Starting with January 1, 2021, employees who have children enrolled in an early education unit - nursery or kindergarten - with the consent of the employer (who is a profit tax payer), can benefit of the reimbursement of early childhood education expenses in amount of up to at 1,500 lei per month.
1) Effects upon corporate taxpayers established according to Law no. 31/1990 with subsequent amendments and upon the associations and foundations paying profit tax established according to GEO no. 26/2000 with subsequent amendments.
By Law no. 296/2020 was amended the Art. 25 par. (4) lit. i^1 and i^2) of the Fiscal Code by which the expenses settled by the employers paying profit tax with the early education of the employees' children are considered non-deductible expenses when calculating the profit tax, but shall be borne by the profit tax due, within a limit of maximum 1,500 lei/month for each child.
If the income tax is insufficient to cover all these settlements, the amounts shall be borne by the income tax on salaries, VAT and excise duties in the listed order.
From fiscal point of view as well, these settled amounts to the early education of the employees' children are not considered income of salary nature and are not in the sphere of compulsory social insurance, according to Art. 76 par. (4) lit. v) corroborated with Art. 142 letter z) of the Fiscal Code. Practically, for these amounts will not be paid the taxes and social insurances that would have been due on the incomes from salaries.
According to Art. 23 para. (1) letter a) of Law no. 1/2011 on national education, early education includes the education of preschoolers aged 0 to 3 years and the education of preschoolers aged 3 to 6 years.
2) Effects upon micro-enterprises
A micro-enterprise may reimburse the expenses of the early education of the children of its employees, at the expense of the employer, without deducting any tax.
The fiscal advantage consists in the fact that neither for the employees of the micro-enterprise the settled amount does not represent income of salary nature nor is due the compulsory social insurance, according to Art. 76 para. (4) letter v) of the Fiscal Code corroborated with Art. 142 letter z) of the Fiscal Code.
To the extent these expenses are re-invoiced to income, such income is non-taxable.
For more details regarding these legislative changes, please consult the attached presentation and/or contact us.
