Order No. 409/2017 on classifying “computer program creation activity” enters into force on July 1, 2017 and again modifies the tax exemption applied to programmers’ salaries.
The new order introduces an additional condition to benefit from the 16% income tax exemption on programmer salaries, thereby reducing the number of qualifying companies, and clarifies the phrase-condition “computer program creation,” expressly establishing the exemption’s applicability to outsourcing companies.
The new order reintroduces the condition that the employer must have obtained revenues of at least €10,000 per programmer employee in a full fiscal year:
“the annual revenues provided in letter d) have a value of at least the equivalent in lei of €10,000 (calculated at the average monthly exchange rate published by the National Bank of Romania, for each month in which that revenue was recorded) for each employee who benefits from the income tax exemption.”
Unlike before, the new Order imposes that those revenues be realized from the commercialization of software created. Therefore, companies that develop software solely for internal use will not benefit from the tax exemption.
Moreover, the new regulation removes the previous requirement that beneficiary firms produce final software products. This problematic stipulation had been interpreted abusively by tax authorities to deny exemption to outsourcing firms whose business model is to create software under service contracts rather than sell packaged products.
Under the new regulation, the €10,000 per programmer threshold is not tied to direct revenues attributable to each programmer’s labor but refers to the aggregate revenues obtained from computer program creation intended for commercialization, divided by the number of programmer employees benefiting from the exemption.