Romanian companies and individuals pay tax on their Romanian and worldwide income. Non -residents companies and individuals pay tax only on Romanian source income.
A foreign company is resident if the management is in Romania.
An individual is resident if the center of living is in Romania, or if staying in Romania for 183 days within 12 months.
Romania Tax Deductions
Losses are carried forward for seven years. There is no carryback for losses.
Depreciation is deducted using one of the 3 methods, the straight line method, the reduced balance depreciation and the accelerated method.
Provisions for bad debts are allowed under certain terms.
There is no company consolidation for tax purpose.
Romania Deduction of Tax at Source
In Romania tax is deducted at source from the following payments to non-residents:
Romania Income Tax Rates for 2014 and Deductions
Romania Income Tax Rate for Individual Tax Payers
Tax rate in Romania for Residents and Non-Residents are 16% Flat rate
Exempt income includes the following (however certain conditions
must be met):
Salary earned from working abroad
Remuneration earned by Romanian tax residents for work done outside
Romania is not taxable in Romania, provided that the remuneration is
not paid by or on behalf of a Romanian resident employer and the
remuneration is not borne by a permanent establishment in Romania of
the non-Romanian employer.
Corporate Tax Rates in Romania
The statutory corporate income tax rate is 16%. Taxpayers involved in activities related to nightclubs, casinos, discotheques, and sport-betting organizers, including legal entities which obtain such type of revenues based on an association contract, and in case the relevant profit tax is lower than 5% of the revenues derived from those activities, then such taxpayers are obliged to pay a profit tax of 5% levied on the respective registered revenues. Certain exceptions would apply to investments in deprived areas (according to transitional dispositions). Moreover, there is a specific regime applicable to Romanian legal entities which may fulfill certain conditions to qualify as micro - enterprises. Such regime is mandatory. The relevant corporate income tax rate under this regime is 3% (levied on revenues of any source).
Capital Gain Tax Rates in Romania
Resident individuals are liable to tax on investment income and capital gains. See below detailed information on applicable tax rates on various types of income.
Non-resident individuals are also liable to withholding tax on investment income, provided that such income qualifies as Romanian-source income. The applicable tax rates to income derived by non-resident individuals are similar to the tax rates applicable to resident individuals.
Individuals who are tax residents of countries that have concluded tax treaties with Romania can potentially obtain treaty relief to reduce these taxes.
Dividends, interest, and rental income
Generally, interest and dividends are subject to a 16 percent tax rate. Romanian resident persons paying interest or dividends to individuals (residents or non-residents) have an obligation to withhold tax.
As a general rule, capital gains from sale of shares are subject to
a 16 percent tax rate.
Gains from stock option exercises
Under current Romanian tax law, employees deriving income from stock option plans qualified as such according to Romanian law, are not liable to tax at the moment of grant or at the moment of exercise of the options. Upon sale of underlying shares, individuals derive capital gains subject to capital gain tax. The taxable income is determined as the difference between sale proceeds and exercise price, less broker?s fees.
Foreign exchange gains and losses
Income derived from foreign exchange/interest rate transactions (such as, currency forward, currency and interest rate swap, and options) is subject to a 16 percent tax rate. Losses from such transactions may be offset against similar gains.
Principal residence gains and losses
Income from sale of real estate properties is subject to regressive tax rates between 3 percent or 1 percent (costs may not be deducted). The applicable rate depends upon the value of the property and whether the property is held for less or more than three years.
Capital losses from sale of shares in listed companies may be deducted from similar gains. Annual capital losses can be carried forward for the following 7 years, provided dully declared.
Personal use items
Capital gains on the sale of personal belongings are not taxable, except from income from sale of real estate properties, although certain exemptions may be available.
Gifts are not subject to tax. Also, gifts consisting of real estate properties may be subject to tax, unless the gift is between relatives up to the third degree or between spouses.
Romania Dates of filing Returns / Reporting and Payment
The tax year ends on 31 December in Romania.