Romanian banks have filed according to Order no. BNR 4/2023, the first reporting of the income of individuals working in the financial sector with a total annual remuneration of at least 1 million euros. Essentially, the required reporting is a transposition of the European Union Directive for bank executives who earned more than this threshold in 2022. According to data from the European Banking Authority (EBA), at the end of last year there were only three bankers in Romania, Portugal, Hungary and Slovenia each with an annual income of more than 1 million euros.

By Order No. 4/2023 of the BNR (published in the Official Gazette No. 391 of May 18, 2023), the provisions of the European Banking Authority (EBA) Guideline 06/2022 have been incorporated into national law, according to which Romanian banks will also report to the BNR the salary of their employees The condition is that the banking institutions selected by the National Bank for reporting cover at least 60% of the assets of the Romanian banking system. If this is not possible, the NBR will collect information from no more than 20 Romanian legal entity banks, excluding those that are reported at the group level. It also concerns banks with Romanian capital and EU banks or banking groups present in Romania, which will also report remuneration information for all branches subject to prudential consolidation, including branches from other Member States and third countries. The information will be provided on the basis of figures recorded at the end of the financial year, with the first reporting for 2022.

It is important to remember that of the two orders (No. 4 and 5 BNR/2023) on the reporting required by the Romanian central bank, in accordance with the European regulations (between which there are differences regarding the scope of application), the fact that in practice expands the scope of reporting about large assets also in the field of financial and banking services. We are talking about incomes that exceed the threshold of 1 million euros, which is referred to in order 5/2023 of the BNR, which provides for the income threshold of the personnel included in the reporting and, accordingly, the forms and form of reporting. .

Local regulation falls under the broader scope of European banking rules and directives in this area, strictly applicable to financial institutions supervised by the BNR in Romania.

Thus, it can be appreciated that, although there is no direct connection between ANAF’s efforts to bring to the surface taxation according to the national legislation on the tax on income received in Romania and the provisions of the NDB for banks in the system, it is obvious that the public authorities are acting agreed to increase tax compliance. On the one hand, we are talking about harmonization with European financial and banking legislation, with the transposition of normative acts into Romanian legislation. On the other hand, it is about increasing the transparency of income declaration, for taxation purposes, for the credibility of the collection of income to the state budget from taxes applied to individuals.

If we look from the perspective of tax compliance for all sectors of society, both individuals and legal entities, the efforts of the Romanian authorities to have a complete picture of received incomes, including those that exceed the average incomes received by the vast majority of workers, are evident in national level.

It should be noted that the local legislation created within the framework of the National Bank of Romania is harmonized and falls within the scope of European banking regulations and EU directives regarding this segment, in accordance with the technical specifications provided by the European Banking Authority, in accordance with Decision no. 355/2020 on the European Centralized Infrastructure for Surveillance Data (EUCLID) for the reporting of high income earners.

Reporting is mandatory and will be sent from financial institutions to the National Bank of Ukraine and will comply with the procedure and document structure clearly established by Order No. 5/2023 on the reporting of high-income earners in credit institutions, which came into effect last month.

What does the order of the BNR envisage?

Order of the BNR 5/2023 defines the concept of persons with high incomes in the banking system, which incomes are referred to in the reporting and the necessary forms to be filled out by commercial banks selected for reporting. So:

1. high income person means an employee who receives a high remuneration, respectively a total remuneration of at least 1 million euros in the reporting financial year;

2. Remuneration range means the range of the total annual gross remuneration of a high earner, determined in 1 million euro increments and starting at 1 million euro. The total remuneration provided to the employee is determined and distributed in accordance with the permanent and variable part of the remuneration in accordance with the provisions of Art. 170 paragraphs (2) and Art. 171 of the Regulation of the BNR No. 5/2013, taking into account the guidelines of the European Banking Authority and the instructions of the National Bank of Romania on a reasonable remuneration policy.

On the application of the provisions of Art. 24 para. (3) from the emergency order of the government no. 99/2006 regarding credit institutions and capital adequacy, approved as amended by Law no. 227/2007, as subsequently amended and supplemented (EOG No. 99/2006), the order establishes the form and content of the reporting form regarding information concerning high-income earners in credit institutions and the method of transmitting this information to the National Bank of Romania.

Individuals with large assets

Since 2012, ANAF has had a Risk Management-based Tax Compliance Strategy for Wealthy Persons (PFAM). Thanks to this strategy, a Directorate was created in the central structure of ANAF responsible for the implementation of the program dedicated to this segment of taxpayers. The department has already settled important points that concern this category of taxpayers. In particular, this draft order concerns: the definition of individuals with large assets, the method of establishing/assessing wealth, the definition of PFAM groups, the extended PFAM, the definition of the competent structure for the implementation of the program of increasing the voluntary tax legislation of individuals with large assets (GUDFO). Thus, a high-net-worth individual is a Romanian tax-resident individual who owns assets, both domestically and abroad, worth more than 25 million euros, equivalent in lei, calculated at the average rate of euros from the year before the wealth assessment , established by the National Bank of Romania.

In the general context of finding solutions by which revenues to the public budget should increase in order to reduce the budget deficit, but above all to cover public sector costs, the Romanian fiscal authorities are pursuing at least two important goals subordinate to the above: increasing the tax base with the tax on incomes of individuals and increased payment of income taxes. A special category is represented by people with large fortunes, as well as people (top managers) with very high incomes, including from the banking system.

Taking into account the constant transformation of the economy and elements of novelty in the field of financial services (fintech, crypto, new types of non-traditional financial institutions), new regulations regarding the income segment of individuals in Romania should be expected.

The article is signed by Corina Minda, Partner, Income Tax and Social Contributions, EY Romania and Alexandra Petrasciu, Bank Lawyer, Deacon and Associates SPR

Article supported by EY Romania