Romania

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Tax Policy

TAX POLICY

Income Tax Rate 16%

Corporate Tax Rate 16%

Sales Tax / VAT Rate 24%

Personal taxes

The rate of tax is 16%.

Individuals subject to Romanian income tax include domiciled residents and nondomiciled residents who are employed by a permanent establishment, carry on self-employed activities or obtain other income from Romania.

Categories of taxable income include the following:

(1) income from independent types of activities: commercial, freelance activities, intellectual property rights. The taxable income is, as a general rule, the diference between gross income and expenses. A taxpayer who performs independent activities must make tax payments on account at a rate of 16%, except for income achieved by selling under consignment, intellectual property rights, commission contracts, civil convention and accounting expertise which is subject to tax conventions at a rate of 10%

(2) income from salaries: based on an individual’s employment contracts or by statute provided by law

(3) trading activities, other than those listed in (1) above

(4) income from investments: dividends, interests, earnings from the transfer of securities, sale and purchase of foreign currency etc

(5) income from pensions

(6) income from agricultural activities

(7) income from awards and gambling

(8) capital gains from the sale of immoveable property is subject to a transfer tax rather than income tax. Property owned for less than three years is subject to tax at 3% on proceeds up to RON 200,000 or RON 6,000 and 2% on any excess above RON 200,000. For property owned for more than three years, the rate is 2% on proceeds up to RON 200,000 or RON 4,000 and 1% on proceeds over RON 200,000.

Personal allowances are available up to a maximum of RON 650. If the monthly gross income is between RON 1,000 and RON 3,000, personal deductions are reduced. For monthly gross income exceeding RON 3,000, personal deductions are not available. Taxable income is calculated after deducting allowable expenses, union contributions and private pensions contributions up to EUR 200 per year.

The following categories of taxpayers are subject to income tax:

(a) resident natural persons, such as any person who meets at least one of the following conditions:

•       his domicile is located in Romania

•       the centre of his vital interests is located in Romania

•       he stays in Romania for more than 183 days in any 12 month period

(b) non-resident natural persons who perform an independent activity through a permanent establishment in Romania

(c) non-resident natural persons who perform dependent activities in Romania

(d) non-resident natural persons who obtain other income in Romania.

Company taxes

The standard corporate income tax rate is 16%.

Total annual revenue (RON)

Annual minimum tax  (RON)

0 – 52,000

2,200

52,001 – 215,000

4,300

215,001 – 430,000

6,500

430,001 – 4,300,000

8,600

4,300,001 – 21,500,000

11,000

21,500,001 – 129,000,000

22,000

Over 129,000,001

43,000

If the corporate income tax was less than the minimum annual tax corresponding to the abovementioned level of income, the taxpayers were required to pay the minimum tax.

For certain businesses, such as gambling, nightclubs and casinos, there is a minimum tax equal to 5% of the turnover.

In Romania, the following entities are subject to corporate income tax:

•       Romanian legal entities

•       Foreign legal entities doing business in Romania through permanent establishments

•       Foreign legal entities which derive income from or in connection with real iestate transactions or from transactions with shares held in Romanian legal entities

•       Foreign legal entities and individuals doing business in Romania through associations without legal personality (partnerships)

•       Resident individuals associated with Romanian legal entities for revenues derived in or outside Romania, through associations without legal personality; in this case the tax due by the individual is computed, withheld and paid by the Romanian legal entity

•       Legal persons with a registered office in Romania incorporated in accordance with European legislation.

A company is considered resident if its head office is registered in Romania or has its place of effective management in Romania.

Local taxes

In Romania, local taxes are set under the Fiscal Code. Local taxes represent a distinct category of taxes set by the local administration, due by both individuals and legal entities.

Building tax: Residents or non-residents owning one or more buildings are subject to real estate tax. All buildings, regardless of their purpose, are taxed according to their value. Rates range between 0.25% and 1.5% and are set by the local councils. The building’s taxable value is determined by the area used and the building type. Building tax payable other than on a person’s place of residence is set at higher rates: 65% higher for the first, 150% for the second and 300% for the third or additional building.

Land taxis payable by owners of land. Generally, the tax is established as a fixed amount per hectare, depending on the location of the land within certain determined zones, towns or villages and depending on land use. The tax is payable annually in two equal installments on 31 March and 30 September.

Vehicle taxis payable by owners of land/water vehicles registered in Romania. The tax depends on the engine’s capacity and is determined as a fixed amount per 200 cubic centimetres. The tax is payable annually in two equal instalments on 31 March and 30 September.

Other local taxes and duties include fees for the issuance of certificates, permits and authorizations, fees for using advertising and publicity materials and hotel fees.

Value added tax (vat)

Companies with an annual turnover of at least EUR 35,000 must register for VAT purposes. Companies with turnover below this threshold may register upon request. The general VAT rate is 24%. The reduced rate is 9% and is applied to various goods and services including:

·           cinema tickets and entrance fees to other attractions

·           books, newspapers and magazines, school books, except those exclusively for advertising

·           certain medicinal products

·           accommodation within the hotel sector or similar sectors, including camping.

Also, a lower rate of 5% applies to the sale of certain buildings carried out as part of the country’s social policy.
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Source: http://www.pkf.com/