Taxation of domestic work passes Parliament: how gardeners, personal chauffeurs, cooks, caretakers who are currently paid illegally will all be paid, and what tax benefits their employers get

The Chamber of Deputies voted on Tuesday, as the deciding chamber, the draft law initiated in 2021 by the Ministry of Labour to regulate the activity of small domestic workers. The bill received 236 votes and goes to President Iohannis for enactment. The law is a milestone in the National Recovery and Resilience Plan (NRRP).

The stakes of the bill initiated by former minister Raluca Turcan are a minimum taxation of income and the provision for a pension and the possibility to receive medical care for small domestic workers who are now paid under the table – gardeners, personal chauffeurs, cooks or caretakers. The bill also provides tax benefits for employers.

The draft, which was taken up by the government through the National Recovery and Resilience Plan (NRRP) sent to the European Commission, lays down the following details:

– payment will be made by means of vouchers printed by the National Agency for Employment (ANOFM), each voucher having a value of 15 lei. The vouchers will be purchased by the employer (the individual who benefits from the domestic work) and given to the employee (the individual who performs the domestic work). The worker then converts these vouchers into cash.

– Of the gross amount paid by the employer, the domestic worker receives 79.2% and the state takes 20.8% in the form of pension and health contributions and taxes.

– Once in this system, the worker becomes insured under the social and health insurance system.

– The domestic activities voucher is a voucher for the payment of the value of the domestic activities carried out by the domestic worker. It contains specific security features, a serial number and a unique number, which enable it to be identified and traced.

– Domestic activity is defined as occasional activity carried out by a natural person in connection with the household or households of a family or a single person.

– The ANOFM prints the household activity vouchers and bears the cost of printing and distributing the vouchers; it provides the household beneficiary with the number of vouchers requested, redeems the number of vouchers received by the household worker in cash or by bank account, from which it deducts and transfers the income tax, social security contribution and health insurance contribution.

– The ANOFM will set up an electronic platform for the registration of domestic activities where it registers domestic workers, domestic beneficiaries and ensures the registration and payment of tax obligations.

– Payment of the social insurance contribution confers the status of insured person in the public pension system to the domestic worker;

– the status of insured under the health insurance system is obtained if the household worker redeems in cash at least 50 household activity vouchers in a calendar month. Amounts withheld for the payment of social health insurance contributions in the months in which the worker does not become insured under the health insurance system are reimbursed once a year, between January 1 and January 31 of the year following the year in which the domestic activity was performed, at the request of the domestic worker.

How contributions and tax are calculated:

– The calculation basis for contributions for CAS and CASS is 50% of the nominal value of the work voucher, i.e.: 7,5 lei. The calculation basis to which the income tax rate is applied is 50% of the nominal value of the work voucher, i.e.: 7.5 lei.

– The net amount payable to the domestic worker for a work voucher of 15 lei: 11.88 lei (i.e. 79.2% of the nominal value of the work voucher). The remaining 20.8% of the nominal value of the work voucher represents contributions and tax.

Tax facilities for beneficiaries (employers):

– Can benefit, annually, on the basis of a tax document (receipt, invoice, tax voucher proving the purchase of household activity vouchers), from a reduction in the income tax base of 50% of the value of the vouchers purchased.
– For the remuneration paid to the domestic worker in the form of household activity vouchers, the beneficiary does not owe the employment insurance contribution provided for by Law no. 227/2015, as amended.

Unemployed persons may also be workers:

– Any natural person who is at least 16 years of age may benefit from these vouchers.

– Please note: if they receive no more than 50 work vouchers in a calendar month for work performed, unemployed persons receiving unemployment benefit (without affecting their entitlement to unemployment benefit) and recipients of guaranteed minimum income (without affecting their entitlement to guaranteed minimum income) may also be domestic service workers.

Edited for English by Ovidiu H.