Taxation in Romania
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24 Februarie 2010 |
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ERNST & YOUNG S.R.L. |
Adresa
Strada Dr. Felix Iacob, Nr. 63-69
Cladirea Premium Plaza, Etaj 15
011033 Bucuresti, Sector 1
Telefon
+40-21-402.40.00
Fax
+40-21-310.71.93
Website
www.ey.com
Corporate taxes at a glance
(a) See section on profits tax.
(b) The withholding taxes referred to above are levied on income earned in Romania by non-resident individuals and legal entities (referred to below as "non-residents"), income that is not attributable to a Romanian permanent establishment of the non-resident income recipient.
(c) See section on dividends.
(d) See section on withholding tax.
(e) Withholding tax generally applies to services rendered in Romania, except for international transport and services related to such transport. However, income from management and consulting services is taxable regardless of whether these services are rendered in Romania or abroad, if such income is obtained from a resident, or if it is a cost of a permanent establishment in Romania.
(f) Withholding tax applies to the proceeds from liquidation of a Romanian legal entity.
(g) See section on determination of taxable income.
Taxes on corporate income and gains
The Fiscal Code came into effect on 1 January 2004. The code has integrated key tax legislation and provides the basis for a more stable framework of tax legislation by requiring amendments to follow a specific juridical route.
Fiscal year
In Romania, the fiscal year is the calendar year.
Profits tax
Resident entities as well as legal entities having their headquarters in Romania, but incorporated as per the European legislation (i.e. European companies) are subject to tax on worldwide income. An entity is resident in Romania if it is incorporated according to the Romanian legislation, or its place of effective management is in Romania (for foreign legal persons), or if its headquarter is in Romania (for legal persons incorporated as per the European legislation).
Associations or consortia between Romanian legal entities, which do not qualify as legal persons, are taxable in Romania separately at the level of each partner. For such associations between a Romanian legal entity and individuals or foreign entities, the tax must be computed and paid by the Romanian legal entity on behalf of the individuals or its foreign partners.
Non-resident companies are subject to tax on their Romanian-sourced income only. Sale of shares held in Romanian companies by non-resident companies, and sale of real estate located in Romania, are also subject to profits tax in Romania (see section on Capital gains tax).
A permanent establishment in Romania may be constituted inter-alia by: an office, a branch, a factory, a mine, land for oil and gas extraction, or a building site that exists for a period exceeding six months. Also, a permanent establishment includes the place where an activity continues using the assets and liabilities of a Romanian legal entity undergoing a restructuring process (e.g. merger, spin-off).
Romanian legal entities should register with the relevant tax authorities any contracts signed with non-resident legal entities or individuals performing in Romania construction and assembly works, surveillance, consultancy, technical assistance or any other activity performed in Romania if such activities could give rise to a permanent establishment of the non-resident in Romania. The contracts should be registered by submitting a declaration within 30 days from the date they were concluded. The form and content of the respective declaration is approved by order of the National Agency of Fiscal Administration (ANAF).
The fine for non-compliance with the above registration requirements is RON 1,000 – RON 5,000.
Rates of profits tax and the minimum tax
Starting from May 2009, taxpayers pay the higher of the standard profits tax rate and the minimum quarterly/annually tax. The standard profits tax rate is 16%.
The minimum annual tax ranges between RON 2,200 – RON 43,000, depending on the level of total income derived in the previous year.
The minimum tax does not apply in certain cases (e.g. to companies that are temporarily inactive).
Profits tax payable by companies earning revenues from bars, nightclubs, discos, casinos and sports bets, including revenues from an association agreement, is computed at the standard 16% rate, provided the tax amount is not less than 5% of the total declared revenue. In case the profits tax payable is below this threshold, the taxpayer is liable to pay profits tax computed at 5% of the declared revenue from such activities. The minimum tax provisions mentioned above are not applicable to these taxpayers.
Starting from 2010, the Romanian Ministry of Finance did not set the percentage of tax to be applied to the revenues earned by micro enterprises. Thus, the companies that used the micro enterprise taxation regime will become subject of the standard profits taxation.
In this respect, companies that were taxed under the micro enterprise regime are required to make quarterly anticipated payments amounting to one quarter of the micro enterprise revenue tax liability for the previous fiscal year, in line with an inflation rate.
Representative offices are taxed on a yearly basis at a lump sum of the RON equivalent of EUR 4,000, payable in two equal instalments, until 25th of June and 25th of December.
Capital gains tax
No separate capital gains tax is payable by resident entities. Capital gains of non-resident entities from the sale of immovable property in Romania, or from sale/transfer of shares held in a Romanian legal entity, are taxed at the standard corporate tax rate of 16%.
During the period 1 January – 31 December 2009, profits derived by non-resident legal entities from transactions with participation titles held in Romanian companies and traded on the regulated market in Romania were treated as non-taxable.
