After obtaining the registration certificate from the Trade Register, other authorizations will be obtained (depending on the type of products sold through the online shop), such as, but not limited to:

• The operating permit (from the City Hall)
• Environmental permit (from AFM)
• Health authorisation (from the DSP)
• Sanitary and veterinary authorisation (from the DSV)

E-commerce in Romania is regulated by Law No 365 of 7 June 2002 republished, and Article 5 lists at least the following information:

• Name or designation of service provider;
• Domicile or registered office of the service provider;
• Telephone numbers, fax numbers, e-mail address and any other data necessary to contact the service provider directly and effectively;
• The registration number or other similar means of identification, if the service provider is registered in the Trade Register or similar public register;
• Tax registration code;
• The identification details of the competent authority, if the service provider’s activity is subject to an authorisation regime;
• The professional title and the State in which it has been granted, the professional body or any similar body of which it is a member, an indication of the regulations applicable to that profession in the State in which the service provider is established and the means of access to them, if the service provider carries out a regulated professional activity;
• The tariffs for the services offered, which must be indicated in accordance with the rules on the marketing of goods and services on the market, specifying whether or not value added tax is exempt, included or not included, and the amount of such tax;
• Inclusion or non-inclusion in the price of delivery charges and their amount, if applicable;
• Any other information that the service provider is obliged to make available to recipients, in accordance with the legal provisions in force.

All this information, as well as any other that may be necessary or relevant, must be easily accessible, permanently and free of charge. The service provider must display this information in a clear, visible form on the web page through which the service is offered.

Other legal obligations of traders

From August 2022, traders have a new legal obligation relating to consumer relations. Thus, by Order no. 449/2022 on some measures to inform consumers about alternative dispute resolution, the National Authority for Consumer Protection has established the obligation for all traders to publish on their website an information leaflet on the alternative dispute resolution procedure.

Thus, according to Article 2 para. 1 of the Order: traders who manage websites for sales, online order taking and/or advertising of products and/or services, tourist services, marketing of packages of tourist services or airline tickets, including e-commerce – electronic commerce, are obliged to display on the first page of the website – home page, on the menu bar of the page, the pictograms provided in Annex no. 2 which is an integral part of this Order.

A particularly important aspect to keep in mind and implement for any e-commerce in Romania and merchant operating online is the implementation of the provisions of Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of individuals with regard to the processing of personal data and on the free movement of such data and repealing Directive 95/46/EC (General Data Protection Regulation).

Personal data is any information relating to a natural person, such as name and surname, ID number, address, e-mail, location, telephone number and any other information that can help identify the person.

In carrying out the online commerce activity, the merchant processes the personal data of its customers, thus becoming a personal data controller. In this capacity, the trader has some essential obligations which, if breached, can lead to some of the highest fines in the EU.

The most important obligation would be to publish on the website an updated Privacy Policy, which would provide in a simple, clear and accessible language, the details of the processing of personal data of customers: what types of data are processed, what is the basis of processing, the duration of data storage, the rights of data subjects regarding the processing of personal data.

The trader will also be obliged to provide an address, telephone number or e-mail address at which he can be contacted regarding the protection of the personal data of the data subjects.

The more payment methods there are, the greater the convenience for the prospective buyer.

You can opt for:

• refund payment
• card payment
• payment by PayPal
• payment by bank transfer

Delivery by courier is most often used, even if this service means a higher cost of the product. However, it is also possible to send the parcel by post or to collect the product directly from the seller or the post office.

In addition, shipping discounts can be offered, the parcel can be tracked, delivery charges can be set according to price, volume or weight and more.

The Terms and Conditions section is perhaps the most important section that must be included in any online store or e-commerce in Romania, because it is, in fact, the remote contract between seller and consumer.

Like any contract, it must contain, among other things, the following:

• Identification data of the seller
• Deadlines for returning the products
• Liability
• Transfer of ownership
• Processing of personal data, etc.

The necessary clauses are numerous, which is why, in order to be convinced that nothing important is omitted, it is recommended to call a specialist who can draft the Terms and Conditions section, taking into account all the legal provisions relating to e-commerce.

Applicable law does not require the customer to return the product in its original packaging, this is a limitation on the customer’s right to withdraw from the contract and, unfortunately, most online shops impose this condition. According to the new regulations, more specifically Article 16, point 12 of Law 249/2015, “It is prohibited to condition, in any form, the legal rights of consumers relating to the warranty of the purchased product to keep the packaging.” It should also be noted that the product must be returned with all the accessories with which it was delivered.

Under EU law, if the products purchased turn out to be faulty or do not look as described, the trader must repair, replace, reduce the price or refund the customer.

Buyers have the right to cancel and return their order within 14 days, for any reason and without any justification

General rules on purchasing of real estate

EU and EEA citizens can buy real estate properties (land and buildings) in the same conditions as Romanian citizens.

Non-UE/EEA citizens may acquire buildings in Romania, while land may be acquired only if there is an international agreement in place which also allows Romanian citizens to acquire land in the respective countries.

Legal forms of business

Before starting the investment in the Romanian market, the investors have to decide upon the legal form of business which will be used.

The types of business forms are stipulated by Law no. 31/1990 as republished and subsequently modified and completed, and there are compiled in the next table with specific information: the minimum share capital, the liability of the shareholders/stockholders, the minimum number of shareholders/stockholders.

The most common forms of business used in Romania are the Limited Liability Company along with the Joint Stock Company and Branches.

General social and health security

Social security and health insurance assessment base of an employee in Romania is derived from salary income.

* For the construction field, agriculture, food industry and IT, there are special provisions applied regarding due taxes and exemptions by case.

Residents of the EU are covered by the provisions of EC Regulation 883/2004 regulating social security and health insurance rules in case of cross-border activities.

General comments on labour law

Individuals working as IT specialists or in the Research & Development field may benefit from an exemption from the standard 10% income tax, under certain conditions expressly mentioned in the Romanian domestic legislation.

Companies doing business in Romania could benefit from the following incentives:

• Tax facilities regarding R&D expenses
  Companies may benefit of an extra 50% tax depreciation for the eligible R&D expenses and may also apply the accelerated depreciation for these expenses.
• Tax exemption on reinvested profit
  The facility refers to the exemption of corporate tax of the profit re-invested in certain types of assets.

The arm’s length principle is based on a comparison of the terms which were agreed in any business or financial transactions between related parties and the terms which would have been agreed between unrelated parties in similar business or financial transactions, in comparable circumstances.

The review of comparability of the terms is made by confronting, in particular, the businesses conducted by the parties, including, but not limited to, their production, assembly works, research and development, purchase and sale, the scope of their business risks, the characteristics of the compared property or the service, the terms agreed between the parties to the transaction, the economic environment in the marketplace, and the business strategy. The terms shall be considered comparable if there is no difference at all or if only minor adjustments would compensate any such difference.

If there is a difference between the prices agreed in transactions of related parties and the prices applied between unrelated parties in comparable business transactions, the tax authorities may adjust the taxable base of the related parties involved in the transactions.

Content

Transfer Pricing documentation represents a set of information, data and facts which demonstrate and explain the method of taxpayer’s price formation in controlled transactions. Transfer Pricing documentation, in general, consists of two parts: a general one and a specific one.

General rules

Transfer Pricing documentation shall be prepared for each controlled transaction separately or for each group of aggregated controlled transactions and in Romanian language. Transfer Pricing documentation refers to each fiscal year.

Even if each Romanian taxpayer performing economic transactions with affiliated parties should prepare a Transfer Pricing documentation, there are some differences when it comes to deadlines and timing, as detailed in the following two subsections.

Taxpayers categories

1. Large taxpayers are obliged to prepare the Transfer Pricing documentation if they carry out transactions with related parties exceeding the following thresholds:

• EUR 200,000 cashed in/paid interest for financial services
• EUR 250,000 services rendered/received towards/from related parties
• EUR 350,000 acquisitions/sales of tangible/intangible assets

2. Large taxpayers that do not meet the above thresholds or medium or small taxpayers are obliged to prepare the Transfer Pricing documentation if they carry out transactions with related parties exceeding the following thresholds:

• EUR 50,000 cashed in/paid interest for financial services
• EUR 50,000 services rendered/received towards/from related parties
• EUR 100,000 acquisitions/sales of tangible/intangible assets

3. The other taxpayers who do not fall in any of the above-mentioned categories are not obliged to prepare the Transfer Pricing documentation, however they should document that the arm’s length principle is observed in dealings with the related parties in line with financial and tax applicable principles.

Deadlines

Based on the classification detailed above, the deadlines for drafting/presenting the Transfer Pricing documentation are as follows:

Taxpayers in category 1 should present the Transfer Pricing documentation within 10 days of the tax authorities’ request.

Taxpayers in category 2 should present the Transfer Pricing documentation within 30-60 days of the tax authorities’ request. The taxpayers may ask for maximum 30-day postponement.

Due to the short preparation period, it is recommended having the documentation prepared in advance.

Advance Pricing Agreements (APA) are available under Romanian legislation. APA are valid up to 5 years with possibility of extension in case of long-term contracts.

For large taxpayers and other taxpayers with consolidated value of transactions higher than EUR 4,000,000, the fee is EUR 20,000 for the initial APA and EUR 15,000 for amending the initial APA.

For other taxpayers and consolidated value of transactions lower than EUR 4,000,000, the fee is EUR 10,000 for the initial APA and EUR 6,000 for amending the initial APA.

For non-compliance regarding the preparation and presentation of the Transfer Pricing documentation, penalties are applicable:

• For large and medium taxpayers – RON 12,000-14,000 (approx. EUR 2,510-2,930)
• Other taxpayers – RON 2,000-3,500 (approx. EUR 420-730)

Separately, adjustment of tax base plus late payment interest and penalties may be applicable.

Employment contract types

There are more types of employment agreements in Romania, no matter if the individuals are residents or non-residents, of which we mention:

As a rule, the employment contract must be concluded for an unlimited duration. The unlimited duration is a measure of protection for the employee.

By exception, the individual employment contract may also be concluded for a limited duration, under the terms expressly provided by the law. Maximum number of defined employment agreement is 3 successive ones.

Employment of residents

According to Article 13 of the Romanian Labour Code, the minimum age required to be employed is 16 years. A 15-year-old individual can be hired for certain activities which will not affect his health or professional development and only with the prior consent of the parents or legal representatives.

The employment of an individual under the age of 15 is forbidden.

The future employee must present to the employer documents as:

For some positions specified in the National Classification of Positions in Romania are required superior studies and it is not allowed to hire an individual without the necessary qualification.

Employment of non-residents (EU and non-EU)

The non-residents that come from countries out of the UE are usually employed with agreements concluded for indefinite period, because they need to prove stability and the fact that they will be able to support themselves during the term they will live in our country.

To employ this type of non-resident, the Romanian employer needs to go through an entire procedure. Firstly, he/she must obtain the approval of the Romanian Immigration Office, and after this stage, the employee may apply for the staying permit.

For UE citizens it is simpler to conclude an employment agreement in Romania. If the period of their staying in Romania exceeds 180 days in one year, they must register at the Romanian Immigration Office.

After the conclusion of the employment agreement, all employees (residents, non-residents from UE or third countries) have the same rights and obligations in relation with the Romanian employer.

Labour contract and required documentation

The Labour Code requires that an individual employment contract must be concluded in written form and in Romanian language.

Among the mandatory elements that an individual employment contract must contain with observance of the provisions of Article 17 of the Labour Code, we mention:

The contract may also specify provisions such as confidentiality, copyrights (in IT area) etc.

The individual employment contract can be concluded with handwritten signature or electronic signature (i.e. advanced electronic signature or the qualified electronic signature). At the conclusion, amendment, suspension or, as the case may be, cessation of the individual labour contract, the parties must use the same type of signature, namely the handwritten signature or the electronic signature, under the terms of the specific law.

Other mandatory requirements

The occupational medical check before concluding the individual employment contract is mandatory. Failure to this obligation shall bring about  the nullity of the individual employment contract, and failure to comply with this provision may also bring sanctions applicable to the employer.

For year 2024, the monthly minimum gross base salary guarantee in payment   is RON 3,300. The employers cannot pay the employees the minimum gross base salary for more than 24 months.

For employees in the construction sector, the minimum monthly gross base salary is RON 4,582 and for employees in the agricultural sector and food industry, the minimum monthly gross base salary is RON 3,436.

The employee is entitled, according to the provisions of the Labour Code, to a minimum of 20 working vacation days per year.

Trial/probationary period

The probation period depends on the employee’s position and the duration of his/her individual employment contract. For contracts concluded for an indefinite period, the maximum probation period can be of:

Trial/probationary periods for part-time employment contracts shall not exceed:

• 5 working days for a duration of the individual employment contract shorter than 3 months;
• 15 working days for a duration of the individual labour contract ranging between 3 and 6 months;
• 30 working days for a duration of the individual labour contract longer than 6 months;
• 45 working days, in the case of employees holding management positions, for a duration of the individual labour contract longer than 6 months.

Cases

A Romanian employment contract can cease as follows:

• by right (for contracts concluded for definite period);
• based on the parties’ consent, on the date agreed upon by them;
• as a result of one of the unilateral will of the parties, in the cases and under the terms restrictively provided by the law.
• based on a dismissal procedure initiated by the employer in the following cases:
  • the dismissal may be ordered for reasons pertaining to the employee’s person (i.e. disciplinary dismissal; dismissal in case the employee is not professionally fit for the position in which he is employed; dismissal following a decision of the competent medical examination bodies, physical and/or mental incapacity of that employee has been established) OR,
  • for reasons that do not pertain to the employee’s person (i.e. restructuring of the job position held by the employee, etc.).

Notice period

The individual employment contract can be ceased by notice given by each party. The termination notice period depends on the position ‒ management or execution.

The notice period in case of termination upon employee’s request is the following:

Currently, the minimum monthly gross base salary is RON 3,300.

*Exceptionally, for employees in the construction sector, the minimum monthly gross base salary is RON 4.582, and in the agricultural and food industry sector, the minimum monthly gross base salary is RON 3.436.

The employer is obliged to compute, withhold and pay monthly the social security contributions and the personal income tax for its employees. The payment of them is processed by the company by 25^th of the following month for which the payroll is processed.

The actual percentage of social security contributions and personal income tax are presented in the table below:

*For the construction field, agriculture and food industry, respectively IT, there are special provisions applied regarding due taxes and exemptions by case.

The normal length of the work time is 8  hours per day and 40 hours per week, usually Monday to Friday, with two rest days, usually Saturday and Sunday. The rule is that the maximum working time for a week cannot exceed 48 hours per week, including overtime hours.

For overtime work, the employee is entitled to paid off hours within the time limit provided by the Labour Code in Romania (90 calendar days) and, if the compensation with paid time off is not possible, the extra work will be paid, during the next month, to the employee by adding a benefit no lower than 75% of the basic wage corresponding to its duration.

Employees are entitled, according to provisions of the Labour Code, to a minimum of 20 vacation days per year (working day, not calendar day).

For medical reasons, the employee is entitled to a medical leave allowance, in percent of 100%, 75% etc.,of the average gross monthly income for the 6 months preceding the period of sickness, depending on the cause of incapacity.

The employer is obliged to pay the remuneration for the first 5 calendar days of incapacity from the medical leave period. The rest of the period is paid by the Romanian state. However, the employer shall credit the state with the amount paid to the employee. In maximum 90 calendar days, the employer is in the position to file a compensation request to the Romanian Health Insurance House for recovering the amounts paid to the employees.

In case of occurrence of special family events, the employees shall be entitled to paid days off which shall not be included in the duration of the rest leave and whose conditions should shall be set forth by the law, applicable collective labour agreement or Internal Regulations of the company.

For solving certain personal circumstances, the employees are entitled to also ask for unpaid leaves in accordance with the provisions of the applicable collective agreement or Internal Regulations of the company.

The most common benefits for employees in Romania are:

Rules for granting meal tickets (meal vouchers):

• Meal tickets are optional benefits in kind granted by the  employer to those employees having declared their primary employment function within the company.
• Starting with January 2024, the maximum nominal value of a meal ticket is of RON 40. The value is decided by the employer.
• Meal tickets value is deductible from the calculation of the corporate and is exempted from paying the social security contribution (pension) due by the employee.
• Meal tickets value is taxed with the personal income tax (flat rate 10%) and, respectively by the quota of 10% corresponding to the health contribution due by the employee.
• Are granted only for the effective worked days – 1 meal ticket/day.
• Are not granted for delegation days with per diem payment or for other type of absences (vacation, sick leave, labour contract suspension etc.).
• Meal tickets are issued exclusively in electronic/card format.
• Meal tickets can be used, in compliance with legal provisions, including for online payments.

All the benefits are granted by the employer to the employees through provisions stipulated in the labour contract, the collective contract, Internal Regulation and/or through internal decision, where applicable.

Temporary labour agent

The employment by temporary labour agent is an activity performed by a temporary employee who, at the direction of the temporary labour  agent, carries out an activity for the benefit of a user and at the user’s disposal and under its supervision and management.

A temporary employee is a person working for an employer ‒ temporary labour agent-  and made available to a user for the duration established by the contract services necessary to perform certain, precise and temporary tasks.

The wage received by the temporary employee for each assignment can not be less than that received by the employee of the user, who performs the same work or one similar to that of the temporary employee.

A temporary labour agent is the legal person authorized by the Ministry of Labour, Family and Social Protection that temporarily provides the user with skilled and/or unskilled personnel employed and paid for this purpose.

The user is the natural or legal person for whom or under whose supervision and management a temporary employee placed at disposal by the temporary labour agent works temporarily.

The temporary work assignment shall be established for a period not exceeding 24 months. The duration of the temporary assignment may be extended for successive periods which, in addition to the initial duration of the assignment, may not result in a period exceeding 36 months.

Delegation and posting within the labour contract

According to the Romanian Labour Code, the place of the work may be unilaterally modified by the employer by delegating or posting the employee to another workplace than the one provided in the individual employment contract. During the delegation or posting, the employee shall retain his position and every right set in the individual employment contract.

Employee delegation

The delegation is the temporary exercise by the employee, on employer’s direction, of works or tasks similar to his usual tasks, outside his workplace. A delegation may be directed for a period of maximum 60 calendar days within 12 months and may be extended for successive periods, with the consent of the employee, for maximum 60 calendar days.

A delegated employee shall be entitled to the payment of the transport and accommodation expenses, as well as a delegation benefit, under the terms of the law or of the applicable collective labour agreement.

Posting of employees

Posting is an act by which the employer directs the temporary change of the workplace to another employer, for the performance of certain works in its interest. By way of exception, the type of work may be changed during the posting, but only with the written agreement of the employee.

The posting may be directed for a period of maximum one year. By way of exception, the period of the posting may be extended every six months, with the agreement of both parties, for objective reasons that require the presence of the employee with the employer where the posting was directed. An employee may refuse the posting directed by his employer only by way of exception and for duly justified personal reasons. 

The rights due to a posted employee shall be provided by the employer where the posting was directed.  During the posting, an employee shall enjoy the rights more favourable to him/her ‒ either the rights with the employer directing the posting, or the rights with the employer he/she is posted to. 

The employer providing the posting must take all measures necessary so that the employer where the posting was directed fulfils completely and in good time all obligations towards the posted employee.  

Cross-border posting

The cross-border posting is regulated by several European Directives, including the Directive 96/71/EC, transposed in Romania by Law no. 16/2017. These legal provisions regulate posting on the territory of EU Member States or on the territory of the Swiss Confederation.

An essential element of distinction between the two concepts is on the effects of posting towards labour contract. In the case of posting governed by the Labour Code, there is a suspension of the labour contract during posting (which implicitly assumes the suspension of payment of wages by employer).

In case of cross-border posting, the labour contract with employer that posts is actively maintained. In this case, the salary will remain in pay at the seconding employer.

The Company has the obligation to ensure the employees’ safety and health („SHW”) relevant instructions in all aspects related to work/ job positions.

The Company has to ensure that each worker receives sufficient and appropriate training in the field of SHW, especially by receiving the pieces of information and work instructions, specific to both the workplace as well as their position:

• upon employment;
• upon change of job or transfer;
• when introducing a new work equipment or some changes to the existing equipment;
• upon the introduction of any new technology or work procedure;
• when performing special duties.

The workers’ training in the field of safety and health at work includes 3 phases:

• introductory-general training;
• on-the-job training;
• periodical training.

Introductory-general training is done when hiring the employee or when posting or delegating them from one company and/or unit to another;

On-the-job training is done after the introductory-general training and aims to present the risks for safety and health at work as well as the measures and actions taken to prevent and protect the employees for each workplace, work station and/or each function exercised.

Periodic training is given to all workers and aims to refresh and update knowledge in the field of safety and health at work.

Prevention and protection activities

The employer is responsible with organizing the prevention and protection activities, in the following ways:

a) by the assumption by the employer of the duties for carrying out the measures provided by law, (but only in the case of micro-enterprises and small enterprises, in which activities are carried out without particular risks, with a number of up to a maximum of 49 employees inclusive); or

b) by designating one or more workers to deal with prevention and protection activities; or

c) by establishing one or more internal prevention and protection services; or

d) by calling on external prevention and protection services.

• Romanian Labour Code (Law 53/2003, republished with subsequent amendments and additions);
• Law no. 16/2017 on the posting of employees in the framework of the provision of transnational services;
• The Order of the Ministry of employment no. 2171/2022 for the approval of the framework model of the individual employment contract;
• Law no. 227/2015 regarding the Fiscal Code, republished with subsequent amendments and additions ;
• Law no. 202/2002 regarding the equality of chances between women and men;
• Government Decision no. 900/2023 for the establishment of the minimum gross basic salary per country guaranteed in payment.
• Government Emergency Ordinance No. 93/2023 for the establishment of the minimum gross basic wage per country guaranteed in payment for the construction, agricultural and food industry sectors;
• Law No 319/2006 on safety and health at work, as amended and supplemented.

Companies can be incorporated by natural persons or legal entities and must register to the territorial Trade Register. Certain activities need prior authorization (e.g. credit institutions, insurance brokers, companies which produce, sell firearms and ammunition, pension entities). Certain activities need to be authorized after the registration of the company (e.g. work agent, transportation).

The main document needed for incorporating a company is the articles of incorporation. This document must specify the following:

The types of documents requested by the Trade Register for the company establishment are:

• Proof of verification of company name availability and its reservation thereof
• articles of incorporation for the incorporated company
• excerpts issued by the Trade Register where the shareholders are incorporated- legal entities
• the identity document of the shareholders natural persons
• passport or ID of the future director of the Romanian company
• the document attesting the right of use over the space with destination of registered office ( e.g. lease agreement) and the ownership property documents
• standard application form(s)

On the incorporation, the company in registered with the Romanian Fiscal Authorities by submitting the registration request with the Trade Register. However, in order to choose the appropriate tax regime, subsequent formalities with the tax authorities are necessary to be performed.

Tax rates

The standard corporate income tax rate in Romania is 16% and the standard VAT rate is 19%.

Romanian taxpayers that are carrying on activities such as gambling and nightclubs are either subject of 5% rate from the revenues obtained from such activities or 16% of the taxable profit, depending on which is higher.

Besides the VAT 19% rate, the following reduced rates would apply:

• 9% for restaurant and catering services, hotel accommodation, water, food, save for food containing a certain amount of sugar, beverages, save for alcoholic beverages, medical treatments, prosthesis, housing under certain conditions, etc.
• 5% for schoolbooks, newspapers, magazines, admission fees to castles, museums, sport events, etc.

Registration requirements

VAT registration for taxable persons having the place of business activity in Romania should be performed when the annual turnover of EUR 88,500 (RON 300,000) is exceeded.

Voluntary VAT registration before the threshold is exceeded is also possible. The VAT registration procedure is complex, and several types of documents are required. Non-resident taxable persons established in Romania through fixed establishments and non-residents having no actual presence in Romania can register without observing the above threshold. However, a VAT number must be in place before the commencement of the economic activity.

A taxable person not registered for normal VAT purposes in Romania and not required to register is liable to request the special VAT registration in the following situations:

• purchase of services from persons established outside Romania having the place of supply in Romania
• supply of services with place of supply in another EU Member State
• intra-community acquisitions of goods from another EU Member State cumulatively exceeding the annual threshold of EUR 10,000 (RON 34,000)

The incorporation of the company, the mentions or the liquidations are tax free as per Law no. 265/2022.

Amounts for publishing the documents (e.g. resolutions, Articles of incorporation) in the Romanian Official Gazette will apply.

Special taxation of micro-enterprises

The microenterprise regime is optional and may be enjoyed by all companies obtaining revenues below the threshold of EUR 500,000 computed at the NBR exchange rate valid for the last day of the financial year and met several other criteria (e.g. revenues from consulting and management services lower than 20% out of the total revenues, one minimum employee etc.).

The microenterprise tax rate applicable is 1%.

Income tax exemption for programmers

Main conditions

A company that conducts creative activities of computer programs for trading purpose can benefit of (salary) income tax exemption for its employees engaged in such activities, up to a limit of Lei 10,000 gross per month under certain conditions provided by law. The tax exemption is granted only for Romanian entities that perform the creation of computer programs to achieve a final product or a component of the final product for trading purposes. 

Starting with February 1^st, 2018, tax exemption in the IT industry is also granted to those employees who do not have a bachelor’s degree at all but are enrolled at a university (not necessarily on the IT area), as well as to those who have graduated superior education programs with a short duration. The main condition is that these employees perform one of the activities stipulated in the local legislation, otherwise they cannot benefit from the tax exemption.

Opening a bank account

For a Romanian company it is mandatory to have a bank account. For opening a bank account, the legal representatives’ personal presence is mandatory at the opening. In the previous years, the banks also accepted a special notarized Power of attorney for another individual, but this practice changed and usually, at the opening, they request the presence of the administrator of the company.

Subsequent modifications in the statute of the company

All modifications regarding the statutory information of the companies (change of registered seat, mandate of directors, change of the shareholders or directors etc.) need to be registered at the Trade Register in 15 days as of the amending deed.

Unique European identifier (EUID)

All Romanian companies receive, beside the unique registration number and the Trade Register identification number, the unique European identifier (EUID).

Through the system of interconnection of the Trade Register institutions in Europe, documents and information relating to the professionals registered in the Trade Register of each country are made available to the public. It will be possible to obtain information on identification and status of a company in the European Union and to obtain copies of certificates of electronic documents.

Basic and reduced VAT rates

The basic VAT rate in Romania is 19%, but a reduced rate of 9% applies to the food and beverage industry, save for food / beverages containing a certain degree of sugar and alcoholic beverages, medical treatments and prosthesis, accommodation, supplies of social housing under certain conditions and admission fees to castles, museums, sport events and cinemas. An extra-reduced 5% rate applies to schoolbooks, newspapers, magazines.

Export within and outside the European Union

The supply of goods to other EU member states are exempt from VAT. In order to apply this exemption, the buyer should be registered for VAT purposes in the other EU member state while the transport of goods to the other EU member state should be justified with a set of required documents.

Starting January 1, 2020, such back-up documentation was aligned at the level of the European Union, therefore such documents required by the tax authorities should be the same in each and every EU Member State.

Deliveries of goods outside the EU are being considered as exports for which the same VAT exemption would apply. In order to apply such exemption, back-up documentation would be required function of the statute of the party involved in the transaction (i.e. supplier or beneficiary).

Taxable amount

The taxable amount to which the relevant quota of VAT would apply equals the total consideration obtained or to be obtained for a supply, including any excise duties or other taxes and fees.

Voluntary and mandatory registration

In Romania, voluntary registration for VAT is possible and may be performed by any taxable person with the headquarter of the economic activity in Romania and currently conducts or intends to carry out economic activity falling within the scope of VAT.

Regarding the mandatory VAT registration, a threshold of EUR 88,500 annual turnover is provided.

The application for VAT registration is made within 10 days from the end of the month in which this threshold is reached or exceeded.

Group registration for taxable entities

Group registration for VAT is available for entities in Romania under certain conditions.

Other specifications of the VAT registration

According to the legislation in force, Romanian tax authorities have the right to register ex officio for VAT purposes those taxable persons that register an annual turnover of at least EUR 88,500 and have not requested the registration as per the law.

Besides the mandatory registration, Romanian taxable persons would have to register for VAT purposes before performing intra-Community transactions, under certain conditions, for the purposes of service delivery to other EU member states, or for the purposes of acquiring goods or services from other EU member states. The registration must be done in advance.

Definition of foreign taxable persons

Foreign persons are taxable person whose seat, place of business or fixed establishment is located outside Romania.

Mandatory registration for foreign taxable persons

Before starting an activity in Romania that is subject to VAT, any foreign taxable person should register for VAT purposes in Romania.

In case of distance sales activity, the threshold for VAT registration is of EUR 10,000 as per the new One Stop Shop system. However, the threshold takes into consideration also other transactions, therefore an analysis is required.

Minimum amount and applicable period

If the VAT refund request concerns a period of less than one calendar year, but greater than 3 months, the amount of VAT for which the refund is requested may not be less than the RON equivalent of EUR 400.

However, if the request refers to a period of one calendar year or the remaining period of the calendar year, the amount of VAT may not be less than the RON equivalent of EUR 50.

The period for which the VAT is refunded may be maximum one calendar year and minimum 3 calendar months. Refund requests may, however, concern a period of less than 3 months if this is the period remaining until the end of the calendar year.

Deadline and place of filing for VAT refund

The request for refund should be transmitted electronically at the latest by September 30 of the calendar year following the refund period. The request should be filed at the local tax authority of the foreign taxable person.

Refund for foreign taxable persons

The VAT refund is possible for foreign taxable person if certain conditions are met.

VAT refund conditions

The VAT refund is possible concerning third countries if certain conditions are met.

Minimum amount and applicable period for VAT refund

VAT refunds to third countries are subject to the same rules as refunds to EU member states.

Nevertheless, another mandatory condition is that between Romania and that third party to be concluded a specific mutual agreement.

Deadline and place of filing for VAT refund

The request for VAT refund should be submitted by September 30 of the subsequent calendar year following the refund period. The request should be submitted to the registry office of the tax authorities or by post. The deadline for issuing the decision is 6 months starting from the date the tax authority has received the entire documentation.

The penalties for non-compliance may be the following:

• Fines between approx. EUR 200 and EUR 1,000
• Interest for late payment 7.3% p.a.
• Penalties for late payment 3.7% p.a.
• Penalties for non-declaration 29.2% p.a.

Vacation days

In the Federation of Bosnia and Herzegovina, employees who established an employment relationship or have a discontinuance of employment longer than 15 workdays, are entitled to min. 20 and max. 30 vacation days, which are granted after 6 months of continuous work. Until the half year is fulfilled, the employee has the right to 1 day off for each month spent working.

Once entitled to the full possible amount of vacation days, employees must take at least one vacation at once with the minimum duration of 12 working days.

In the Republic of Srpska, employees who established an employment relationship or have a discontinuance of employment longer than 30 workdays are entitled to at least 20 vacation days, but extra vacation days can be granted by the employer. The employees are entitled to vacation after 6 months of continuous work. Until the half year is fulfilled, they have the right to 1 day off for each month spent working.

Once entitled to the full possible amount of vacation days, employees must take at least one vacation at once with the minimum duration of 12 working days.

Additional paid leave

Employees in the Federation of Bosnia and Herzegovina are given altogether 7 working days of additional leave per year, which can be drawn in case of a marriage of the given employee, birth of a child, sickness or death of a close family member or voluntary donation of blood. In the Republic of Srpska, the additional leave for the same reasons amounts to 5 working days.

In the calendar year there are 10 public holidays celebrated in the Federation of Bosnia and Herzegovina and 12 in the Republic of Srpska, however, none of them are included in the paid annual leave; neither are national holidays and weekly rest days.

The impact of employment termination and probation period on the vacation leave

In Bosnia and Hercegovina, in case an employee’s contract is terminated but their vacation leave was not fully drawn due to the employer, the employer has to pay compensation for the remaining vacation days. There are no further consequences in case the vacation leave is overdrawn by an employee, who’s contract has been terminated, since their employment ends with the termination date as written in their termination agreement.

As for the probation period, which can last up to maximum 6 months, employees have the right to 1 day off for each month worked, unless prior to the date of employment they worked for another employer for more than 6 months and were entitled to a full annual leave.

Child- and health-related absence

The compulsory maternity leave lasts for 42 days in the federation of Bosnia and Herzegovina, but mothers may take one full year off after a child is born. Upon agreement, after the 42-day compulsory maternity leave, the father may continue to use the leave (which is considered as the paternity leave) instead of the mother. The same is applicable to the Republic of Srpska, however, the compulsory leave for mothers lasts for 60 days. When an employee draws their maternity or paternity leave, their right to vacation days is dismissed. Upon the employee’s return from the leave, they regain the right to a paid vacation. Parental leave is granted only in case of an adoption of a child, or in case a child with serious developmental disability is born; however, there are no detailed regulations in this regard.

Each employee is entitled to health care and a paid doctor’s visit during their annual leave. This is applicable also to employed pregnant women. As for other employees, there is no limitation for the duration of sick leave, however, it depends on the legal basis of the leave or illness, and on the place of exact residence. A compensation of salary is granted when health-related leave is taken.

Vacation allowance and compensation

The vacation allowance and compensation are regulated individually in the Employment Rulebook by employers. In the Federation of Bosnia and Herzegovina, the allowance is calculated in the amount equalling max. the 50% of the average net salary paid in the preceding calendar quarter. This amount is non-taxable as specified by the Income Tax Law, but the rest above the 50% is subject to taxation. In the Republic of Srpska, the employee receives the vacation allowance in the amount of at least 100% of their average salary from the decisive period, which is subject to taxation.

Vacation days

According to the Croatian Labour Code, after 6 months of work each employee is entitled to at least 4 weeks of vacation leave in a year, which equals to 20 working days. During those 6 months, employees are granted only the proportional amount of overall vacation days.

Each year, one part of the vacation leave must be taken in one block, at least in amount of two weeks, i.e. 10 working days.

Additional paid leave

Additional leave can be drawn but must be either due to important personal needs such as wedding of the employee, childbirth or death of a close family member. The extra days off can amount to max. 7 working days each year.

In Croatia, there are 14 public holidays in one calendar year as of 2020, however, they are not included in the paid annual leave; neither are national holidays and weekly rest days.

The impact of employment termination and probation period on the vacation leave

When a contract is terminated or comes to an end without renewal, an employee receives a compensation for their remaining vacation days. In case an employee’s vacation leave is overdrawn, the employer cannot request a compensation from the employee even though they took more vacation days than entitled to.

Employees who are in a probation period have the right to a proportional amount of vacation days, i.e. to one-twelfth of vacation leave for each full month of work.

Child- and health-related absence

During maternity leave, employees exercise the right of compulsory maternity leave for a continuous period of 98 days, of which 28 days are taken before the expected birth and 70 days after the birth of the child. These employees are entitled to vacation days when returning from maternity leave. Parental leave may be drawn after the child reaches 6 months of age and may be used until age 8. As for paternity leave, mothers may pass on their remaining leave to fathers after their compulsory  leave.

As for the health-related absence, the employer pays for a sick leave up to 42 days. After that, the sick leave is drawn at the expense of the Croatian Institute for Health Insurance. According to the Labour Code, the minimum amount of the paid sickness benefit is 70% of the salary compensation base, but the employer may also pay a higher amount than obliged. Therefore, an employee is entitled to a salary compensation while on sick leave. As for a doctor’s visit, is treated as a sick leave. Pregnant female employees are entitled to at least 1 examination per month.

Vacation allowance and compensation

When the vacation leave is drawn, an allowance is paid to the employee, calculated from the average monthly salary of the preceding calendar quarter. Due to this calculation, the amount of wage compensation can be affected and increased e.g. by bonus payments and other monetary rewards in the decisive period. If the employee is provided a wage or part of a wage that pertains for a longer period than one calendar quarter (e.g. yearly bonuses) during the decisive period, its proportionate part is used for the calculation of average earnings.

Vacation days

In the Czech Republic, employees are granted 20 working days of vacation leave, or 4 weeks altogether, as specified in the Labour Code. Exceptions concern some professions, such as government sector workers, who are granted 5 weeks or teachers and academic staff with 8 weeks of vacation days.

Requirements for the vacation days to be granted are the following:

• Continuous employment under the same employer;
• Duration of work performance for at least 60 days in one calendar year;
• If an employment does not last for a whole year, the employee is entitled to a proportional part of the annual vacation leave – i.e. one twelfth of the leave for each calendar month of employment duration;
• In case an employee performed less than 60 days of work, they have the one twelfth of annual vacation leave for every 21 working days.

If the vacation days are not taken at once in one block, at least one leave must take 2 weeks long, unless agreed otherwise with the employer.

Additional paid leave

Additional leave is granted in the amount of 5 working days per year to workers who are performing particularly hard work or are exposed to risks of health (further specified in Section 215 of the Labour Code) and had a continuous employment under the same employer for at least one calendar year. In case the one year is not fulfilled, the entitlement of the additional leave is decreased to a proportional part, i.e. one twelfth of annual leave for every 21 days of work.

In the Czech Republic, there are 13 public holidays in one calendar year. They are not included in the paid annual leave, however, employees are entitled to salary compensation for salary loss due to such public holiday. National holidays and weekly rest days are not included in the paid annual leave either.

Additional paid leave can be drawn but must be either due to important personal needs such as wedding of the employee, childbirth or death of a close family member.

The impact of employment termination and probation period on the vacation leave

In general, when an employee does not draw all their vacation leave in the Czech Republic, the remaining days get transferred to the next year and must be scheduled till the 30th of June.

If an employee’s contract is terminated, but their vacation leave has not been fully drawn, the employee is entitled to a salary compensation for the remaining days of their leave. In some cases, when a new employment immediately follows the terminated one, the remaining leave may be transferred to the new employer upon the employee’s request, based on an agreement between all parties involved.

If an employee’s contract is terminated and their vacation leave has been overdrawn, the employee must return to the employer the salary compensation paid in excess.

During the probation period, the proportional vacation entitlement is applicable. The general basic rule is, however, that not the employee schedules the vacation leave but the employer, who must respect the employee´s legitimate interests and take into consideration their operational needs. Therefore, in principle, the employer may rule out the possibility of taking a vacation during the probationary period either generally or in specific cases, which is then subject to the principle of equal treatment. Regardless, taking vacation proportionately prolongs the probationary period in the amount of days drawn.

Child- and health-related absence

Maternity leave, which lasts 28 weeks in the Czech Republic, is considered as work performance for the purposes of leave entitlement, and thus the entitlement for vacation leave emerges during the maternity leave. On the other hand, no vacation entitlement arises during parental leave, which can last up to 3 years of the child’s age, and the allowance may be decreased according to the statutory provisions. The Labour Code allows an employee to take their remaining vacation between maternity and parental leave, but not during any of them.

The paid paternity leave lasts 1 week (i.e. 7 calendar days without interruption) and starts based on the employee’s choice. The paternity leave may be taken within the first 6 weeks from the date of the child´s birth, or from the date when the child is taken into foster care. The father may also take parental leave starting from the day when the child is born.

Regarding health-related absences, an employee is entitled to an unlimited paid time off during medical examination or treatment in a health care institution for the necessary time period, if such procedure is performed in a suitable facility nearest to the employee´s home or workplace and could not have been performed outside the working hours. The same applies to doctor´s visits during an employee´s pregnancy.

Vacation allowance and compensation

As stated above, the vacation allowance equals the proportional part of leave, where less than 1 day is rounded to half a day. The same applies when calculating one twelfth of the leave entitlement.

Salary compensation is calculated in the amount of average earnings, i.e. the average gross earnings from the decisive period (including bonuses and other variable payments), which is the preceding calendar quarter, divided by the hours of work performed in the given period.

The average earnings are ascertained on the first day of the calendar month following the decisive period. In case the employee did not perform work for at least 21 days within the decisive period, probable earnings are taken into consideration according to Section 355 of the Labour Code.

Taking the vacation leave after a quarter when premiums, extraordinary monthly or quarterly bonuses were paid, the value of average earnings is increased based on the calculation. However, this does not apply to the payment of annual bonuses, as those are distributed within the 4 quarters when the average earning is calculated.

Vacation days

Hungarian employees have the right to take 20 working days of vacation leave annually, which is granted in a proportional amount to the time spent at work in the given year. Vacation days are allocated by the employer and should contain at least 14 consecutive calendar days once in a calendar year, when the employee is exempt from work and availability. The weekly rest period, public holidays and any further days off are taken into consideration.

Additional paid leave

Additional leave is granted to workers according specific criteria, based on:

• Age: employees older than 25 years are entitled to 1 extra day off. Employees above 28 years receive 2 extra days, above 31 years 3 days, above 33 years 4 days, above 35 years 5 days, above 37 years 6 days, above 39 years 7 days, above 41 years 8 days and above 43 years 9 days. After the age of 45, employees have the right to 10 days of additional leave each year.
• Number of children raised: only child parents are entitled to 2 additional days off; employees with two children are granted 4 extra days; more than 2 children bring 7 extra days off each year.

Additional leave is also granted for employees with reduced ability to work, employees eligible for disability allowance or employees eligible for special aid for the blind and employed minors under the age of 18.

In Hungary, there are 11 public holidays in one calendar year, however, they are not included in the paid annual leave; neither are national holidays and weekly rest days.

The impact of employment termination and probation period on the vacation leave

In Hungary, in case an employee’s contract is terminated but they still have remaining days of vacation leave left, compensation shall be provided. No certain rule applies in case an employee’s contract is terminated and their vacation leave has been overdrawn, but the compensation paid in excess might be reclaimed by the employer.

During the probation period, which can last no longer than 3 months, an employee may take vacation leave only based on the employer’s decision. In principle, the employer may rule out the possibility of granting a vacation during the probationary period.

Child- and health-related absence

Maternity leave lasts 24 weeks in Hungary and is considered as time spent at work in terms of the calculation of annual leave. Male employees are granted a fathers’ leave of 5 days; in case of twins the amount of extra days off is 7. In both cases, the leave may be drawn only once. Additional unpaid parental leave may be taken for the purposes of taking care of a child up to 3 years of age, or a prolonged unpaid leave for taking a personal care of a child until the age of 10 years.

The Hungarian Labour Code does not specify any entitlement of an employee to a paid doctor’s visit, neither in the case of pregnancy.

Vacation allowance and compensation

Employers are entitled to a salary compensation for the time spent on vacation, which is calculated from the wage base or fixed supplement in effect at the time when the vacation was drawn or from the performance-based wage or wage compensation paid in the preceding six calendar months before the vacation.

Vacation days

According to the Polish Labour Code, employees are entitled to a specific amount of vacation days, based on the number of years worked, such as:

• An employee, who has worked less than 10 years, is entitled to 20 days per year;
• An employee, who has worked 10 years or more, is entitled to 26 days per year.

Furthermore, employees in Poland shall draw at least 14 consecutive calendar days at once, which is precisely the half of the overall vacation leave. However, there are no sanctions foreseen for not meeting the obligation and, upon request, the vacation can be shorter than 14 days in bulk, being divided into parts.

Additional paid leave

Additional paid leave may be granted upon the occurrence of extraordinary family events, mainly:

• Marriage of employee, birth of a child or funeral of employee’s spouse, child, father, mother, step-father or step-mother; in these cases, employees are granted 2 additional days off;
• Marriage of employee’s child, or the death and funeral of their sister, brother, mother-in-law, father-in-law, grandmother, grandfather or any other person falling under the employee’s care; in these cases, employees are granted 1 additional day off;

In Poland, there are 13 public holidays in one calendar year, however, they are not included in the paid annual leave; neither are national holidays and weekly rest days.

The impact of employment termination and probation period on the vacation leave

In case the allocated leave has not been drawn in full extent due to the termination or expiry of an employment relationship, an employee shall receive an equivalent compensation. In case the allocated leave has been overdrawn by the employee and their contract has been terminated, the employer cannot reclaim any compensation.

An employee during the probationary period is entitled to a leave proportional to the period they carry out working. They acquire the right to take vacation after each month of work amounting to one twelfth of the leave they are entitled to after one full year of employment.

Child- and health-related absence

Maternity leave lasts 20 weeks in Poland, while a compulsory time off is 14 weeks. The length of the leave increases in case of the birth of twins. During maternity, employees retain their vacation rights, whereas the amount of days depend on the number of years worked, just as during regular employment. The vacation leave may be taken all at once, right after returning from maternity leave. In addition, employees are entitled to 32 or 34 weeks, depending on the number of children born in one delivery, while male employees may also take two weeks of paid paternity leave in the first 24 months of the child.

In case a medical examination prescribed by a doctor in connection with pregnancy cannot be carried out outside of working hours, the employer is obliged to grant paid time off to the pregnant employee.

Regarding health-related absences, employees in Poland are not granted a limited amount of days for sick leave, however, the employer reimburses the sick leave up to 33 days of illness per calendar year (or 14 days, in case the employee is aged over 50). After this period, a sickness allowance is paid by the Social Insurance Institute up to 182 days, or 270 in case of tuberculosis or the incapacity to work occurs during pregnancy.

Vacation allowance and compensation

Employees are entitled to remuneration for their vacation leave, in case they fulfilled their working duties during their employment. Remunerations are due for periods no longer than one month and are calculated based on the total amount paid to the employee during the preceding calendar quarter.

If the preceding three months, which are subject to the calculation of the remuneration, include a considerable fluctuation, such as annual bonuses, the salary compensation shall be calculated based on the total amount paid to the employee during a period which does not exceed 12 calendar months preceding the month when the vacation was drawn by the employee.

The remuneration for vacation days are calculated the following way:

• The basis for assessment is divided by the number of hours when the employee performed work within the period in which such basis was determined, and then
• The remuneration for one hour of work is multiplied by the number of hours the employee would have worked during the vacation within the regular working time, according to the work schedule applicable to the given employee.

In case of substantial differences in the amounts of remuneration within one year, the period over which the basis for assessment is calculated may be extended up to 12 months. Therefore, there is no specific period in a year when taking a vacation is financially more advantageous.

Vacation days

The Romanian Labour Code specifies 20 working days as annual paid leave, which is guaranteed to all employees. Vacation days are granted based on the labour contract and are mandatory in case of employment. While the effective duration of the vacation leave is established in the individual employment contract, in compliance with the law and the applicable collective labour contracts, the minimum duration of the vacation leave defined in general is 20 working days.

If vacation leave is scheduled in fractions, the employer falls under the obligation to do the distribution of vacation in one calendar year in a way that each employee benefits from at least 10 workdays of uninterrupted leave.

Additional paid leave

Additional leave may be granted up to at least 3 working days per calendar year, according to the following specifications:

• Employees who work under difficult, dangerous or harmful conditions, blind persons, other disabled people and young people less than 18 years old shall benefit from an additional leave of at least 3 workdays;
• Employees who follow an in vitro fertilization procedure benefit from 3 additional paid days of annual vacation, which is granted as follows:

1. 1 day from the date of ovarian puncture,
2. 2 days from the date of embryo transfer.

In Romania, there are 11 public holidays in a year, counting up to 15 days of lawful holiday annually, however, they are not included in the paid annual leave; neither are national holidays and weekly rest days. Statutory public holidays are considered non-working days.

The impact of employment termination and probation period on the vacation leave

In case of a terminated employment, the rest of unused vacation days, to which the employee is entitled to, shall be compensated due to the contract termination. The employee who draws more vacation days than entitled to is obliged to return the allowance related to these days, for this allowance represents an undue payment.

During the probationary period, the employee benefits from all the rights provided by the Labour Code, as well as in the individual employment contract. However, it is generally recommended not use vacation days during probation, as this period serves for verifying the employee’s professional and personal skills in order to assess its ability to handle the job.

Child- and health-related absence

Maternity in Romania lasts at least 126 calendar days, while the salary received by the female employee is calculated from the amount equal to the 85% of their average salary in the preceding 2 quarters. Male employees are entitled to a paternity leave of 5 workdays within the first 8 weeks after the birth of a child, and additional 10 workdays, if the father of the newborn child has obtained a graduation certificate from a childcare course. Employees may also take up to two years of additional childcare leave.

When establishing the duration of the vacation leave, the periods of temporary incapacity for work related to the maternity leave, the maternal risk leave and the leave for the care of the sick child are considered as periods of activity. Therefore, the respective periods do not affect the number of rest days to which the employee is entitled each year.

Based on the maternity protection at workplace, pregnant employees are entitled to undergo medical examinations during pregnancy up to 16 hours per month without loss of pay, in case the medical check-ups can take place only during working hours.

For health-related reasons, Romanian employees are entitled to medical leave. In case of temporary incapacity for work, employees may take sick leave up to 183 days per year, based on a medical certificate issued by the doctor in accordance to law provisions.

Vacation allowance and compensation

When the vacation days are drawn, an employee is entitled to an allowance which may not be lower than the basic wage, emoluments and permanent additions due for that period, as stipulated in the individual labour contract. This allowance represents the daily average of the wages in the preceding calendar quarter, multiplied by the number of leave days.

Vacation rights

According to the Labour Code in Serbia, for each calendar year an employee has the right to no less than 20 working days of vacation. The duration of the leave is determined in the general act and employment contract, while the number of vacation days per year is determined by the work contribution, conditions of work, work experience, professional qualifications and other criteria. Based on that, the min. amount of 20 days of vacation leave may be increased.

The right to vacation arises after a month of continuous work from the stating date of employment. In general, an employee is entitled to one-twelfth of the vacation leave under Article 69 of the Labour Code for each month of work in which the employment either started or got terminated.

The vacation leave can be drawn at once or in two or more parts, based on a mutual agreement with the employer. If an employee takes it in parts, the first part shall be used in the duration of at least two consecutive working weeks during the calendar year, while the remaining shall be used by 30th of June of the following year the latest.

Additional paid leave

An employee is entitled to take a paid leave from work for a total duration of 5 workdays in a calendar year, which may be drawn either for getting married, due to a spouse’s childbirth, a serious illness of a close family member or in other cases determined by law or the employment contract.

In addition, the employee is entitled to paid leave in the amount of:

• Five workdays in case of a death of a close family member;
• Two consecutive days for voluntary blood giving.

Close family members include spouse, children, brothers, sisters, parents, adoptive parent, adoptee or legal guardian. The employer may grant the leave to the employee for relatives other than listed and for other persons who live in the same family household with the employee, for a period specified by the employer. Furthermore, the duration of paid leave may be exceeded upon agreement.

In Serbia, there are 10 public holidays in one calendar year, however, they are not included in the paid annual leave; neither are national holidays and weekly rest days.

The impact of employment termination and probation period on the vacation leave

When terminating the employment contract of an employee who did not draw the full amount of their vacation days, the employer shall reimburse the remaining leave. In case the employee took more vacation days than entitled to, the employer can request a compensation. However, this is not common practice.

As for the probation period, an employee gains the right to vacation after a month of continuous work starting from the date of employment.

Child- and health-related absence

Female employees during pregnancy are entitled to a leave in case of temporary incapacity due to complication related to pregnancy. During the leave, they are entitled to a salary compensation in the amount of 100%  of the average salary from the preceding 12 months.

Maternity leave in Serbia lasts for 3 months and can be extended with parental leave up to additional 9 months. In case of 3 or more children, the leave can be extended with 12 months. Male employees are entitled to 5 days of paid paternity leave (as listed among the additional leave). An employee, who has not taken vacation leave within a given calendar year due to absence from work for maternity leave, the absence for childcare and special child care, has the right to use the remaining vacation leave till the 30th of June at latest of the following year.

When it comes to health-related absence, female employees during pregnancy are entitled to a paid leave from work for medical examinations related to pregnancy, as instructed by a physician, and in accordance with the law, whereof she is obliged to notify the employer in time.

Furthermore, all employees are entitled to salary compensation for the time of absence from work due to temporary impairment lasting up to 30 days, as follows:

• In the minimum amount of 65% of the average salary from the preceding 12 months before the month in which temporary impairment occurred. However, it may not be lower than the minimum salary determined in conformity with the present Act where the impairment was caused by illness or injury sustained outside of work, unless otherwise determined by law;
• In the amount of 100% of the average salary from the preceding 12 months before the month in which temporary impairment occurred. However, it may not be lower than the minimum salary determined in conformity with the present Act, if the impairment was caused by an injury sustained at work or by a professional illness, unless otherwise determined by law.

Vacation allowance and compensation

The compensation for the annual vacation is calculated from the amount of average earnings in the previous 12 months, in proportion to the number of days of vacation leave. The allowance and compensation are calculated according to the general act and the employment contract. Due to the way of calculation, there is no specific period when the allowance is financially more advantageous.

Vacation days

The basic scope of the paid vacation leave in Slovakia is at least 4 weeks, i.e. 20 working days. The paid vacation leave of an employee who at the end of the relevant calendar year will be at least 33 years old, increases to 5 weeks per year, i.e. 25 working days.

An employee who, during the continuous duration of an employment relationship with the same employer, performed work for at least 60 days in the calendar year, is entitled to a paid leave or a proportional part thereof. Under Section 102 of the Labour Code, the proportional part of the paid vacation leave for each whole calendar month of continuous duration of the same employment relationship shall be one twelfth of paid leave.

An employee who is not entitled to paid vacation nor the proportional part, as they have not performed at least 60 days of work in the calendar year with the same employer, shall be entitled to a paid vacation leave for days worked to the extent of one twelfth of leave for each 21 days worked in the particular calendar year.

At least one part of the paid vacation leave must have a duration of minimum two weeks, according to the Section 111(5) of the Labour Code, unless the employee and employer agree otherwise.

Additional paid leave

5 working days are granted as additional paid leave according to the Slovak Labour Code for specific professions. For instance, an employee working underground over a whole calendar year in the extraction of minerals, drilling tunnels or passages and an employee who performs particularly difficult or health-endangering work, shall be entitled to additional paid leave of one week. If the employee works under such conditions for only a part of the calendar year, they are entitled to one twelfth of additional paid leave for each 21 days of work.

To be more precise, the additional leave is granted for employees, who are:

• Permanently working in health-care facilities, where patients with a contagious form of tuberculosis or acquired immune deficiency syndrome (HIV/AIDS) are treated,
• Exposed to a direct threat of contagion when working at a workplace with contagious materials,
• Exposed to the adverse effects of ionisation radiation to a significant degree,
• Working with the mentally ill or mentally handicapped for at least half the determined weekly worktime,
• Working continuously in a tropical or other health-demanding area for at least one year,
• Performing exceptionally difficult work, exposed to damaging physical or chemical effects which may inevitably affect the employee’s health to a significant degree,
• Working with known chemical carcinogens.

These types of particularly difficult or health detrimental professions or workplaces can be found in more details in a generally binding regulation Directive No. 75/1967 Coll. issued by the Ministry of Labour, Social Affairs and the Family of the Slovak Republic and the Ministry of Foreign Affairs and European Affairs of the Slovak Republic on such employees and their compensation for the loss of earnings resulting in the incapacity for work due to certain occupational diseases.

In the Slovakia, there are 15 public holidays in one calendar year, however, they are not included in the paid annual leave; neither are national holidays and weekly rest days.

The impact of employment termination and probation period on the vacation leave

In case the vacation leave is not fully drawn by an employee, who’s contract has been terminated, Section 116(3) of the Labour Code allows financial reimbursement of unused leave due to termination of the employment relationship.

If an employee uses all their vacation entitlement for a current year before it is fully accrued, which is possible only with the approval of the employer, they are deemed as not legally entitled to the full vacation leave but only to a proportional part based on the length of the employment relationship in the respective year, and therefore they should return the wage compensation or part to which they are not entitled. In case the employee does not return the wage compensation voluntarily, the amount is deduced from the employee’s wage according to the Section 131(2)(g) of the Labour Code.

During the probationary period, the same rules and conditions apply for vacation rights as for the annual leave in general. According to Section 113(1) of the Labour Code, the employer may let the employee to take a leave, regardless whether the employee met the conditions to be entitled to vacation days, given that they are expected to fulfil them by the end of the calendar year in which the vacation is taken. In conclusion, taking a vacation leave during probationary period depends on individual agreement between the employer and employee.

Child- and health-related absence

Maternity leave or paternity leave for men employees (i.e. as other insured person for the purposes of social insurance) is justified work leave provided by an employer in accordance with the Labour Code related to childbirth or care of a newborn. Male employees can take parental leave on the first 6 weeks from the birth if they take care of the child personally.

The basic extent of leave and financial support granted to women by legislation in respect to child birth and taking care of a child is a 34-weeks long leave. In case of a single parent the leave is 37 weeks; in case of 2 or more children born at the same time it increases to 43 weeks. For other insured individuals for the purposes of social insurance the leave amounts to 28 weeks; in case of a single parent it is 31 and in case of 2 or more children born at the same time it equals 37 weeks.

During maternity and parental leave, which is considered as performance of work, the employee is entitled to regular annual leave, if the full extent or part of the maternity or parental leave falls into the time period which is treated as a performance of work in extent of 60 days within the calendar year.

Parental leave for women and men is considered as a justified leave from work, which is provided by the employer to the employee (the parent) until the day the child turns three years old for the purpose of deepening the care of the child if the employee requests so. If a child requires special care due to a long-term unfavourable health state, the employer shall be obliged to provide the employee with parental leave until the day the child turns six years old. Parental leave shall be provided for the length requested by the parent, but not less than one month. The vacation days for parental leave can be reduced or not granted at all, as parental leave is not considered as work performance for the purposes of annual leave entitlements.

For health-related absence, the employer must grant the employee time off from work according to Section 141(2) of the Labour Code for the following reasons:

• Examination or treatment of an employee in a medical facility, when time off from work is provided:

1. With wage compensation for a necessary time, usually for 7 days in a calendar year, if the examination or treatment could not be performed out of worktime,
2. Without wage compensation for a necessary time, if the examination or treatment could not be performed out of worktime,
3. With wage compensation for a necessary time for preventative medical examination related to pregnancy, if they could not be performed out of worktime.

• Birth of an employee’s child, when time off from work with wage compensation is provided for the time necessary to transport the mother of the child to a medical facility and back,
• Time off from work with wage compensation provided to only one family member for a necessary time for accompanying:

1. A family member to a medical facility for examination or treatment upon sudden disease or accident, and for predetermined examination, treatment or cure; maximum seven days are granted for such purposes in a calendar year, in case the accompanying is necessary, and the relevant activities could not be performed out of worktime,
2. A handicapped child to a social care facility or special school; maximum ten days are granted for such purposes in the calendar year.

Vacation allowance and compensation

The wage compensation for vacation leave is calculated based on the average earnings during the preceding calendar quarter in which the vacation is drawn, which is therefore considered as the decisive period. The average earnings are always ascertained on the first day of the calendar month following the decisive period and used during the entire following quarter. The average earnings are ascertained as average hourly earnings and rounded to four decimal places.

In case an employee did not work at least for 22 days or 170 hours during the decisive period, the probable earnings are used for calculations instead of average earnings. Probable earnings are ascertained from wages that the employee has attained since the beginning of the decisive period, or from wages they would evidently attain.

Due to the way the wage compensation for vacation leave is calculated, the amount of wage compensation can be affected and increased, for example, due to the payment of bonuses and other monetary rewards in the decisive period. If an employee during the decisive period is provided with a wage or part of a wage that belongs to them for a period longer than one calendar quarter (e.g. yearly bonuses, etc), its proportionate part that pertains to the calendar quarter is determined and used for calculation of average earnings.

Vacation days

Slovenian employees are entitled to at least 20 working days of vacation each calendar year. With employment, the rights for vacation leave are automatically gained, however, additional leave is granted according to the amount of years spent working or the employee’s age, tariff class, having children under 15 years old or having a disability.

Furthermore, employees shall draw at least 14 consecutive calendar days at once, i.e. 10 working days, which is precisely the half of the overall vacation leave.

Additional paid leave

The amount of additional leave is not specified in the Slovenian Labour Code, but extra days off may be granted upon the death of a close relative, marriage of the employee, childbirth or for the purposes of relocation.

In Slovenia, there are 12 public holidays in one calendar year, however, they are not included in the paid annual leave; neither are national holidays and weekly rest days.

The impact of employment termination and probation period on the vacation leave

If an employee’s contract is terminated, but their vacation leave has not been fully drawn, the remaining days may be compensated upon agreement between the employer and the employee.

The law in Slovenia does not specify whether the allowance must be returned in case the employee overdrew the vacation leave and their contact has been terminated; it is a matter of agreement with the employer.

During the probation period, employees have the same entitlement to vacation days as employees who already finished their probation.

Child- and health-related absence

Employees, who leave for maternity, are entitled to 105 days of paid leave calculated from the average of their salary, or 30 days of paternity leave, both entitled to the same amount of vacation days as other working employees. The parental leave lasts 130 days for both parents or 260 in case only one of them takes them. In addition to child-related absences, pregnant women are entitled to a paid doctor’s visit during their pregnancy.

As for health-related absence, if not caused by a work-related illness or injury, the leave is compensated in an amount equal up to 80% of their wage. If the source of sick-leave is work-related, the compensation equals 100% of the wage. In general, the employer covers the costs of the first 30 working days of sick leave; after then the state finances the compensation.

Vacation allowance and compensation

Slovenian employees receive a vacation allowance for their vacation leave, which has to be paid until the 30^th of June of the current year. The amount of the allowance must be at least equal to the amount of the gross minimum wage in Slovenia (approx. EUR 941) and is except from taxation. Allowance is not limited upward and is not taxed up to the amount of the average gross salary in Slovenia (which equals approx. EUR 1700). Allowance in excess of the gross national average wage is subject to taxation.

Vacation days and public holidays

Vacation leave is part of the paid annual leave, usually granted by the local Labour Code to employees and financed by the employer, guaranteeing a reimbursed time off work. Most countries define a minimum duration of one vacation leave, e.g. 2 weeks, but in common practice the amount of days taken at once depends on a mutual agreement between employee and employer.

Public holidays are not included in the paid annual leave, but when not falling on a weekly rest day, i.e. weekend, they may bring the benefit of extra days spent off work for employees.

Table no. 1: Comparison of vacation days and public holidays

*Expressed in working days; **Expressed in calendar days

Legend: Federation of Bosnia and Herzegovina (BIH), Republic of Srpska (SRP), Croatia (HR), Czech Republic (CZ), Hungary (HU), Poland (PL), Romania (RO), Serbia (SR), Slovakia (SK), Slovenia (SI)

The impact of employment termination and probation period on the vacation leave

When an employee’s contract is terminated, but they did not fully draw their vacation days, in most cases they have the right to compensation for the remaining leave. In case they took more vacation days than entitled to, sometimes they must compensate the employer. In both cases, the outcome depends on the local legislation.

The same applies to probation period and vacation – country Labour Codes specify different rights when it comes to new employees, but usually grant only a part of what regular employees are entitled to for a specific time.

Table no. 2: Comparison of the impact a terminated employment and probation period have on vacation leave

*Financial reimbursement of employee for unused vacation leave in case of contract termination; **Financial reimbursement of employer for overdrawn vacation leave in case of contract termination; ***No specific rule applies in case of overdrawn vacation leave, but the employer might reclaim the compensation paid in excess

Legend: Federation of Bosnia and Herzegovina (BIH), Republic of Srpska (SRP), Croatia (HR), Czech Republic (CZ), Hungary (HU), Poland (PL), Romania (RO), Serbia (SR), Slovakia (SK), Slovenia (SI)

Child- and health-related absence

When a child is born, employees are entitled either to a maternity or paternity leave, based on their gender, and an additional parental leave. Their length depends on local legislation and may be voluntary, such as paternity and parental leave.

Health-related absence can be defined as time spent off work due to illness or health-related matters, such as medical examination. Labour Codes may define either paid or unpaid days of sick leave, with specified or unspecified number of days per year.

Table no. 3: Comparison of child- and health-related absences

*Parents may agree that the father and not the mother continues to use the leave after the expiration of the compulsory maternity leave, **Based on the number of children, ***Based on the health conditions of the child; ****The number of weeks increases in case of twins; *****Depends on whether both parents take the leave or only one of them

Legend: Federation of Bosnia and Herzegovina (BIH), Republic of Srpska (SRP), Croatia (HR), Czech Republic (CZ), Hungary (HU), Poland (PL), Romania (RO), Serbia (SR), Slovakia (SK), Slovenia (SI)

Vacation allowance

Vacation allowance is paid to employees for each day of vacation taken in a calendar year. They are calculated usually from the average wage from the decisive period, which varies for each country.

Table no. 4: Comparison of vacation allowances and the way they are calculated

*The period from which the vacation allowance is calculated; **But not more than 2150,68 RUR per day

Legend: Federation of Bosnia and Herzegovina (BIH), Republic of Srpska (SRP), Croatia (HR), Czech Republic (CZ), Hungary (HU), Poland (PL), Romania (RO), Serbia (SR), Slovakia (SK), Slovenia (SI)