The problem of benefits in kind is more and more important as a result of the extension of the salary package offered by the employers. This package may contain beside amounts in money, goods and services paid by the employer but dedicated to personal use of the employee. Even if the cash equivalent of such benefits is assimilated to salary income, it is not possible for the amount in cash specifically written in work contract, to be less than minimum guaranteed by law.
This type of benefits may include:
– catering services (ex. a canteen operated by the entity );
– use of company car for personal purpose (completely or partial);
– use of company phone for entire / partial personal purpose ;
– a house for personal use and the expensed related to its maintenance;
– health insurance for family members, life insurance, etc.
There is a category of expenses to which benefits in kind are easily mixed up with. These are so called social expenses which are, according to Fiscal Law, (art 21.(3).c ) , deductible in the limit of 2% of expenses with employees’ salaries. These are :allowances for special events : birth, funerals, hard disease or incurable, expenses generated by operating activities or entities found in the administration of tax payers, kindergartens, health services provided for professional disease and work accidents until there is a necessity for hospitalization, museums, canteens, sports , clubs, single hostels, and also schools administered by employers. In these limit can be deducted kindergarten tickets provided according to law, gifts in money or in nature offered to minor children and to employees, the cots of treatment and relaxation services, including the transportation, for own employees and their family members, allowances for the employees that suffered losses in their houses and the contribution to intervention funds of the association of miners, help for children is schools and foster centers.
It is very important to avoid the confusion between the social expenses and benefits in kind because the taxes that need to be paid differ significantly. While the social expenses are tax deductible in the limit of 2% from expenses with employees salaries, the rest being taxed with 16 % rate, the benefits in kind support taxes from employer point of view and also retains from employees’ salaries due to the increase in the basis of calculation of payroll related taxes.
If the salary package contains such benefits in kind it is good to inform the employee about these fiscal elements, so that we would be prevented for the situation in which net amount is lower the the amount presented in work contract.
For example, the employee is informed about a gross salary income of 3.500 RON. This corresponds to a net amount of 2.484,3 RON, considering the tax rates in use starting with 1st of July 2008 (social insurance 9,5%, health insurance 5,5%, unemployment tax 0,5%, income tax 16% ) . We suppose that the employee receives a hot meal daily, amounting 10 RON/day, according to the contract signed between the employer and the canteen operator, and that there are 20 meals taken/month. This means an increase with 200 RON of gross salary to 3.700 RON. After calculating all the taxes and retaining the benefit in kind there is a net amount of 2.426,3 RON.
Of course, in this case the amount is not significant, but if there are more benefits that need to be cumulated and if the base salary is lower, this difference might not pass unnoticed.
