The Ministry of Finance confirms in a response to HotNews.ro that clarifications are needed regarding the fiscal framework applicable to income from private pensions, as a result of the entry into force on January 1, 2024 of the amendments to the Fiscal Code by Law 282 /2023. The ministry says it has repeatedly communicated that if this law is passed, it will cause uncertainty and rewording, and is referring the matter to the Ministry of Labour.

• “The Ministry of Finance has repeatedly reported that if there is no law. 282/2023 will be adopted in this form, it will create uncertainty and necessary reformulations.
• The Ministry of Finance indicated the need to clarify the fiscal framework applicable to income from non-state pensions as early as November 2023 during a meeting at the headquarters of the State Financial Supervision Authority as a result of the entry into force of the amendments to the Fiscal Code established by Law 309/2022 and Law 282 on January 1, 2024 /2023.
• In particular, the Ministry of Finance clarified that the need for clarification is necessary, since Law 309/2022 established that in the case of private pensions, only the part that exceeds the net contributions of participants/beneficiaries is taxed, while Law No. 282/2023 introduces the taxation of all pension income by applying progressive tax rates depending on contributions/non-contributions, without taking into account the separate regime to be applied to private pensions as regulated by Law 309/2022.
• Representatives of the Ministry of Finance supported the preservation of the fiscal regime for non-state pensions in the spirit of Law 309/2022, showing the need to carry out some technical correlations of the provisions of the two regulatory acts.”, This was reported to HotNews.ro by representatives of the Ministry of Finance.

Officials of the Ministry of Finance led by Marcel Bolosh (PNL) also say that “the same aspects were also indicated in the view of the Ministry of Finance during the parliamentary debate on the draft Law 282/2023” and they will refer the matter to the Ministry of Labor led by Simona Bukura Oprescu (PSD).

• “We also clarify that the draft law was initiated by the Ministry of Labor and Social Solidarity, this institution has the right to express itself in the form adopted by the parliament.” this is also stated in the answers sent to HotNews.ro by the Ministry of Finance.

The Ministry of Finance did not respond to HotNews.ro’s question whether it intends to propose legislative changes so that these provisions will not apply from January 1, 2024.

APAPR: Legislative ambiguity in Fiscal Code could tax private pensions at 15% or 20% like special pensions

Clarifications from the Ministry of Finance came after HotNews.ro on Monday asked to clarify whether the concerns of the Association of Pension Fund Administrators (APAPR), which warned of legislative ambiguity in the Fiscal Code, which creates the prerequisites for progressive taxation, capital gains from funds , private pensions (compulsory Level II and optional III) erroneously equated to the non-contributory portion of seniority pensions (known as “special pensions”) are confirmed from 1 January 2024.

• “Thus, instead of taxing payments from non-state pension funds at the usual rate of 10% (as now and as with pensions paid from the state system), from January 1, 2024, the tax regime risks turning into a progressive one. 15% or 20% applicable to capital gains, the most unfavorable of all savings/investment products in Romania,” APAPR warned.

More specifically, the APAPR warns of legislative changes made to Articles 100 and 101 of the Fiscal Code by Law 309/2022 and, accordingly, by the recent Law 282/2023 on the reform of long-term pensions, due to which capital gains from private pension funds may be erroneous. equated to the non-contributory portion, resulting in progressive taxation similar to retirement pensions.

• “The application of these provisions would mean an unfair punishment for the participants of private pension funds and the beneficiaries of the benefits, therefore APAPR has started procedures in an institutional dialogue with the Financial Supervisory Authority (ASF) and the Ministry of Public Finance (MFP) to clarify as much as possible the relevance of this legislative ambiguity.
• APAPR requests, including publicly, to amend the Fiscal Code (Art. 100 and Art. 101) by decree of the extraordinary government to correctly reflect the difference between the contribution principle governing private pensions par excellence and the non-contribution principle of special pensions. In essence, APAPR calls for maintaining the current tax rate of 10% instead of applying rates of 15% or 20%,” the Association of Pension Fund Administrators warned.

What losses risk participants of the II and III levels of pensions

The stake of this necessary legislative clarification is the annual payments of billions of lei to hundreds of thousands of Romanians, with the level of payments made by private pension funds growing exponentially.

To date, all pension funds (Level II and Level III) have made payments totaling more than 2.36 billion lei to almost 210,000 beneficiaries.

Level II payments alone are estimated to reach 1 billion lei in 2023, almost as much as the 1.1 billion lei paid out over the 15 years from 2008 to 2022, and the exponential growth rate is estimated to continue in the following years .