Romanian Tax Guide – 2020

This is a short Romanian tax guide, presenting valuable information on the main tax rules applicable for year 2020 under the Romanian tax law.

The Romanian tax guide below provides you with valuable understanding around Romanian main taxation rules. It provides information of general nature, which may not be applicable to all possible situations. Therefore, for specific guidance related to your case, we advise you to contact us.

Taxation of individuals

1. Romanian tax resident individuals (for any type of income, from any source)  – i.e. an individual is tax resident of Romania if he/she meets at least one of the following conditions:

– has his/her domicile registered in Romania

– the center of his/her vital interests is located in Romania

– resides in Romania for more than 183 days in any 12 months period.

2. Tax non-resident individuals who perform an independent activity through a permanent establishment registered in Romania;

3. Tax non-resident individuals, for income derived from employment activities that are performed in Romania;

4. Tax non-resident individuals who obtain other income from Romania, only for the income obtained from Romania.

Income tax: 10% (flat tax rate),

applied to gross salary less mandatory employee social contributions.

Employee social contributions:

  • pension fund contribution: 25% (no cap applicable)
  • health fund contribution: 10% (no cap applicable)

Employee social security contributions are deductible for income tax calculation purposes.

Employer social contributions:

  • labour insurance contribution: 2.25% (no cap applicable)

Personal tax deduction: only available for gross salaries of up to 3,000 LEI/month, can be between 300 – 800 LEI / month, depending on the salary level and number of dependents

Gross monthly salary: 5,000 LEI

Less employee social contributions:

  • Pension fund contribution 25%: 1,250 LEI (no cap applicable)
  • Health fund contribution 10%: 500 LEI (no cap applicable)

Total employee contributions: 1,750 LEI

Taxable base (for income tax calculation): 3,250 LEI

Income tax due 10%: 325 LEI

Net salary payable: 2,925 LEI

Employer social contribution 2.25%: 112.5 LEI

Total cost for employer: 5,112.5 LEI

You can use the Salary Tax Calculators on our website to determine your net salary, gross salary, or payable taxes according to Romanian tax law.

Income tax: 10% (flat tax rate)

5% for dividend income

Health fund contribution: 10% (Certain exemptions are applicable)

Taxable base can be chosen, but cannot be lower than 2,080 LEI/month.

Pension fund contribution: 25% (certain exemptions are applicable)

Taxable base can be chosen, but cannot be lower than 2,080 LEI/month.

Taxation method: gross income derived less deductible business expenses. For certain types of independent activities, taxation based on annual income quotas can apply.

Income tax: 10%

5% for dividend income

Health fund contribution: 10%

applicable only if total level of annual income equals or exceeds 12 minimum national salaries (for 2019: 12 x 2,080 Lei = 24,960 Lei)

Income tax: 10%

applied to gross salary less mandatory employee social contributions.

Health fund contribution: 10%

with some exemptions applicable

Taxable income is gross income derived, minus lump-sum expenses of 40% of gross income.

Income tax: 3%

The taxable base is the gross income derived, less a non-taxable fixed amount of 450,000 LEI.

Exemptions from taxation apply to:

  • any transfer by donation between relatives up to the 3rd degree, as well as between spouses
  • any transfer where value of the real estate is less than 450,000 LEI.

Income tax: 3%

must be withheld at source, if the payer is Romanian resident

The taxable base is the gross income derived, less a non-taxable fixed amount of 600 LEI/each prize.

Income tax

1% for income between 1 and 66,750 LEI, inclusively

16% for income between 66,751 and 445,000 LEI, inclusively

25% for income that exceeds the amount of 445,000 LEI

The taxable base is the gross income derived by a gambler from the income payer, and it is subject to progressive tax rates, as reflected above.

The gambling organizer/the income payer has the liability to calculate, withhold and pay the income tax due for each beneficiary.

Tax guide for companies

1. Romanian tax resident companies, for their worldwide income – i.e., any type of income, from any source – with applicability of double tax treaties, where the case.

A company is tax resident of Romania if:

– it is incorporated under the Romanian legislation

or

– its place of effective management is located in Romania.

2. Non-resident companies, only for their Romanian source income.

Companies taxable on profit are those with an annual turnover exceeding 1 mil EUR.

Tax base must be determined as the difference between the gross income and the business expenses incurred, reduced by non-taxable income and increased with non-deductible expenses.

According to the general rule, expenses can be deducted only if they are made for the economic activity carried out by the company.

Companies may carry forward annual losses for a period of 7 years. The carry forward of tax losses is not affected if company changes shareholders.

Corporate tax rate: 16%

Tax period: calendar year, unless it has been chosen to apply a different fiscal year, to match the company’s own applicable accounting regulations.

Micro-enterprise tax regime applies to companies having a turnover less than 1 million EUR.

Tax rates:

1% of the revenue, for companies with at least 1 employee

3% of the revenue, for companies with no employees

Tax period: the calendar year

Filing of the returns and payment of the tax due must be done quarterly, by the 25th of the month following the end of each quarter. For companies taxable on profit, the final year tax return and payment must be performed until 25 March of the following year (for the entire closing year).

VAT (Value Added Tax)

According to the Romanian tax legislation, VAT applies to any supply of goods or services that are performed in exchange for money.

Prior to commencing any economic activities that involve transactions subject to VAT/exempt from VAT, every company (that is Romanian based or has a fixed base registered in Romania) must register for VAT purposes with the Romanian tax authorities.

VAT standard rate in Romania is 19%, with following reduced rates applicable for certain types of transactions:

9% – for: pharmaceutical products or certain medical equipment, hotel accommodation, restaurant and catering services (less for alcoholic drinks), agricultural supplies, etc.

5% – for: school books, newspapers, magazines, admission to museums, zoos, cinemas and any cultural events, social housing, etc.

Tax Incentives

Employees working for companies that render software development services may benefit of salary income tax exemption (10%). The salary tax exemption for the software development industry is regulated by specific law. The piece of law regulating the incentive provides for a set of cumulative conditions that must be fulfilled, such as:

  • the company must be dully registered with the Romanian Registry of Commerce for economic activities that include software development;
  • the employee must be part of an IT department contributing to the soft development activities, and must be working on certain job positions as mentioned by the law, such as: programmer, data base administrator, analyst, etc.
  • company must register a minimum annual revenue of 10,000 EUR per each employee for which the tax exemption is applied;

The salary tax exemption must be applied by the employer, via monthly payroll.

Employees who carry out activities of research & development nature (R&D activities), as they are defined in the Romanian specific legislation, can be exempt from salary income tax (10%). The exemption can be applied only for the salary income that can be allocated to the R&D activities. Certain conditions must be fulfilled cumulatively, as enforced through specific law. Most important condition is the carrying out of activities that have genuine R&D nature.

Tax treaties

Romania has a large number of tax treaties signed with other countries. Today, a number of approximately 87 double tax treaties can be applied with these countries for avoiding double taxation of income or capital.
You can find some of the tax treaties on our website here: Tax treaties signed by Romania with other countries. If there’s a treaty you can’t find, please e-mail us and we will be glad to help.

Romanian tax guide updated at: 15 March 2020

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