As of August 1st, 2016, a new category of employees is exempt from income tax on wages and other wage-related income. It consists of employees who carry out applied research and development activities and/or technological development activities, and the conditions for inclusion in this category are established by Order No. 4947/899/2018/1840/906/2016 issued on September 9th, 2016.
Thus, the activities for which this Order applies must be carried out under:
– An individual employment contract;
– An employment relationship;
– A special status provided by law;
– A document certifying job relocation signed with/by a public or private law unit/institution, included in the national research and development system, in accordance with Government Ordinance No. 57/2002 regarding scientific research and technological development.
According to this Order, the eligible activities are:
– Applied/industrial research activities, which include the creation of components for complex systems or prototypes;
– Experimental development activities, which may include prototyping, demonstration, development of pilot projects, testing and validating certain products;
– Testing activities carried out to solve scientific and technological uncertainties.
To qualify for exemption, all of the following conditions must be met:
– The employee’s position must be part of a research and development department, distinguished in the employer’s organizational chart;
– The employee should conduct eligible applied research and development activities and/or technological development activities, included in an applied research and development project and/or technological development project;
– The employee has completed at least the first cycle of university studies or some form of long-term higher education, and holds a bachelor’s degree, or an equivalent, issued by an accredited institution of higher education in Romania, or a diploma granted for completing undergraduate studies at accredited institutions of higher education abroad, recognized and equated by the Ministry of Education and Scientific Research;
– The wages and wage-related expenses are included in the project’s budget;
– The employer’s scope of business includes applied research and development activities and/or technological development activities.
Supporting documentation for obtaining exemption:
– Memorandum or, where appropriate, incorporation documents of the employer;
– The employer’s organizational chart, indicating the structure of the research and development department which includes the employee’s position;
– Certified true copy of the bachelor’s degree or equivalent document;
– Document containing identification data of the applied research and development project and/or technological development project;
– Certified true copy of the individual employment contract, or any other document showing the employment relationship, or the job relocation document;
– Job description;
– Time sheet of the project;
– Document which highlights the components of wages and wage-related income obtained by each employee from activities in the project.
It is important to note that this exemption should be granted even if the project objectives are not met. Also, if the project includes amounts of annual leave pay, they are equally exempt from income tax.