In this article we provide answers to the most frequently asked questions about Bitcoin tax regime in Romania. The clarifications provided below are written by the best tax consultants and experts in taxation of cryptocurrency transactions.
Bitcoin is a form of digital money, from the category of cryptocurrencies, created back in 2009. Bitcoin is based on a peer-to-peer network of autonomous computers, a consensual digital network, called “blockchain”. Thus, the system behind Bitcoin is a digital, decentralized one, supported only by its users, without any intermediaries or any central authority, such as a bank.
Bitcoin can be bought and sold like any other fiat currency, and Bitcoin markets, called “Bitcoin exchanges”, allow people to buy or sell Bitcoins using any type of money.
Every Bitcoin is practically a digital file on a computer that is stored in an application, called “digital wallet”, and which in turn is installed on a device such as smartphone or computer. People can send Bitcoins (or even part of one – i.e., sub-units) to your digital wallet, and you can send Bitcoins to other people.
Each transaction is recorded in a kind of public register, called blockchain.
This makes it possible to track all historical transactions with Bitcoin, thus preventing system fraud, such as stealing coins by replicating them, or canceling transactions.
As mentioned above, like any other fiat currency, Bitcoin can be bought and sold in cryptocurrency markets. Given that the value of Bitcoin fluctuates constantly in the market (Bitcoin market price can fluctuate significantly in just a few minutes), this makes it possible to make gains from these types of buy-and-sell transactions.
Thus, for investors it may seem very promising to invest in Bitcoin, even more than in transactions with shares or other types of assets, because they can generate significant short-term gains.
Historically speaking, before January 2019, the Romanian tax legislation did not regulate in any way the taxation of profits made from the trading of Bitcoin or other virtual currencies.
However, the fact that the taxation of cryptocurrencies in Romania was not specifically mentioned in the tax legislation does not mean that such gains could not be taxed by the authorities. The Romanian Tax Code (Law no. 227/2015) did not include them in any specifically defined category of income, but at the same time did not exclude such income from the general rule of taxation.
Therefore, the gains that an individual derived from buying and selling of Bitcoins or any other type of cryptocurrency (Ethereum, Ripple, Stellar, Litecoin, etc.) were considered taxable income and taxed as income from other sources even before January 2019.
Starting with January 20, 2019 however, based on the Ordinance no. 25/2018 which amended the Romanian Tax Code, the income derived from the transfer of digital currencies was for the first time specifically regulated from a tax perspective. More exactly, under Article 114, paragraph (2) of the Romanian Tax Code, the authorities introduced letter m), applying starting with the income tax due for the revenues generated in 2019.
Thus, under the newly introduced letter, starting with the revenues related to year 2019, it was clarified that the income from the transfer of digital currencies derived by individuals must be taxed as “income from other sources”.
Individuals who generate gains from Bitcoin transactions or any other digital currencies are required to pay 10% income tax in Romania.
As per the Romanian tax legislation in force, the taxable income is determined as the difference between the selling price of the currency and the purchase price, deducting also the transaction related costs.
In addition, the following tax exceptions apply:
- gains below the level of 200 Lei per transaction are tax exempt,
- with the condition that the total tax exempt earnings for one year do not exceed the amount of 600 RON.
Therefore, all earnings that exceed the amount of 600 Lei per calendar year are taxed with 10% income tax.
Only the profits generated from the trading of digital currencies must be declared, and not the total revenue cashed-in. As explained above, the taxable gain must be calculated as the difference between the selling price (income cashed-in) and the purchase cost, deducting also the transaction related costs.
Given that the total income cashed-in also includes the amounts originally invested by the taxpayer, only the profits earned must be declared for taxation. For example, if a person invests 10,000 Lei in Bitcoins and subsequently sells them for 12,000 Lei, the annual taxable income to be declared is determined as follows: 12,000 – 10,000 – 600 (non-taxable threshold) = 1,400 Lei.
As classified under the category of income from other sources, the only additional tax (apart from the income tax) that is due is the health insurance contribution (CASS).
However, CASS is only due if the annual taxable income that an individual generates from activities other than employment reaches a certain threshold. More exactly, if the total annual taxable income generated from Bitcoin transactions, determined according to the above rule, or cumulated with income other than salary (such as income from self-employment, investment, or rent) exceeds 12 minimum gross wages, then the social health insurance contribution (CASS) is also due.
For the year 2020, this threshold is calculated at the level of 2,230 lei x 12 months, i.e., 26,760 Lei per year. If the annual taxable income reaches this level, then the taxpayer also owes CASS. The contribution must be calculated at 10% of this amount, regardless of whether the value of the income exceeds the amount.
More precisely, CASS due for 2020 will be capped at 10% of 26,760 Lei – meaning 2,670 Lei per year (approximately 550 EUR/year). For example, if one registers a taxable income of 50,000 Lei in 2020, he will also owe CASS in amount of 2,670 Lei per year.
Even if you already pay health insurance contribution (CASS) for your salary income, if the income from virtual currency transactions (alone or cumulated with income other than salary) reaches the minimum threshold described above, you will still have the obligation to declare and pay CASS for this income as well. The amount of CASS due must be calculated as described above.
This obligation is expressly established in the Romanian Tax Code, without any other exception in force for year 2020. Therefore, CASS on cryptocurrency transaction gains is due regardless of whether you also have the status of employee or not.
Individuals generating gains from cryptocurrency transactions must report this income to the Romanian tax authorities by submitting the annual tax return (“Declarația unică”). Thus, all individuals are required to declare the earnings they derive each year, in the first part of the next year.
More precisely, the official deadline for submitting the annual tax return is May 25 of the year following the one during which the income is generated (for 2020, the deadline is 25 May 2021). The reporting deadline may be extended by the authorities.
The annual tax return can be submitted to Romanian tax authorities (ANAF) in both paper and electronic format. The submission in electronic format can be done through the Virtual Private Space (on ANAF’s website), as well as through the online portal e-guvernare.ro. The submission through the e-guvernare.ro website can be done only by electronic signature (based on a qualified digital certificate).
For more details on submitting the annual tax return in Romania you can also read the article: Romanian annual tax return – frequently asked questions.
If your taxable income from cryptocurrency transactions (determined according to the above explanations) generated during a tax year (calendar year) does not exceed the non-taxable ceiling of 600 Lei per year, then yo do not have an obligation to declare it for income tax purposes.
You can compensate losses with gains from transactions operated during the same tax year only. If at the end of a tax year you are in a loss position, it cannot be carried forward to the next tax year.
Unlike the carryover of losses that the Romanian Tax Code allows in the case of security trading, this is not allowed in the case of virtual currency trading.
As foreigner living in Romania for more than 183 days within a 12 month consecutive period, you have the obligation to undergo the tax residency assessment procedure with the Romanian tax authorities. In practice, this means that the authorities will establish if you are deemed a Romanian tax resident or non-resident. For more details on the Romanian tax residence and the tax residence assessment procedure, please read our articles here: Romanian tax residence explained in details; Foreign nationals in Romania not complying with tax residency assessment will be subject to fine.
If the Romanian authorities deem you a Romanian tax resident, then you will have the obligation to report for tax purposes in Romania any type of income, including income from Bitcoin transactions.
As general rule, a Romanian tax resident (irrespective of his/her nationality) has the obligation to report to Romanian tax authorities any taxable income that he/she generates, from any sources (Romanian sources and foreign sources).
For this answer we will assume that you are Romanian tax resident, and that the income from Bitcoin transactions you generate is taxable in a country that has a double tax treaty (hereinafter “DTT”) in place with Romania.
If your income is already taxed in the other country, for the application of the avoidance of double taxation you will have to observe the specific article provisions in the DTT (on avoidance of double taxation). Generally these provisions are established under article 23 or article 24 of the applicable DTT.
You can find a list of double tax treaties signed by Romania with other countries here: Tax treaties signed by Romania with other countries.
As general rule, when income is taxed in the source country, the DTT provides for deduction of the amount of tax paid in that country from the income tax due in Romania (as the country of tax residence). More precisely, this means that the amount of income tax due in Romania will be reduced with the amount of tax due in the source country. The deduction can be actually applied in the Romanian annual tax return, as part of the annual tax reporting process.
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