The Cholak Government Tax Bill (L296/2023) also changes some things about PFAs, PFIs, the liberal professions and individual businesses. So there are some things you need to know as there are changes that will come into effect from 2024.

*Important clarification: when in the text of the article we refer to a PFA, we will mean any legal entity that is classified as an independent activity (PFA, PFI, liberal professions, sole proprietorship II, family enterprise IF).

First, contributions to CAS and CASS will continue to be linked to the minimum wage, but when it increases, they will automatically increase only from this point of view.

Currently, the minimum wage is 3,300 lei, but on 01.01.2024 it is expected to be at least 3,500 lei.

In the calculations, we will take the minimum gross salary for 2024 – 3,500 lei.

Regarding income tax, 10% remains.

In a PFA with a real system, when calculating tax from 2024, tax and CASS can be deducted from the taxable base in addition to CAS, as now.

This is because from 2024 CASS will be calculated very differently than it is now.

As for CASS – 10% of earned income or rate of income will be paid and will be capped at 60 minimum wages.

Therefore, CASS will be calculated on the basis of a calculation that cannot exceed 60 salaries to net income, respectively, annual rate of income, accordingly adjusted annual rate of income.

If a PFA has an income rate, it owes CASS the income rate, even if it generates much higher income than the rate.

Let’s take an example of a PFA in a real system that realizes 10,000 lei of net income in 2024.

He will pay a CASS contribution of 10% of the net income of 10,000 lei, i.e. 1,000 lei.

In addition to the present, there is another tax measure, namely:

• If the calculated base is lower than 6 minimum salaries (ie 3,500 lei x6 = 21,000 lei) then the PFA will owe the DIFFERENCE in the CASS contribution to the calculated base of 6 minimum salaries) so that she ends up paying 10% x 21,000 lei = 2,100 lei CASS.

• Going back to our example with 10,000 lei earned, this means that in addition to the 1,000 lei, the difference of 1,100 lei will still belong to CASS.

• This means that the PFA still comes from home with money to pay the health care contribution.

Exempt from this CASS DIFFERENCE are those PFAs with income from:

a) wages and wage equivalents at a level at least equal to the 6 minimum wages in each country in force during the period in which the income was received; or

b) from the provisions of Art. 155 para. (1) lit. c) – h) (rent, dividends, interest, stock market, cryptocurrency, other sources) for which they must pay social health insurance contributions at a level at least equal to 6 minimum salaries before gross in each country.

In our example, if we fall under one of the 2 exceptions a) or b), CASS will have to pay 10,000 lei, i.e. 1,000 lei.

But obviously he will pay CASS on wages if it is specified in letter a) or for other categories of income if it is an exception to letter b).

Risking it, this law will eventually force ANY self-employed person (PFA, PFI, liberal professions, sole proprietorship II, family business IF ) to pay CASS at least 6 minimum wages in one form or another (ie at the luckiest 2100 lei/year with a minimum salary of 3,500 lei).

You can say that this is a kind of “one-off Pogea benefit”, as it was in 2009, regardless of whether you have an income as a PFA or not, you pay CASS at least 2100 lei per year.

Another tax measure in this burdensome law for the PFA

If a PFA has an income from independent activities of more than 60 salaries (210,000 lei) and from (dividends or rent or stock market, cryptocurrency, etc.) more than 24 minimum salaries, it will end up paying CASS in the amount of 84 minimum salaries (so on income 294,000 lei CASS 10% will be 29,400 lei).

In other words, almost 30,000 lei/year ONLY contribution to CASS.

I argue this below:

Example: A PFA with an income of more than 60 salaries (210,000 lei) that also has dividends of more than 24 salaries.

I quote:

“ART. 155 – Income categories subject to social health insurance contribution

paragraph (1)

a) income from wages and salaries

a1) income from pensions, determined in accordance with Art. 99, in the part exceeding the monthly amount of 4,000 lei;

b) income from self-employment;

c) income from intellectual property rights;

d) income from association with a legal entity

e) income from the transfer of goods for use

e) income from agricultural activities, forestry and fish farming;

g) investment income (interest, dividends, stock market, cryptocurrency, etc.)

h) income from other sources”

Article 170 – Basis for calculation of contribution to social health insurance, which is paid by persons who receive the income provided for in Art. 155 para. (1) lit. b) – c):

Persons receiving income provided for in Art. 155 para. (1) lit. b), from one or more sources has to pay a social health insurance contribution, which on an annual basis of calculation is equal to the annual net realized/gross income or the annual rate of income, accordingly adjusted annual rate of income, depending on the circumstances, established in accordance with Article 68. 120. When determining the annual basis for calculating the contribution to social health insurance, the annual tax losses provided for in Art. 118.

(in letter b — independent activity of PFA, liberal professions)

(2) Natural persons who receive income provided for in Art. 155 para. (1) lit. c) – h), from one or more sources and/or categories of income, pays the social health insurance contribution to the calculation base established in accordance with para. (5), if he assesses the income of the current year, the total value of which is equal to at least 6 minimum gross salaries per country, valid for the deadline for submitting the declaration, provided for in Art. 120″.

(under the letter ch are indicated: dividends, rent, profit from the stock exchange, cryptocurrency, interest, etc.)

(5) The annual basis for calculating the contribution to social health insurance for persons who receive income from the income provided for in Art. 155 para. (1) lit. c) – h) represents:

• a) level 6 of the minimum gross wages per country, effective at the time of submission of the declaration, provided for in Art. 120, in the case of incomes from 6 minimum salaries per country up to and including 12 minimum salaries per country;

• b) the level of 12 minimum gross salaries per country, valid for the deadline for submission of the declaration, provided for in Art. 120, in the case of incomes from 12 minimum salaries per country up to and including 24 minimum salaries per country;

• c) the level of 24 minimum gross salaries per country, valid at the time of submission of the declaration, provided for in Art. 120, in the case of earned income at least equal to 24 minimum gross wages per country.”

It will therefore pay CASS as follows:

• 60 salaries x 3,500 x 10% = 21,000 lei in PFA

• 24 salaries x 3500 x 10% = 8400 lei in dividends

There is no provision that if you pay PFA of 24 salaries on top of other income (dividends, rent, stipends, interest) you are exempt from tax because you have already ‘deposited’ 24 salaries. What’s more, you paid for… 60 salaries!

Self-employment income is no longer stacked with other income categories for the 6/12/24 salary thresholds as before.

They are considered separately.

Observation:

As we can see, the advantage is given to people with independent activities with very high incomes (lawyers, notaries, doctors), who, for example, with an income of 1 million lei per year, will pay CASS 21,000 lei (at 60 salaries) as well as PFA, which is 210,000 lei (60 salaries).

Regarding CAS: 25% will remain calculated at 12 or 24 minimum wages

Salary limits 12/24 remain current.

In other words, the PFO with an income of more than 60 salaries will pay ONLY from social contributions:

CAS 21,000 lei

CASH 21,000 lei

The amount is 42,000 lei per year, i.e. 8,500 euros only from social contributions in addition to the 10% tax.

If he also has other categories of income that I mentioned above (rent, dividends, stock market, cryptocurrency, interest, other sources), he “contributes” to CASS another 10% for 24 salaries, that is 8400 lei.

Under these conditions, such a form of organization as PFA no longer has any reason to be chosen by an entrepreneur, a micro-enterprise is by far the best solution.

N.red: Cornel Grama is a tax consultant from Cluj and one of the founders and administrators of the Tax Consultants Association and the Tax Consultants Facebook Group with over 44,000 members. Its services cover the following areas: preparation of tax and tax declarations, assistance in tax matters and budget claims, representation in tax authorities, education and training in the tax field. The opinions expressed in this article belong solely to the author.