Looking retrospectively, over the past years (more than 20 years) up to December 2024 (inclusive), the IT industry benefited from an income tax exemption for employees’ salaries in this sector and from a few other fiscal incentives.
Looking retrospectively, over the past years (more than 20 years) up to December 2024 (inclusive), the IT industry benefited from an income tax exemption for employees’ salaries in this sector and from a few other fiscal incentives.
The purpose of introducing these measures was to contribute to accelerating the development of the Romanian software industry in Romania.
What fiscal incentives were applicable until 2024?
The income tax exemption applied to gross salaries up to 10,000 lei per month, and a 10% tax applied only to amounts exceeding the 10,000 lei monthly gross limit.
Additionally, a reduced pension contribution rate (CAS) of 20.25% was applied to gross incomes up to 10,000 lei, while the standard CAS rate of 25% applied to the portion exceeding this limit.
Regarding the Pillar II pension contribution of 4.75%, it applied only to amounts exceeding 10,000 lei of the gross salary. For the first 10,000 lei, the contribution to Pillar II was optional, allowing IT employees to retain a larger portion of their income.
Which fiscal measures affect the IT industry from 2025?
From 2025, IT employees’ salaries will be fully taxed for income tax purposes, meaning the tax applies to the entire gross salary, and it also becomes mandatory to contribute to Pillar II for the full gross income.
These changes will affect net income, reducing it in 2025 compared to 2024.
Although digitalization is considered one of the government’s targets, following the revision of fiscal incentives, the income tax exemption for IT employees was removed due to its negative impact on the budget and its extensive (incorrect) application by other companies that were not genuinely engaged in IT activities.
Therefore, to retain existing employees, companies must review their salary policies and identify more attractive compensation packages (for example, additional in-kind benefits and professional development programs).
If these solutions are no longer attractive in the medium and long term, some IT employees may migrate to countries with lower taxation.
At the same time, it is necessary to reanalyze all costs to find possible reductions (for example, using internal digital solutions or outsourcing accounting and fiscal services).
It is also worth noting that, for IT companies, the VAT rate change from 19% to 21% will also have an impact.
Conclusion
IT companies that manage to adapt most effectively to the new circumstances and find feasible solutions to overcome fiscal obstacles will be the ones achieving business success in the coming period.
