Corina Roman, Managing Associate and Alina Paraschiv, Associate | SIMION & BACIU
Artists, authors and other players from the cultural environment who opt for registration in the professional cultural workers’ registry may benefit from an enhanced regime of social protection, similar to that of employees (unemployment benefits, medical leaves and allowances, occupational safety and health measures and others), thanks to recently adopted enactments. On the other hand, in addition to contractual constraints, such as, for example, the obligation to include certain provisions or to indicate certain identification details in contracts, companies working with persons holding the professional cultural worker status will need to pay a new contribution and will have new reporting obligations in relation to such collaborations.
Artists and, generally, the persons involved on a professional capacity in the cultural industry are once again on the agenda of the European and Romanian lawmakers due to the crisis caused by the COVID-19 pandemic, which had put back on the table and deepened the pre-existing vulnerabilities of such industry (such as the fluctuating revenues of artists, the lack of proper social security and others) as a result of the various interdictions imposed during such times.
Although at the level of the EU the efforts for adopting a European Status of the Artist failed to take shape up to now, at national level, the Government Emergency Ordinance no. 21/2023 on the Professional Cultural Workers’ Statute entered into force in April 2023. By way of its provisions, the Professional Cultural Workers’ Statute is meant to constitute a first step towards the mitigation of risks borne by cultural workers in the context of intermittent, fragmented and unstable work conditions, ensuring a higher and easier mobility at domestic and global level, and facilitating the social dialogue required in this sector by enabling professional workers to set up professional associations.
As a general remark, artists, authors and other beneficiaries of such enactment have the option and not the obligation to register as professional cultural workers, in such latter case being able to benefit from this special regime, while undertaking also to comply with the related duties.
The beneficiaries of this enactment are the authors and performing artists, such as defined by Copyright Law no. 8/1996, as well as the individuals conducting a support or ancillary cultural activity among those included in the annex to the ordinance (which has a broad scope), who have registered as such for a period of three years.
In order to obtain the status of professional cultural worker, the individual is required to have obtained in the fiscal year previous to the one when the request for registration is submitted, at least 50% of the total taxable income from the assignment of copyright or neighboring rights, independent activities falling under the categories provided by the ordinance, or fixed term individual labor contracts concluded for cultural activities or activities from the cultural field, which ceased to produce effects prior to the submission of the request for registration. The income derived by individuals from the exploitation of copyright or neighboring rights acquired by way of assignment or inheritance, as well as the income made from the assignment of copyright for scientifical works or software are not taken into consideration for such calculation.
Thus, the cultural worker who meets the above requirements will submit a request for registration in the professional cultural workers’ registry, together with the tax papers attesting that the individual meets the 50% threshold representing taxable income from cultural activities.
The registration as professional cultural worker is valid for a period of 3 consecutive fiscal years as of the registration in the registry. The registration may be extended only if at least 50% of the taxable income obtained during such period, as an annual average, comes from activities conducted as professional cultural worker.
The registration may cease either at the professional cultural worker’s request or by law in the following cases: at the expiry of the 3-year period for which the registration was made, if no extension is obtained, if an individual labor contract for cultural activities is concluded for an indefinite period, as sanction for the failure to notify in due time the cases that trigger the rightful suspension, or in case of death of the individual.
One of the cases for automatic revocation of the registration which appears to be unclearly regulated is the one referring to the obligation to have the contracts concluded by professional cultural workers for cultural activities, comply with the regime instituted by the ordinance. We believe that such a sanction, which has a major impact on cultural workers, should be more clearly and restrictively regulated. Otherwise, there is a risk for a plea on the non-constitutionality of such provision due to lack of predictability to be raised in court.
From a legal perspective, we are witnessing the set-up of a new category of contracts, namely that of contracts for cultural activities. In the lawmakers’ eyes, such contracts are fixed-term agreements concluded for cultural activities. Time will tell how the provisions of the ordinance that enable the professional worker to conclude both contracts for the assignment of copyright and contracts for cultural activities will be interpreted in practice.
Another eye-catching aspect is, among others, the importance that the ordinance bestows on the registration of the professional cultural worker in the professional cultural workers’ registry and on the prerequisite to include occupational health and safety provisions in the contracts. That is, if one fails to mention the registration date and the sole registration code that the cultural workers has, as well as if one does not include the occupational health and safety provisions in the contract, the contract may be declared null and void, which might cause an entire array of legal and tax issues, such as the lack of a valid and clearly regulated agreement between the parties, but also potential issues with the deductibility of expenses arising from the cultural activity.
As a praiseworthy effort whose results depend however on the survival of a viable pension system, the ordinance expressly provides that the period when the individual held the professional cultural worker status will be considered as specialized length of service. Moreover, artists may benefit from protection in case of events similar to work accidents, from medical leaves and temporary work incapacity, maternity, sick child, maternity risk and unemployment benefits.
From a tax perspective, in an attempt of the lawmaker to align the various forms of collaboration already implemented in the cultural industry, a few key elements of the new tax regime applicable to such workers are laid down.
Hence, a benefit of the registration in such registry is the fact that the income will be treated as income from independent activities with the taxation applicable to income deriving from independent activities or from intellectual property rights, as the case may be. The main purpose of such provision is to remove the risk of having the cultural activities requalified as dependent activities, an aspect which posed legal and tax problems. Together with such advantage also comes the obligation of artists to submit unique statements and to pay the relevant contributions, in due time, under the terms of and considering the derogations provided by the legislation applicable to social security and health insurance fields.
In terms of applicable tax mechanism, similar to the income deriving from intellectual property rights, the income tax for cultural workers is withheld at source by the payer when the payment is made, and it represents a final tax. Another advantage of the registration as professional cultural worker is the fact that the individual is entitled to a 40% tax relief applicable to the gross income.
A key aspect of the ordinance, which, in our opinion, will raise eyebrows in the private sector, is that a new payment obligation is imposed on companies that conclude contracts for cultural activities. Such companies, as payers, now have the obligation to pay an insurance contribution of 1% from the total value of each contract concluded with professional cultural workers. Such contribution is transferred under the same terms and conditions as the insurance contribution for work.
In addition to such payment obligation, the companies hiring cultural workers will also have a new reporting obligation, which is rather discouraging. They will have to file on a biannually basis, before the 25th of the month following the reporting semester, a return on payment obligations corresponding to insurance contributions, accompanied also by a nominal list of persons for which the contribution is paid. In the context of a more and more growing administrative burden due to SAF-T, e-invoicing and other similar obligations, adding a new reporting obligation accompanied by the need to indicate on a nominal basis the persons benefitting from such income will adversely impact the activity of such companies, causing higher costs with the licensing of specialized software and/or hiring of new staff to handle such matters.
Unfortunately, many of the effects of the ordinance are postponed due to the absence of the professional cultural workers’ registry. The implementation norms for such registry, which is essential for the operation of the ordinance, should have been drafted and approved within 90 days from the moment the ordinance started producing effects. However, the norms have not been issued yet and thus the registry has not become yet operational.
Also worth mentioning is the fact that the members of the parliament have now on their agendas the draft Bill approving the Government Emergency Ordinance no. 21/2023 on the Professional Cultural Workers’ Statute. The version already passed by the Senate seems to bring changes in favor of the beneficiaries of such regulations (including, for example, a reduction of 50% to the health insurance contributions for the first three fiscal years as of the registration date, and an exemption for the period 2023-2026 for the income tax applicable to the assignment of rights and performance of contracts for cultural activities concluded in line with the provisions of the ordinance), opening thus the way for potential adjustments and enhancements of the legal framework created by the ordinance.
Meanwhile, implementation norms and potential amendments would be very much appreciated in the hope that they will also bring additional clarifications, without however increasing more the administrative burden of companies that choose to work with professional cultural workers. In the end, private companies must be encouraged by means of clear, straightforward and cost-effective procedures to support the cultural industry so that the State would not be the only key player financially supporting a domain that is so important for all of us.