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Romania

Country Name: Romania
Currency: Romanian Leu (RON)
Primary Tax Authority: National Agency for Fiscal Administration (Agenția Națională de Administrare Fiscală – ANAF)
Key Legislation:

  • Law on Corporate Income Tax (Codul Fiscal)
  • Law on Personal Income Tax
  • Law on Value Added Tax (VAT)

Fiscal Authority Allocation

Centralized Fiscal System:
Romania operates a centralized tax system, with the National Agency for Fiscal Administration (ANAF) responsible for the collection of all major taxes, including corporate income tax (CIT), personal income tax (PIT), and VAT. Local governments collect property taxes and minor local fees.

Corporate Income Tax (CIT)

Standard Rate: 16%
Romania applies a flat corporate income tax rate of 16% to resident companies, which are taxed on their worldwide income. Non-resident companies are taxed only on Romanian-sourced income.

Corporate Forms and Taxation:

  1. Limited Liability Company (Societate cu Răspundere Limitată – SRL): The most common corporate form, taxed at 16%.
  2. Joint-Stock Company (Societate pe Acțiuni – SA): Typically used by larger businesses, also taxed at 16%.
  3. Branches of Foreign Companies: Taxed on Romania-sourced income at 16%.

Exemptions and Incentives:

  • Micro-enterprise Tax Regime: Companies with annual turnover below €500,000 may qualify for a reduced tax rate of 1% or 3%, depending on the number of employees.
  • Tax Incentives for R&D: Enhanced deductions for research and development (R&D) expenses are available, along with accelerated depreciation for certain equipment.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 19%
Romania applies a VAT rate of 19% on most goods and services. Reduced rates of 9% and 5% apply to certain goods, including food, medicines, and hotel accommodations.

Exemptions:
Healthcare, education, and certain financial services are exempt from VAT. Exports are zero-rated, allowing businesses to reclaim VAT on input costs related to exported goods.

Personal Income Tax (PIT)

Flat Rate: 10%
Romania levies a flat personal income tax rate of 10% on worldwide income for residents and Romanian-sourced income for non-residents.

Dividends:
Dividends are taxed at a flat rate of 5%.

Additional Mandatory Contributions

Social Security Contributions:
Both employers and employees must contribute to Romania’s social security system, which covers pensions, healthcare, and unemployment benefits.

  • Employer Contribution: 2.25% of gross salary.
  • Employee Contribution: 25% for pensions, 10% for health insurance, and 0.5% for unemployment benefits.

Withholding Taxes

  • Dividends: 5%
  • Interest: 16%
  • Royalties: 16%
    Withholding tax rates may be reduced under Romania’s double taxation agreements (DTAs).

Transfer Pricing Rules

Romania adheres to OECD transfer pricing guidelines. Related-party transactions must comply with the arm’s-length principle, and businesses are required to maintain documentation for related-party cross-border transactions.

Special Tax Regimes

  • Micro-enterprises: Micro-enterprises, defined as companies with a turnover of less than €500,000, are taxed at either 1% (with employees) or 3% (without employees).
  • Special Economic Zones (SEZs): Companies operating in designated SEZs enjoy various tax incentives, including CIT exemptions and reductions, VAT exemptions on imports, and customs duty relief.

Other Taxes

  • Real Estate Tax: Local governments impose real estate taxes on land and buildings, typically ranging between 0.08% and 0.2% for residential properties and 0.2% and 1.3% for commercial properties.
  • Capital Gains Tax: Capital gains are taxed at 10% for individuals and included in the CIT base for companies.
  • Excise Duties: Excise duties apply to products such as alcohol, tobacco, and fuel.

Double Taxation Agreements (DTAs)

Romania has signed over 85 double taxation agreements with countries worldwide, including major trading partners such as Germany, France, and the United States. These treaties help reduce withholding taxes on dividends, interest, and royalties and prevent the double taxation of income.

Local Taxes

Local governments in Romania collect real estate taxes, vehicle taxes, and various municipal fees. However, income tax and VAT are administered at the national level by ANAF.

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed by March 25th of the following tax year. Personal income tax returns are due by May 25th. The tax year coincides with the calendar year.

Penalties for Late Filing:
Penalties for non-compliance include interest on overdue tax payments and fines, with interest rates generally set at 0.02% per day on unpaid taxes.

Recent Developments

Digital Services Tax:
Romania is considering introducing a digital services tax aimed at taxing multinational technology companies providing online services to Romanian consumers, in line with broader EU initiatives.

Green Energy Incentives:
The Romanian government has introduced tax incentives for investments in renewable energy projects, including accelerated depreciation for energy-efficient equipment and exemptions from excise duties for electric vehicles.

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