Nothing shall escape the income tax: employee perks are next

Springing from the “nothing shall escape the income tax” principle, the norms for the legislation in this field, which were approved by the Government at the end of last year, define all the categories of employee benefits, for which the employees have to pay taxes.
Whereas the old regulations left enough room for interpretation, the norms for the income tax Law actually spread on several dozen pages, enumerating all the types of income and benefits which taxpayers must declare to the Exchequer, in order to be taxed. From transportation perks and phone cards to spa treatments and insurance premiums paid by the employers – all these benefits must be declared and taxed.
“Theoretically, all these perks had to be declared before, as well, but they were not shown in detail, as they appear in the norms. This way, the employers could draw their own conclusions,” a tax advisor says.
According to the old regulations, employees had to pay taxes for the perks granted by employers unless the latter registered the respective benefits as deductible expenses.
Although this principle was in fact included in a variant of the norms for the income tax Law, the final form expressly states that eleven types of perks are part of taxable revenues. On the other hand, the norms stipulate that some of these perks, which are directly related to the taxpayer’s activity as employee, are not deemed as benefits.
“Loopholes are certain to appear, so that the taxpayers will be able to slalom through these stipulations,” one tax advisor feels.
Ordinance 7/2001 on the income tax, approved and modified this year by Law 493/2002, is one year late but comes with a set of stuffy norms, to be published in the Official Gazette.
The norms for Ordinance 7/2001 were supposed to be issued within three months after the normative act was published, but the deadline was ignored by the Finance Ministry. The ordinance entered effect on January 1, 2002, sans norms. According to analysts, the Finance Ministry may check the 2002 statements in accordance with the methodological norms that were only enforced as late as last December, especially since they fail to mention any date for application.