Taxes in Romania

Expats looking to settle in Romania for work, or just for a change of scenery, will need to pay taxes. The Romanian tax system is mainly consisting of four types of taxes. These are the income tax, the tax on profits, tax on social contributions and the value-added tax (VAT). These taxes will vary, depending on each particular situation. When it comes to expats, they should pay attention to the personal income tax conditions and payment procedures. Also, it is good to know the key points of all the taxation system here. 

Personal Income Tax in Romania

For those expats who are moving to Romania and will work here, the state will require them to pay income tax. This tax applies to both residents and foreigners. That Personal Income Tax stands at 10 per cent.

Foreign individuals, regardless of their domicile, will be taxed in Romania only on their income in Romania. Non-resident individuals, as well as expats, are taxable on their worldwide income as soon as they become tax residents in Romania. 

To obtain a tax residency in the country, expats will need to:

• Be a resident in Romania and fulfil at least one of the following conditions: have the primary domicile located in the country, stay in Romania for more than 183 days within a 12-month period or prove you have vital interests in the country, such as personal or financial;
• Prove that you are a non-resident in Romania, but you perform an independent activity via a permanent establishment in the country;
• You are a non-resident, but you are obtaining the income in Romania.

The flat tax rate in Romania represents 10 per cent and applies to the following activities: independent activities, rent, and real estate transactions, wages, monthly retirement amounting to more than 215 euros, investments, other sources. 

Exemptions for non-residents in Romania

The tax will not be levied at non-residents who are part of these categories: 

• obligations issued or guaranteed by the Romanian government;
• income from international transport and auxiliary services;
• prices or rewards received from a non-resident physical person paid by public funds;
• income received from foreign legal persons exercising advisory activities under free funding agreements in Romania.

Where do you pay income tax in Romania? 

Taxpayers in Romania have to submit a tax return and pay the taxes at the nearest tax office to their place of residence or their company's address at the latest on the 25th of the month. The tax year is superimposed on the calendar year. You will find the tax return on the National Agency of Tax Administration website. 

Non-profit organisations and agricultural companies, for their part, are required to submit their tax return and pay tax on their annual profit at the latest on the 25th of February of the following year. Finally, companies can choose to submit their tax returns and pay tax on the combined annual profit to advance payments made each quarter. The choice is then valid and compulsory for at least two consecutive tax years.

Tax on profits in Romania

The standard profit tax rate in Romania is 16 per cent and applies for both Romanian companies and foreign ones, that are operating through a permanent establishment. The resident companies will be taxed on their worldwide income while the non-resident companies will be taxed on all income which comes from the Romanian taxpayers. The tax applies regardless of whether the services are rendered in Romania or somewhere abroad. 

The profit tax due for gambling operations or nightclubs is either 5 per cent of the revenue or 16 per cent of the taxable profit. 

Here are the companies which need to pay tax on profits:

• Romanian companies;
• Foreign companies receiving revenue from real estate transactions or from shares of a Romanian company;
• Foreign companies that have offices in Romania;
• Physical residents associated with Romanian legal persons when income is received in Romania as well as from abroad in associations without legal personalities;
• legal persons having an office in Romania in accordance with European laws.

Exemptions from paying tax on profits:

• Micro-enterprises;
• State institutions involved in a particular activity;
• Religious organisations;
• Teaching institutions and professionals;
• Owners associations;
• Guarantee funds in bank deposits, for economic activities that are limited to 10 per cent of the total exempt income.

Micro-companies taxes in Romania

The micro-companies will have to pay a revenue tax rate, in lieu of the standard profit tax. To qualify as a micro-company, the business needs to have a maximum revenue at the end of the previous year of 1 million euros. 

The tax rates for micro-companies are:

• 1 per cent for micro-companies with one or more employees;
• 3 per cent from micro-companies that have no employees.

Micro-companies can opt for applying profit tax only if:

• They have subscribed share capital at least 45,000 RON;
• They have at least two employees. 

Value-added tax in Romania

The VAT standard rate in Romania values 19 per cent. There are some reduced rates that are applicable to some types of transactions: 

• 9 per cent for hotel accommodation, restaurant and catering services, agricultural supplies, medical equipment, catering services (less for alcoholic drinks), etc.;
• 5 per cent for newspapers, magazines, zoos, cinemas, cultural events, etc. 

 Useful links:

ANAF ' National Agency of Tax Administration
ANAF ' Tax declaration form
ANAF ' Online tax declaration
Ministry of Public Finance