscribers. The obligation to submit this return lies with individuals and companies with employer status or entities similar to employers, as described by the Fiscal code.
Employers calculate and withhold salary contributions when paying salaries. State budget and state social security budget contributions are payable by the twenty-fifth of the month following that to which the salary relates. Failure to pay these withholding contributions within 15 days of their becoming due is deemed a criminal offence and sanctioned accordingly.
Exemption from social security contributions is granted for salaries which are non-taxable, and for certain taxable benefits.
Contributions due for professional income:
- Social security and unemployment contributions are due for professional income, other than salaries, including income from intellectual property rights or related rights and / or income from professional activities based on contracts/conventions concluded as per the Civil Code).
- The taxable base for individual social security contributions is computed based on the gross income for civil contracts, and based on the gross income minus the expense quota (20% or 25%) for intellectual property rights.
- in case such income is obtained on a regular basis, the monthly taxable base for these contributions is capped at five times the medium gross salary used to substantiate the state social security budget and is approved by the state social security budget law. For revenue generated ocasionaly, the annual taxable base cannot be greater that five times the average gross salary.
The obligation to declare, calculate, withhold and pay the social security and unemployment contributions lies with the payer of the income (using Form 112) and has to be complied with by the twenty-fifth of the following month.
Foreign Personnel
Fiscal Registration Number
Foreign individuals including citizens of the European Economic Area (EEA) and Switzerland earning income sourced in Romania and who do not need to obtain a residency permit or a registration certificate (for EEA and Switzerland citizens) need to file a fiscal application form with the Romanian tax authorities through a fiscal agent to obtain a fiscal registration number.
Foreign individuals that require a residency permit or registration certificate (for EEA and Switzerland citizens) should use this number as their fiscal identification number upon registering with the Romanian Tax Authorities.
Citizens from the EEA and Switzerland undertaking dependent activities in Romania may have:
- a forein employment contract (secondment)
- a local employment contract
Working rights for EEA and Switzerland citizens
EEA and Switzerland citizens working in Romania as employees with a local/secondment contract do not have to obtain an authorisation for work; these individuals have free access to the local labor market.
For secondees, a procedure for notifying the competent authorities has been established (the notification procedure does not apply for EEA or Switzerland citizens seconded in Romania by companies from non-member states)
Authorisations for Work
As a general rule, foreign individuals working in Romania need to apply for a Romanian work authorisation (before obtaining their residence permit). There are some exceptions to this rule, such as:
- Foreign citizens married to Romanian citizens, which obtained a sitting permit for reuniting the family, do not have to obtain a work authorisation to work in Romania.
- Foreign citizens seconded to Romania by companies from EEA or Switzerland do not need work authorisations; however , there is a procedure for notifying the competent authorities about these secondments.
The type of employment relationship can significantly affect tax and social security liabilities (e.g. foreigners performing activities in Romania based on local employment agreements are liable to pay income tax on their entire remuneration received in Romania as well as all social security contributions required by the Romanian legislation. Foreigners seconded to Romania may be entitled to certain secondment rights (such as tax incentives) while observing the limitations/exceptions provided by domestic law and/or the EU regulations for immigration and social security).
Further to Romania's EU accession, the EU regulations on social security contributions now prevail over domestic legislation. Accordingly, EU expatriates working in Romania can be exempted from paying social security contributions, provided that they obtain the A1 certificate from another EU Member State where their employer is located, or the E101 certificate from Norway, Iceland, Liechtenstein and Switzerland for expatriates whose employers are located in these states.
Work authorisation for local employment purposes
If a local employment contract is to be concluded between a foreign individual and a Romanian company, a work authorisation for permanent workers must previously have been obtained for this purpose (apart for those cases excepted by law), by the foreign individual. Foreign individuals become taxable in Romania from the first day, with salary tax and social charges being withheld monthly by the employer through the payroll.
Work authorisation for secondment purposes
Foreign citizens can be seconded to Romania by companies located in third countries (i.e. based on a foreign employment contract) for a total of one year within a five-year period.
To obtain a work authorisation for secondees requiring long-term visas, a secondment visa should be obtained from the Romanian diplomatic mission or consular offices abroad.
Individuals seconded to carry out dependent activities for Romanian companies are required to contribute to the health fund. Health fund contributions of 5.5% are payable once the right for temporary residency in Romania is extended (i.e. stay of more than 90 days). Such individuals have to calculate and pay salary taxes (i.e. income tax and health fund contributions) on a monthly basis.
Residency documents
The residency documents are: certificates of registration, residency cards and residency permits
Romanian legal residence for EEA and Switzerland individuals and their family members who are not EEA/Switzerland citizens.
EEA and Switzerland nationals can enter and reside in Romania for a three-month period without obtaining any formal residency documents (registration certificates). After this period, they can extend their legal stay here by obtaining a 'certificate of registration' (the certificate is obtained within 24 hours of being requested and has unlimited validity). Certificates of registration are obtained observing the purpose of stay in Romania (e.g employment, secondment, etc).
However, family members who are not EEA/Switzerland citizens themselves are subject to different immigration compliance requirements, as follows:
- they should obtain Romanian entry visas if necessary; and
- they should obtain Romanian residency cards to extend their legal stay in Romania
over a three-month period.
Romanian legal residence for foreign individuals
As a general rule, foreign Individuals whose stay in Romania exceeds 90 days within a six-month period need to apply for temporary residency permits (there are very limited exceptions to this rule, for very special situations).
Temporary residency permit applications can be made based on long-term visas which have to be obtained from the Romanian embassy or consulate abroad prior to the application. Foreign nationals from certain countries, including USA, Canada, Japan, etc are exempted from obtaining Romanian long-term visas.
The documentary requirements for obtaining Romanian long-term visas / residency permits depend on the purpose of stay.
