Tax rates in Romania

Company Tax

16%

Tax Rate For Foreign Companies

Resident companies are taxed on their worldwide income, while non-resident companies are taxed on all income derived from Romanian taxpayers, regardless of whether the services are rendered in Romania or abroad.
Foreign businesses that have a permanent establishment are subject to the same income taxes as a Romanian company. An entity is deemed to be tax resident in Romania if it was set up under Romanian law or has its place of effective management in the country.

Representative offices of foreign businesses are subject to a fixed tax of RON 18,000 for each fiscal year.

Capital Gains Taxation

Capital gains derived by resident and non-resident entities from the sale of shares and real property are included in overall profits and taxed at the ordinary corporate tax rate of 16% (certain capital gains may be exempt). Capital gains from the sale/transfer of shares, as well as income arising from the evaluation or revaluation of shares held in a Romanian or foreign legal entity located in a country that has concluded a tax treaty with Romania, are exempt from tax if the recipient holds at least 10% of the share capital of the entity whose shares are sold/transferred or evaluated/revaluated for an uninterrupted period of at least one year.

Main Allowable Deductions and Tax Credits

Expenses incurred for business purposes are generally deductible. The Romanian Fiscal Code lists the following deductible expenses:

• expenses incurred for environmental protection and resource conservation
• R&D expenses that are not recognised as intangible assets for accounting purposes
• expenses related to benefits granted to employees as equity instruments settled with cash (if the benefits are subject to personal income tax)
• losses incurred when writing off client receivables (under certain conditions)
• travel and accommodation expenses related to business; including transportation of personnel to and from the workplace
• expenses incurred from professional training and development of employees
• business travel and accommodation expenses
• marketing and advertising expenses
• fines, interest, penalties, and other increased payments due under commercial contracts.

Other expenses can be deducted only up to certain specific limits:

• certain provisions and reserves
• interest expenses and other borrowing costs
• protocol expenses (up to 2% of the accounting profit)
• lunch vouchers and holiday vouchers
• social expenses (capped at 5% of salary expenses)
• taxes and fees paid to non-government organisations or professional associations related to the taxpayer’s activity (maximum EUR 4,000/year)
• certain vehicle expenses
• certain provisions and reserves (with limits).

Start-up expenses may be capitalised and depreciated over a maximum period of five years, but cannot be depreciated for tax purposes.
Certain R&D expenses give rise to an extra 50% deduction. Furthermore, machinery and equipment used in R&D activities is subject to accelerated depreciation.
Companies can carry forward fiscal losses declared in the annual profit tax returns for a period of a maximum of seven years (no inflation adjustment is allowed). Carryback of losses is not permitted.

Other Corporate Taxes

Other taxes on corporations include:

• a building tax, which differentiates between residential buildings (tax rate between 0.08% and 0.2%, applicable to the value resulted from the evaluation report for legal entities) and non-residential buildings (between 0.2% and 1.3%; 0.4% if the building is used for agricultural purposes). Legal entities pay an increased rate of 5% (if no revaluation was performed during the last five years)
• a land tax, established at a fixed amount per square metre, depending on the rank of the area where the land is located and the area or category of land use, in accordance with the classification made by the local council. Similar to the building tax, the land tax is paid annually in two equal instalments, by 31 March and 30 September, with a 10% reduction granted for full advance payment before the 31 March
• stamp duties apply for judicial claims, issue of licenses and certificates, and documentary transactions that require authentication
• social security contributions: employers are liable to pay 2.25% for insurance contribution and 4% for social insurance contribution for uncommon work conditions (8% for special work conditions).

For certain activities (e.g. dangerous hazardous substances, activities that generate polluting emissions, etc.), companies have the obligation to declare and to pay (as the case may be) related contributions and taxes to the Environmental Fund. Several environmental taxes apply (packaging and packaging waste management; plastic bags; sale of wast; industrial oil; air emission; electric and electronic equipment; batteries and accumulators; etc.).
Entities in the tourism, hotel, restaurants, bars, and catering sector pay a specific tax, regardless of the size of the turnover and the level of profits. The tax is calculated according to the area of the business, the location and other criteria.

Other Domestic Resources

National Agency for Fiscal Administration

Consult the Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Tax Rate

Allowable Deductions and Tax Credits

Allowable deductions for the primary workplace include:

• individual mandatory social contributions due according to the provisions of the law and in line with the provisions of the EU legislation or any social security agreement to which Romania is a party
• personal deductions calculated in accordance with the relevant legislation
• trade union membership fees
• contributions to voluntary pension funds classified as such by the Financial Surveillance Authority, made to authorised entities established in member states of the EU or EEA, up to the RON equivalent of EUR 400 per annum per employee
• voluntary health insurance premiums and subscriptions to private healthcare facilities, according to the relevant legislation, borne by employees, up to the RON equivalent of EUR 400 per year

For the salary income obtained in other cases, taxable income is computed as the difference between the gross salary income and the individual mandatory social contributions.

Individual taxpayers may direct up to 3.5% of their annual income tax to charitable purposes.

Special Expatriate Tax Regime

Romanian citizens domiciled in Romania are taxed on their worldwide income, while Romanian citizens not domiciled in Romania and foreign individuals are only taxed on their Romania-source income.

An individual is resident in Romania if he/she fulfils at least one of the following conditions: is domiciled in Romania; is present in Romania for a period or periods that exceed 183 days in any 12 consecutive months interval ending in the calendar year concerned; is a Romanian citizen working abroad as a civil servant or as an employee of the Romanian state; or has the centre of vital interests in the country.