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Changes in the social security legislation

Changes in the social security legislation

KPMG's Tax News outline and highlight legislative changes and trends in the area of tax.


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In this edition of KPMG’s Tax News we present the changes in the Regulation for the Remuneration Elements and Income on Which Insurance Contributions Are Levied, which are introduced by a decree of the Council of Ministers and which concern the social security implications in case of in-kind benefits for personal use of company assets and in case of summarized working time.

An obligation abolished

The obligation for payment of insurance contributions on in-kind benefits for personal use of company assets is abolished.

The amendments to the Regulation extend the scope of remuneration elements which are exempt from insurance contributions with the explicit clarification that the in-kind benefits in case of private use of company assets, for which the company has elected to levy a one-off tax under the Corporate Income Tax Act (CITA), will be exempt from social security contributions.

With the changes made in the CITA at the end of year 2016, employers were allowed to choose how these expenses would be taxed: in the form of additional employment benefits under the Personal Income Tax Act (PITA) or with a one-off tax under the CITA. This right is introduced retrospectively from the beginning of 2016.

Due to the absence of an equivalent change in the insurance legislation, however, this option does not result in the expected administrative relief in processing these in-kind benefits, as they continue to fall within the scope of the remuneration elements on which insurance contributions are due and therefore continue to have to be accounted for as part of the insurable income of employees.

The change adopted by the Council of Ministers explicitly exempts in-kind benefits subject to a one-off tax under the CITA from insurance contributions as of the moment the decree is promulgated in the Official State Gazette (it was published in issue 29 of 7 April 2017) and not retrospectively. This means that, from the introduction of the right to choose and up to the moment of promulgation of the decree, insurance contributions will be due on these benefits if an employee’s income is below the maximum insurance threshold.

Until the promulgation of the amendments, the employer’s right to choose between the two approaches does not lead to a material difference in terms of liabilities to the state budget. But with the introduced amendments to the social security treatment of benefits in-kind levied with a one-off tax under the CITA, the difference in the financial impact under the two alternatives becomes more substantial.

Minimum insurable income under summarized working time

In addition to the method for determining the maximum insurable income under summarized working time introduced as of 1 January 2015, the adopted decree implements an equivalent change related to the minimum insurable income effective as of 1 January 2017. According to the introduced additional provision, in case of more or less hours for the respective period in comparison to the standard ones, the minimum monthly insurable income of the respective profession as per the main economic activity of the employer/the minimum salary for the period must be proportionally increased/decreased.

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