|  26.06.2014

Taxation in Romania for companies and individuals

Over the last years, the Romanian business environment has been facing the challenge caused by the frequent changes in the tax regulations and an increasingly complex taxation system. MAZARS Romania presents the key information about the local tax frame applicable for companies and individuals.

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It became more and more difficult to keep direction against a quite unpredictable and sometimes not very clear legal frame. This is particularly challenging for the foreign investors who are interested to start investment projects here, but are not familiarized with the specific context.


VAT - standard and reduced rates
In Romania, the regular TVA rate that applies to almost all transactions in goods and services is 24%. There are also two reduced VAT rates:
➤9% for books and newspapers, medical products and medicines, tourist accommodation services and access to monuments and other tourist attractions;
➤5% for social housing and land allocated for this purpose and in particular, those for single people or families with no more than 120 sqm and a market value that does not exceed RON 380,000 (approximately EUR 85,000).


Legal persons with an annual turnover above RON 220,000 are obliged to register for VAT. Companies that are not based in Romania may have to register for VAT purposes according to the rules of ‘distance selling’. The threshold applied in Romania is of RON 118,000.


The VAT cash accounting system became optional from 2014. Taxpayers whose yearly turnover did not exceed RON 2,250,000 may continue to apply this system.


Microenterprise Income Tax

Legal persons that cumulatively meet the following conditions at the end of the previous year (December 31) are required to apply the income tax for microenterprises:
➤Annual income of less than EUR 65,000;
➤Revenues earned from other activities than banking, insurance and reinsurance, financial and capital markets, gambling;
➤Revenues from consultancy and management do not exceed 20% of total revenues;
➤Capital owned by entities other than the state and local authorities.


In this case, tax rate is 3% applied on turnover.


Revenues from the differences in the exchange rate are not included in the computed tax base for microenterprises. At the end of the fourth quarter, the positive / favorable difference from the exchange rate will be considered subject to tax and take into account for the tax base.


The newly formed legal entities are subject to income tax for microenterprises if the share capital is less than EUR 25,000 (RON equivalent).


Corporate Tax
In Romania, the standard corporate tax is 16%. For nightclubs and gambling activities, the corporate tax rate for gambling and night club activities cannot be lower than 5% of revenue obtained from these activities. All the companies operating under the Romanian law are generally subject to the same tax regime including the payment of income tax, regardless of their activity or legal form.


The following entities are subject to corporate income tax:
➤Romanian legal entities and foreign companies operating in Romania through a permanent establishment;
➤Foreign legal entities with a permanent establishment in Romania, for the earnings registered by this establishment;
➤Non-resident foreign companies and natural persons carrying out their activity in Romania as part of a joint venture (with or without separate legal personality);
➤Foreign legal entities which derive income from or in connection with real estate transactions in Romania or transactions with shares held in Romanian legal entities;

➤Resident individuals that operate in Romania and abroad, as part of a partnership with Romanian legal persons (without separate legal personality), for the share of earnings attributable to them.


Expenses are deductible if and only if they are related to obtaining the taxable income. The Fiscal Code also includes a list of non-deductible or partially deductible expenses.


The following categories of income are nontaxable:
➤Income from dividends received by a Romanian company from another Romanian company or a company resident in a third country (non- EU) with which Romania has concluded a tax treaty to avoid double taxation, if the Romanian company owns at least 10 % of the share capital of the other company for a continuous period of at least one year ending on the date when the dividend is registered. The exemption also applies to dividends from companies established in the European Union, provided that certain conditions are met (including the holding of 10 % for a 1-year interval);

➤The income earned by a Romanian company from sale/cession of shares held in another Romanian company or in a resident company from a country with which Romania has concluded a tax treaty to avoid double taxation if, at the date of sale / transfer of shares, the Romanian company owns at least 10% of the share capital of the other entity for a continuous period of at least one year.


The depreciation scheme for fixed assets that are subject to depreciation is as follows:
➤Constructions: straight-line method;
➤Technological equipment (machines, tools, equipment, computers and related peripheral equipment): option of choosing between the straight-line, digressive and accelerated methods;

➤Any other fixed assets that are subject to depreciation: only the straight-line or the digressive method can be used.


The deficits from 2009 can be carried over the next seven years.


Legal entities may choose a different fiscal year than the calendar year. Companies have the option of paying the income tax quarterly on the basis of fixed deposits, without the need for quarterly calculations. Only the year-end calculation is compulsory. Tax quarterly payments during the fiscal year shall be adjusted against the tax amount determined at the end-of year calculation.


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