For almost two decades, Romania’s IT industry benefited from a unique tax incentive in Europe: the income tax exemption for employees in the IT sector. The exemption applied to employees with individual employment contracts performing software development activities, provided that the employer was classified under eligible CAEN codes and certain gross income thresholds were met.
As of 1 January 2024, the IT tax exemption has been completely eliminated. There are no exceptions, no partial regime. Standard salary taxation now applies, exactly as in any other sector.
The real impact is both fiscal and market-driven. Romanian IT now competes directly on total cost and compensation design, without the support of a tax advantage. Many companies still treat the change as a minor tax adjustment, when it is in fact a shift in compensation architecture.
The good news is that there are legal, tax-efficient instruments through which an attractive compensation package can be built.
Alongside widely used benefits in Romania (meal vouchers, standard medical subscriptions, private health insurance, annual bonuses, or periodic salary increases), IT companies have increasingly turned to more sophisticated compensation tools with a real impact on retention and tax efficiency.
In this context, several instruments are reshaping how compensation packages are designed:
1. SOP / stock options plan: a medium- and long-term retention mechanism in which employees are rewarded for both their work and the company’s value growth.
Unlike salary, taxation is deferred to the point of share sale, rather than applied monthly as employment income. When an employee sells shares, they pay only 10% capital gains tax, resulting in an overall tax burden that is more efficient than the combined taxation of standard salary income.
2. Occupational pensions: one of the most underestimated compensation tools in Romania. An occupational pension is defined by the employer and functions as a direct retention instrument integrated into the compensation package. Employer contributions are tax-exempt up to EUR 400/year/person, meaning the contribution is:
- fully exempt from state social security contributions (25%),
- health insurance contributions (10%),
- and income tax (10%).
3. Individual learning budgets: annual amounts dedicated to real technical development (cloud, architecture, security, certifications), representing a direct investment in the team’s technical capability.
4. Wellbeing and organizational culture benefits
- Additional vacation days above the legal minimum of 20 days have a significant impact on employee satisfaction, even without a dedicated tax treatment.
- Flexibility of schedule and location: the post-2020 developer generation prioritizes autonomy over secondary material benefits. In today’s IT sector, flexibility often has a greater impact on acceptance or resignation decisions than small differences in net salary.
5. Extended medical benefits: broader packages covering prevention, dentistry, and psychology, with real day-to-day utility for employees.
The removal of the IT tax exemption has fundamentally changed the logic of compensation, beyond the immediate fiscal impact. Companies that rely exclusively on salary competition will face steadily increasing costs over time. A broader approach to retention, built on a strategically redesigned compensation package, offers a more sustainable path to staying competitive.
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