Taxation in Romania August 2008

Septembrie 2008

VENKATESH SRINIVASAN - Partner - Head of Tax Advisory & Compliance Services ERNST & YOUNG

 

Corporate taxes at a glance

 

Taxes on corporate income and gains

The Fiscal Code came into effect on 1 January 2004. The code integrates 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 are subject to tax on worldwide income. Anentity is resident in Romania if it is incorporated in Romaniaor if its effective management and control are in Romania.

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, an agency, a factory, a mine, land for oil and gas extraction, or a building site that exists for a period exceeding six months.

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 suchactivities 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.

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