Global tax guide for Romania

Romania entered the European Union at the beginning of 2007 and underwent significant changes to meet the criteria for membership. As an EU member, Romania has embraced the EU’s tax regulations.

Regarding income and capital gains generated anywhere in the globe, Romania imposes a flat tax regime on its people for both corporate and personal income tax. Non-residents who operate businesses in Romania, work there, or sell specific types of real estate are also liable for Romanian income tax.

System of legislation in Romania

Identical to other nations with civil law systems in Europe, Romania has a legal system. Romania has a system of civil law, and in 2011 a new Civil Code was established. Both a new Fiscal Procedure Code and a new Fiscal Code went into effect in 2016. The bulk of Romanian taxes has undergone significant changes as a result of this Fiscal Code. Its key goals are to eliminate bureaucracy, increase investment in the economy, and offer local taxation with transparency and certainty.

Authorities that responsible for taxation

The National Agency for Fiscal Administration, which reports to the Department of Finance, is responsible for managing the taxation system in Romania. Additionally, there are regional tax administrations that report to ANAF and are in charge of tax collection from taxpayers.

Business structures

By founding a brand-new firm or buying an existing one off the shelf, investors from other countries can install a presence in the Romanian market. Corporations with restricted liability and joint-stock companies are the primary businesses that investors utilize in this regard.

The benefits and drawbacks of business structures:

• Joint-stock enterprises

Of all Romanian corporations, JSCs are the most sophisticated and complicated. They need at least two stakeholders, who may be either people or legal entities. The share capital of JSCs guarantees their social duties, and the stockholders are solely accountable for their payments up to the maximum allowed. The minimum equity is 90,000 Romanian Lei, or around €25,000. Every investor’s contribution to the JSC’s share capital at the time of its incorporation cannot be less than 30% of the subscribed share capital. The JSC shares are freely transferable and can be exchanged on established marketplaces.

• Limited liability companies

Due to its organizational flexibility and minimal capital requirements, the LLC is the entity that is employed the most commonly. It can be formed with at least one person and a maximum of 50 people. As of December 2020, there is no longer a minimum charter capital requirement for LLCs, and it is no longer a prerequisite for incorporation. Before this modification, 200 Romanian Lei (about €45) was the required minimum authorized capital for LLCs to register. The quotas cannot be exchanged on structured marketplaces since they do not reflect tradable titles. Only the amount of their subscribed share capital makes members responsible for the company’s debts.

• Representation office

Through this office, foreign businesses can carry out marketing operations including advertising and market analysis. It promotes and performs actions on behalf of its parent companies with a clear mission that is restricted to the tech assistance and development of the main firm’s business.

• Satellite company

An extension of the overseas corporate parent, a branch lacks financial freedom. It is only permitted to engage in activities that the parental abroad firm has been granted permission to do in its native country.

Cross-border transactions

In line with the EU’s Code of Conduct on Transfer Pricing Documentation for Associated Enterprises, Romanian law is applicable. The specifics and scope of transfer pricing are outlined in the Organization for Economic Co-operation and Development standards.

Large taxpayers who engage in intragroup transactions that exceed specified thresholds are obligated to annually create a transfer price formation file in the Romanian language and include all pertinent supporting paperwork.

Tax on corporation income in Romania

The corporate tax rate is 16% in Romania. Objects of financial payments are:

• legitimate organizations making money outside of the nation;
• groups from outside that receive a portion of the profits from a Romanian-based business;
• legal entities of non-residents with relation to gains from sales of stocks of a company with a Romanian registration or  the property in the nation;
• businesses that profit from activity in the nation.

Principles of individual taxation

In Romania, a fixed income tax is imposed at a rate of 16% on both citizens and non-citizens who make money domestically. It is important to note that medical treatment, financial and banking-related services, and educational programs are not obligated to pay taxes.

Real estate taxation in Romania

• Natural persons

The tax rate on the value of residences and other buildings held by natural people ranges from 0.08% to 0.2% of the building’s taxable value. The tax rate on the value of non-residential structures owned by natural people ranges from 0.2% to 1.3%.

• Juridical persons

The tax rate on residential structures ranges from 0.08% to 2% of the building’s taxable value and the tax rate for non-residential buildings ranges from 0.2% to 1.3% of the building’s taxable value.

Based on the place of the property and the type of area being used, landowners are subject to a specific sum per square meter of land tax.

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