Taxes in Romania, Taxation in Romania, Taxes system in Romania
personal Income Tax
Romania personal income tax rate is a flat 16%.
Individuals subject to Romanian tax include domiciled residents and non-domiciled residents who're employed by a permanent establishment, carry on self employed activities or obtain other income from Romania.
The following categories of taxpayers are subject to income tax:
- 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
- non-resident natural persons who perform an independent activity through a permanent establishment in Romania
- non-resident natural persons who perform dependent activities in Romania
- non-resident natural persons who obtain other income in Romania.
Income from dividends and interest is taxed through the withholding tax regime. However, the following types of interest are exempt from income tax:
- interest on sight deposits and current accounts
- interest on state and municipal bonds
- interest on certain bank deposits
- income distributed to members of mutual benefit funds based on the share capital held.
Capital gains from the disposal of shares in 'closed' companies are subject to 1% advance tax payment.
'Short term' gains from sales of shares are subject to tax at 16%, the 1% advance payment being deducted from this. For 'long term' gains, the 1% advance payment represents the total tax due on such gains. All other capital gains are exempted from taxation.
Other income exempted from taxation includes scholarships, income from external consultancy projects, work on approved projects in Romania, income from insurances and other damage compensation.
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 incomes that exceed 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 rate of tax is 16%.
The income of employees developing computer software is exempt from income tax. Taxable income includes all benefits in kind such as, for example, free accommodation, use of a vehicle belonging to the business for personal use, personal telephone calls and credit cards used for a personal purpose. Net rental income is established by subtracting from gross income a fixed deduction of 25% of the gross income. Alternatively, the taxpayer may opt to calculate taxable income by deduction of actual expenses.
Trading losses can be carried forward for five years to offset against trading profits from the same source. However, losses may not be offset against employment income. Annual net income is determined for each source from the following categories:
- Income from independent activities
- Income from trading
- Income from agricultural activities
Foreign profits may be offset against losses from the same source arising in the same tax year.
Salary taxes are payable monthly by the 25th day of the month following the month in which the salary is paid, or quarterly by the 25th day of the month following the end of the quarter.
Social insurance contributions, health social insurance contributions and unemployment insurance contributions are paid both by the employer and by the employee. The following rates are applied to gross salary and charged on the employee:
Social insurance contribution: 10.5% employee
Health social insurance contribution: 5.5%*
Unemployment insurance contributions: 0.5%
Romania Corporate Tax
Corporate income tax rate in Romania is 16%.
Certain businesses are subject to a minimum tax equal to 5% of turnover.
In Romania, trading companies consist of the following types: general partnerships, limited partnerships, joint-stock companies, companies limited by shares, and limited liability companies (pursuant to Law on trading companies No. 31/1990). The most common types of establishment are joint stock companies (SA) and the limited liability companies (SRL).
Also subject to corporate income tax are European companies (SE) as per the EC Regulation No. 2157/2001 and European Cooperative Companies (SCE) as per the CE Regulation No. 1435/2001, that have their head office in Romania. These legal entities are subject to corporate income tax in Romania on their worldwide income.
Corporate income taxes are chargeable on resident companies and non-resident companies with a permanent establishment in Romania. 'Romanian company' is defined as being any company established under Romanian legislation or with its business or management premises in Romania.
Profits earned by Romanian companies are taxed at the corporate income tax rate which is generally 16%. Certain businesses such as night clubs, discos, casinos and gambling establishments are subject to a minimum tax equal to 5% of turnover.
A concept of "minimum tax" has also been introduced. This sets a minimum tax to be payable by companies, based on the revenues reported up to 31 December of the previous year, using the following thresholds:
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
Banking trading companies are liable to pay profit tax every year, making advance payments on a quarterly basis, updated by the inflation index (December as in December of the previous year), estimated on drawing up the initial budget of the year for which the advance payments are carried out. Starting in 2010, this system will apply to all corporate taxpayers.
Romania tax year is the calendar year. From 2010 taxpayers must submit an annual profit tax statement by 25 April following the end of the tax year. An advance payments system for corporation tax was also introduced from 2010. Payments are due on the by the 25th of the month following the quarter end.