The Romanian Government recently issued an amendment to the Romanian Tax Code whereby severance payments or compensation received in connection with the termination of employment will be subject to a 85% income tax rate (as opposed to the regular 16%. income tax rate). This rule is applicable to all employees occupying executive positions, as well as the members of the management and supervisory boards.
The measure was initially intended to apply only to public sector and state-owned companies, but, as currently drafted, it now extends its scope to all types of company. The measure has been heavily criticised, since it unjustifiably discriminates between employees occupying executive positions and other employees. Further, the measure places an additional burden on employers, in case the termination is mutually agreed between the parties, and may generate confusion, since the list of executive positions is usually approved by each employer through the organisational chart. The measure has been regarded as a potential precedent for future derogations from the flat tax rate principle, governing the Romanian income taxation system.