The Complete Tax Guide To Romania: Everything You Need To Know
Last Updated on 14 January 2025
Navigating the tax landscape in a foreign country can feel like wandering through a maze.
Did you know that Romania has a standard value-added tax (VAT) rate of 19%?
This comprehensive guide will demystify Romanian tax laws, helping expats and digital nomads to understand their obligations and effectively file their taxes.
Key Takeaways
- Romania has a standard value-added tax (VAT) rate of 19%.
- The legal system in Romania helps protect businesses and their rights, making it safe to do business in the country.
- The main body in charge of taxes in Romania is the National Agency for Fiscal Administration (ANAF), which ensures all businesses and people pay their taxes.
- Starting a Limited Liability Company (LLC) is the most common choice for foreigners looking to invest in Romania, as it protects personal funds if the company loses money or has debt.
- Financing options for corporate subsidiaries in Romania include equity investments, bank loans, and intra-group loans from parent companies. There are no restrictions on repatriating profits or capital for foreign investors.
- Expat investors may qualify for tax incentives such as local tax exemptions and support for professional and technical education expenses.
- Corporate Income Tax (CIT) rates in Romania are set at 16%, with additional rates for capital gains and dividends’ tax. Nonresident aliens cannot use losses to lower their taxes or carry them forward to another year.
- Personal income tax in Romania is a flat rate of 10% applied to worldwide income, except salary income received from abroad. Personal exemptions are currently suspended until 2025, but other deductions may still apply.
Overview of Doing Business in Romania
The legal system in Romania is the basis for conducting business, while taxation authorities play a crucial role in ensuring compliance with tax laws.
Business vehicles, such as corporate subsidiaries, can be financed through various means, and investment incentives are available to attract foreign entities.
Legal System
Romania’s legal system rules on business dealings. It is made after other European models.
The legal system helps to protect businesses and their rights.
Laws are created, changed, and put in place by the government.
The courts make sure everyone follows these laws.
They can solve disputes between businesses.
Having a strong legal system makes it safe to do business in Romania.
Taxation Authorities
In Romania, the main body in charge of taxes is the National Agency for Fiscal Administration (ANAF).
This group makes sure all businesses and people pay their taxes.
They also give out tax forms and help with any tax problems.
All cities have a local tax office as part of ANAF where you can go to get help.
Each city or town has its own local tax office too. These offices are where you pay your property taxes and any other small local fees.
Some cities may ask for more money in local taxes than others; that’s under their control.
So if you run a business in Romania, remember to check with both ANAF and your local office about what taxes you need to pay!
Business Vehicles
In Romania, you can start a business in many ways.
The most common choice is a Limited Liability Company (LLC).
It is the top pick for foreign investment.
With an LLC, your own money is safe if the company loses money or has debt.
This makes it easier to do business in Romania and keep your personal funds secure.
Financing a Corporate Subsidiary
If you plan to start a corporate subsidiary in Romania, it’s important to understand how to finance it.
The good news is that Romanian subsidiaries of foreign entities are treated the same as residents.
This means they have access to a range of financing options available in the country.
When it comes to funding your subsidiary, you can choose from various sources, such as equity investments, bank loans, or even intra-group loans from the parent company.
Additionally, there are no specific restrictions on repatriating profits or capital for foreign investors in Romania.
So, if you’re considering financing a corporate subsidiary in Romania, you have flexibility and options to explore for your business venture.
Investment Incentives
If you’re an expat or digital nomad considering investing in Romania, there are some incentives available to encourage you.
For example, if you set up a manufacturing business in Romania, you may be eligible for local tax exemptions.
This means that your company could benefit from reduced taxes and potentially increase its profits.
Additionally, there are tax incentives specifically aimed at supporting expenses related to professional and technical education.
So if you’re planning on expanding your skills or hiring employees who need training, these incentives can help with the costs.
The tax regime in Romania is designed to support both industrial investment and start-up initiatives equally, making it an attractive destination for foreign investors.
Taxes on Corporate Income
The taxes on corporate income in Romania include corporate income tax (CIT) rates, taxable income and period, advance payments, deductions and loss carry forward, as well as research and development (R&D) benefits.
Corporate Income Tax (CIT) Rates
The corporate income tax (CIT) in Romania is set at a standard rate of 16%.
This tax is imposed on a company’s net income derived from its business operations within the country.
The rate is applied to a company’s gross income after allowable deductions and exemptions have been subtracted.
Here is a summary of the CIT rates in Romania:
| Type of Tax | Rate |
|---|---|
| Corporate Income Tax (CIT) | 16% |
| Capital Gains Tax (for resident companies) | 16% |
| Combined CIT and dividends’ tax | 20.2% |
| S Corporation Tax Rates | Based on total net income not subject to federal income taxation |
As an expat or digital nomad doing business in Romania, understanding these tax rates can help you effectively plan your financial obligations.
The Division of Taxation provides more details about the corporation’s business tax in Romania.
Taxable Income and Period
To determine the amount of tax you need to pay in Romania, you have to consider your taxable income and the tax period.
Taxable income refers to the money you earn that is subject to taxation.
It includes things like salaries, business profits, dividends, and rental income. The tax period is usually one calendar year in Romania.
For example, if you work as a freelancer or have a business in Romania, your taxable income would be the total amount of money you make from your work or business during the tax year.
It’s important to keep track of your taxable income throughout the year and report it accurately when filing your taxes.
This will ensure that you pay the correct amount of taxes based on your earnings.
Advance Payments
Banks and foreign banks in Romania have to make advance payments on their corporate income taxes every quarter.
This means that they pay a portion of their taxes in advance throughout the year.
Other taxpayers, like companies with a permanent establishment, may also need to make these advance payments.
The standard corporate income tax rate in Romania is 16% for both Romanian and foreign companies with a permanent establishment.
So if you have a business or investments in Romania, it’s important to be aware of these advance payment requirements and factor them into your financial planning.
Deductions and Loss Carry Forward
Romanian companies have a helpful benefit called deductions and loss carry forward.
This means that if a company has more expenses than income in one year, they can use those losses to reduce their tax liability in the future.
It’s like getting a credit for the money you lost.
For nonresident aliens, though, this benefit doesn’t apply when it comes to capital losses.
They can’t use these losses to lower their taxes or carry them forward to another year.
So it’s important for expats and digital nomads who are non-resident aliens to keep this in mind when filing their taxes in Romania.
Research and Development (R&D) Benefits
Companies in Romania can benefit from research and development (R&D) benefits.
They are eligible for an additional deduction of 50% of their R&D expenses.
This means that they can reduce their taxable income by half of the expenses incurred for R&D activities.
It’s a great opportunity for companies to invest in innovation and technological advancements while enjoying tax savings.
Additionally, Romania has also introduced a personal income tax exemption for the salaries of researchers and others working in R&D, making it even more attractive for individuals involved in these fields.
Taking advantage of these benefits can help businesses thrive and contribute to the growth of the Romanian economy.
Taxes on Individual Income
The section on taxes on individual income covers topics such as personal income tax, exemptions and deductions, and international aspects.
Personal Income Tax
Romania has a flat tax rate system for personal income, which is set at 10%.
This simple and straightforward taxation approach applies to everyone, including expats and digital nomads residing and working in Romania.
It’s important to be aware of this to properly manage your tax obligations while living in the country.
| Category | Description |
|---|---|
| Tax Rate | Flat Rate of 10% |
| Taxable Income | All Worldwide Income (excluding salary income received from abroad) |
| Tax Period | Calendar Year |
| Tax Payment | Payable in two equal installments (July 25 and 25) |
| Tax Exemptions | Specific exemptions for certain types of income, such as IT tax exemption and exemptions for dividends and capital gains |
| Implementation | A flat tax rate system was implemented prior to 2005, replacing the progressive Personal Income Tax (PIT) system |
| Aggregation Method | Used to determine the applicable tax rate by adding together the taxpayer’s income from all sources |
This tax guide covers the basic aspects of personal income tax that you need to know as an expat or digital nomad in Romania.
Be sure to consult with a tax advisor or legal professional to fully understand your tax obligations and benefits.
Exemptions and Deductions
As an expat or digital nomad in Romania, you may be eligible for certain exemptions and deductions when it comes to your taxes.
Here’s what you need to know:
- Personal Exemptions: Romanian tax residents can claim personal exemptions to reduce their taxable income. However, from 2018 to 2025, the deduction for all personal exemptions is suspended, meaning that your taxable income could be reduced to zero.
- Deductions: While personal exemptions are currently suspended, there are still other deductions you may be able to claim. These deductions can help reduce your taxable income and potentially lower the amount of tax you owe. It’s important to consult with a tax professional or refer to the relevant tax laws to understand which deductions apply to your specific situation.
- Gross Income Limitation: In 2023, there will be a gross income limitation for deductions in Romania. This means that there may be a cap on the total number of deductions you can claim based on your gross income.
International Aspects
If you’re an expat or digital nomad living in Romania, it’s important to understand the international aspects of taxation.
Romanian citizens who are considered tax residents must pay taxes on their worldwide income, except for salary income received from abroad.
However, certain income related to a foreign permanent establishment is exempt from personal income tax in Romania.
This means that if you earn salary income from a foreign company with a presence in Romania, you may not have to pay personal income tax on that specific amount.
It’s essential to consult with a professional or refer to the relevant tax regulations to ensure compliance with Romanian tax laws and take advantage of any exemptions or benefits available to you as an expat or digital nomad.
Value-Added Tax
Value-Added Tax, or VAT, in Romania is governed by specific rates and legislation.
Rates and Legislation
Understanding the rates and legislation regarding value-added tax (VAT) in Romania is crucial for expats and digital nomads planning to conduct business activities in the country.
This knowledge would help you comply with tax requirements and avoid legal issues.
| Rate Type | VAT Rate | Applicable to |
|---|---|---|
| Standard Rate | 19% | All supplies of goods and services, including imports. |
| Reduced Rate | 5% | Some goods and services are based on specific rules. |
| Temporary Rate Cuts (2023) | Varying | It depends on the government’s decision for a given period. |
| Proposal for Basic Aliments | 0% | Basic foods are pending government approval. |
Remember, VAT is calculated on the basis of customs duties and VAT for imports.
The VAT number format in Romania is “RO,” followed by a 10-digit number.
It’s essential to keep up-to-date with the changes in these laws, as they can have significant impacts on your business operations and bottom line.
Registration Requirements
To start a business in Romania and register for value-added tax (VAT), there are certain requirements you need to meet.
If you’re not already established in Romania, you’ll need to appoint a fiscal representative who can help with the VAT registration process.
This representative will handle your tax affairs on your behalf.
When registering for VAT, make sure you have all the necessary information ready.
You’ll need details about your business activities, such as what goods or services you provide.
Additionally, there are specific thresholds that must be met to determine if VAT registration is required.
Once registered for VAT in Romania, it’s important to submit a declaration regularly that includes all taxable supplies and acquisitions of goods made by your business.
This helps ensure compliance with tax regulations and avoids any penalties.
VAT Group Registration
VAT Group Registration is an important aspect of value-added tax in Romania.
It is a common practice for companies worldwide when they engage in transactions involving goods and services.
If your company is incorporated in another country, you will need a VAT registration certificate from that country as well.
To register for VAT in Romania, you must meet certain thresholds and provide the necessary information to obtain a VAT number.
It’s crucial to understand this process as it ensures compliance with Romanian tax regulations regarding value-added tax.
So make sure to familiarize yourself with the requirements and guidelines for VAT group registration if you are doing business in Romania.
Reverse Charge and Cash Accounting System
In Romania, there is a system called the reverse charge mechanism for value-added tax (VAT).
This means that instead of the seller charging and collecting VAT from the buyer, it is actually the buyer who becomes responsible for paying the VAT.
This system helps to prevent tax fraud and evasion.
On another note, there is also an optional cash accounting scheme available for taxpayers in Romania.
With this scheme, businesses have the choice to account for VAT based on their cash flow rather than when invoices are issued or received.
It can be beneficial for businesses with irregular payment cycles or cash flow issues.
However, it’s important to note that not all companies qualify for this scheme, and those that do need to carefully consider if it aligns with their financial goals and reporting requirements.
Other Business-Related Taxes
In addition to corporate and individual income taxes, there are several other business-related taxes in Romania that you need to be aware of.
These include property taxes, excise and customs duties, as well as social security and labor law aspects.
It’s important to understand these taxes and how they may impact your business operations in Romania.
Property Taxes
Property taxes in Romania are an important consideration for expats and digital nomads who own property in the country.
It’s worth noting that Romania does not have net wealth or worth taxes, but property tax rates and collections are determined by local governments.
The classification of tangible personal property includes all personal belongings that are not considered intangible personal property or merchants’ capital.
This means that any physical assets you own, such as real estate or vehicles, may be subject to property taxes based on the regulations set by your local municipality.
Excise and Customs Duties
Excise and customs duties are important taxes to consider when doing business in Romania.
These duties are charges imposed on imported goods as well as some specific products domestically produced or sold.
Customs duties can vary depending on the type of goods being imported, their value, and other factors.
It’s important for businesses to understand how these charges are calculated and who is responsible for paying them.
Companies in Romania can obtain rulings from customs authorities on the tariff and ad valorem excise duties.
This helps ensure compliance with the regulations and avoid any unexpected costs or penalties related to these taxes.
Understanding excise and customs duties is crucial for expats and digital nomads who may be importing goods or operating businesses in Romania.
Social Security and Labor Law Aspects
Expats and digital nomads in Romania need to be aware of the country’s social security and labor laws.
In Romania, all forms of payment are subject to social insurance contributions of 25%.
This means that income from independent or freelancing activities, as well as intellectual property rights, will have this contribution deducted.
Double taxation can occur when comparable taxes are imposed by different tax authorities within a federal state.
Make sure you stay informed about your tax obligations and file your taxes correctly to avoid any issues.
Cryptocurrency and tax
When it comes to crypto taxes in Romania, there are some important things to know.
Any income or profit earned from cryptocurrency is subject to a 10% income tax rate.
This means that if you make money from buying and selling virtual currencies, you will need to pay taxes on your gains.
The tax rate for these transactions is a blanket 10% called the Personal Income Tax (PIT).
It’s important to note that Romania does not have a progressive tax structure for cryptocurrencies, so the same rate applies regardless of how much you earn.
Additionally, if you transfer crypto-assets and receive capital gains, those gains are also taxable at a 10% individual income tax rate.
However, small businesses or microenterprises in Romania may be subject to a lower flat tax rate of just 1% on their profits.
Key Contacts and Resources
For more information and personalized advice on taxes in Romania, it is recommended to contact Romanian accountants who specialize in expat taxation.
They can provide expert guidance and help navigate the complex tax system.
Don’t hesitate to reach out to them for assistance with your tax obligations in Romania!
Conclusion
In conclusion, this comprehensive tax guide provides expats and digital nomads with everything they need to know about taxes in Romania.
From understanding the different types of taxes to navigating the local legislation and compliance requirements, this guide offers valuable information and resources.
Remember to consult Romanian accountants for personalized advice on your specific tax situation.
Stay informed and ensure you meet your tax obligations while enjoying your time in Romania!
Frequently Asked Questions
What are the main taxes that businesses in Romania need to know about?
Businesses in Romania must understand value-added tax, corporate tax, profit Tax and payroll tax. They should also be aware of transfer pricing rules and specific taxes on buildings.
How are foreign tax credits handled in Romania?
Foreign tax credits can help with local income taxes for non-residents or those with a tax residence in another EU member state.
What is the withholding tax rate on dividends paid by a Romanian company?
The withholding tax may differ based on whether it’s paid to residents or non-residents. Details are found under laws like the Parent-Subsidiary Directive or Double Tax Treaty (DTT).
How does the value-added tax apply in Romania?
Value-added tax (VAT) is applied to many goods sold and services provided inside Romania at different rates depending on their nature.
When do companies have to file their annual corporate income tax return?
Companies need to fill out an annual corporate income tax return form by a set due date that usually comes within one month following the end of each year.
If I am a non-resident earning from land located in Romania, how am I taxed?
As a non-resident owner of land located in Romania, you might have to pay land taxes even if your base isn’t here, but there could be exceptions based on legal terms present under DTT between your home country and ours.
