Industries

The IT industry is one of the largest and most profitable industries in Romania, having also strong workforce given the technical and IT educational environment.

The following industries have the strongest workforce, which you should consider when planning on doing business in Romania:

Investment incentives when doing business in Romania

IT&C companies doing business in Romania are favoured by investment incentives. The income tax for employees working in IT&C companies is 0% up to a limit of Lei 10,000 gross per month, in compliance with the Romanian current legislation.

In addition, investors setting up manufacturing locations or offices in an industrial, scientific or technological park benefit from some exemptions on local taxes. Employees who have income in the agricultural and food industry can be supported by fiscal incentives under certain conditions. Taxpayers that are performing R&D activities may also enjoy tax incentives in the area of corporate income tax and salary tax.

The most common form of doing business in Romania is through the Limited Liability Company (or LLC in short). The minimum required capital for setting up an LLC is only RON 1.

An LLC in Romania can have between 1 and 50 shareholders. The shareholders respond in the limit of the contribution to the share capital.

A Limited Liability Company can be founded by natural or legal entities and must be registered to the Trade Register.

The limited liability company may be managed by one or more directors, separately or together, appointed within the Article of Association and which can be revoked by shareholders’ resolution (GSM/EGSM) or by the sole shareholder’s decision, as the case may be.

Certain activities need prior authorization for doing business in Romania (e.g., credit institutions, insurance brokers, companies which produce and/or sell firearms and ammunition, pension fund).

Certain activities need to be authorized after the registration of the company (e.g., temporary work agents, companies that require transportation licence).

• company’s name and its registered seat
• a list of the company’s members, with their respective addresses, date of birth, personal tax number
• the main activities of the company doing business in Romania (certain activities require special permits)
• the amount of share capital and distribution
• representation of the company, the method of signing in the name of the company
• identification data, the duration of the mandate, the powers conferred on them and whether they are to exercise them jointly or separately details identifying the beneficial owners and how the company control is exercised, if applicable
• the duration of the company, if founded for a fixed period
• all other items are relevant to the given form of business as required by the prevailing act of law

The incorporation procedure of a company for doing business in Romania consists mainly in:

• reserving the name of the company
• drafting the relevant documents (mainly constitutive act of the company and shareholders and directors’ statements)
• filling the registration application within the Trade Register

The registration of a company doing business in Romania is mandatory in the country:

• the incorporation procedure must be initiated by request.
• the registration request must be filed with the competent Trade Register Office.
• company registration request may be submitted with electronic signature via the Trade Register portal or at the registrar’s office of the authority.

There are no fees applicable for the Trade Register, however Official Gazette fees for publishing documents will be applied.

After submitting the complete file to the Trade Register, the request is usually processed in 3 working days. Sometimes, the approval of the file may be delayed because additional documents are requested by the Trade Register’s referents. The website of the Trade Register where online request can be submitted is https://portal.onrc.ro

After the incorporation, the company doing business in Romania must register within the Romanian Fiscal Authorities in 30 days and open the bank account.

Corporate income tax

• 16% is the standard rate of corporate income tax in Romania
• 16% rate applies to taxpayers that carry on activities such as gambling and nightclubs on the taxable profit, or
• 5% is the rate that is applied to taxpayers that carry on activities such as gambling and nightclubs on income received from such activities, depending on which is higher
• 1% is the rate for taxpayers with a turnover higher than EUR 50,000,000 in the previous tax year, starting from January 2024, if the corporate income tax is lower than the minimum tax on turnover.

The tax period in Romania can be either the calendar or fiscal year, which may differ than the calendar year

Taxpayers doing business in Romania must submit their quarterly CIT returns by the 25th day of the first month following the first, second, and third quarters. The annual CIT return is due by March 25 of the following year for which the CIT is due in case the fiscal year equals the calendar year. For 2023, the deadline was extended to 25^th of June. In case the fiscal year is different than the calendar year, the annual CIT return is due by the 25th day of the third month after the end of the company’s fiscal year.

A company doing business in Romania is considered as tax resident if:

VAT

• 19% is the standard VAT rate in Romania
• 9% the reduced rate applies to medicines, water, food and beverage industry – save for alcoholic beverages and beverages with a high concentration of sugar, restaurant and catering services, hotel accommodation, supply of housing under certain conditions etc.
• 5% an extra-reduced rate applies to supplies of schoolbooks, newspapers, magazines, admission fees to castles, sport events, museums, cinemas, etc.

VAT registration

Romanian tax residents doing business in Romania are required to register for VAT when their annual turnover exceeds EUR 88,500 (RON 300,000). Voluntary VAT registration before the threshold is exceeded is also possible.

Non-resident taxable persons established in Romania through fixed establishments and non-residents having no actual presence in Romania can register for VAT without exceeding the threshold of EUR 88,500 (RON 300,000) on annual turnover or may be even required in certain specific cases.

A taxable person that is not established in Romania performing intracommunity distance sales of goods to Romania (mail order business) to any non-taxable person or a person not registered for Romanian VAT, shall either register for VAT purposes in Romania if the annual volume of intracommunity distance sales, as well as the volume of telecommunication, broadcasting and electronic services cumulatively exceed the EUR 10,000 threshold. Alternatively, the One-Stop-Shop regime that was designed to avoid VAT registration in multiple EU countries may be applied if the prerequisites are met.

Other taxes

Entitlement to work

According to article 10 of Law no. 53/2003 (Labor Code), the Individual Employment Contract is the agreement based on which a natural person, referred to as the employee, undertakes to perform work for and under the authority of an employer (company doing business in Romania), natural or legal person, in exchange for payment.

As such, any natural person can be employed, regardless of whether they are a Romanian citizen, a foreign citizen, stateless person or a refugee.

According to the Romanian law, the future employee must be at least 16 years old to be able to conclude an individual employment contract.

For teenagers who have reached the age of 15, such a contract can be concluded only with the consent of the parents or legal representatives and only if the job does not endanger their health.

Employment contracts

In Romania, the individual employment contracts can be classified according to several criteria, as follows:

Duration

The Individual employment contract concluded for an indefinite period

This type of contract is regulated by art. 12 para. 1 of the Labour Code and represents the rule regarding the duration for which the individual employment contracts are concluded. This assumption is regulated by the Romanian law as a means of employee protection.

Individual employment contract concluded for a fixed period

In accordance with the provisions of art. 82-87 of the Labor Code, the individual fixed-term employment contract will be concluded in writing and will expressly contain the period for which the contract is concluded, a period that cannot exceed 36 months (3 years).

The individual employment contract can be concluded for a determined duration only in the following cases:

1. replacing an employee whose employment contract is suspended, except for the case in
   which that employee participates in the strike;
2. the increase and/or temporary modification of the structure of the employer’s activity;
3. carrying out seasonal activities;
4. in the event where the employment contract is concluded based on legal provisions issued
   with the aim of temporarily favoring certain categories of unemployed persons;
5. employment of a person who, within 5 years from the date of employment, meets the
   conditions for retirement due to the age limit;
6. occupying an eligible position within trade unions or non-governmental organizations, during
   the term of the office;
7. the employment of retirees who, under the law, can cumulate the pension with the salary;
8. in other cases, expressly provided by special laws or for carrying out works, projects or
   programs.

Between the same parties, no more than 3 individual fixed-term employment contracts can be concluded successively. Individual fixed-term employment contracts concluded within 3 months of the termination of a previous fixed-term employment contract are considered successive contracts and cannot have a duration greater than 12 months each.

Number of working hours

Full-time employment contract

This type of contract usually involves a work schedule of 8 hours per day, i.e., 40 hours per week, in principle from Monday to Friday (inclusive).

Part-time employment contract

This type of contract assumes that the number of normal working hours, calculated weekly or as a monthly average, is lower than the number of normal working hours of a comparable full-time employee.

Such an agreement must include provisions related to the duration of the work and the distribution of the work schedule, the conditions under which the work schedule can be changed and the prohibition to work overtime, except in cases of force majeure or for other urgent works intended to prevent the production of accidents or removing their consequences.

If these elements are not specified in an individual part-time employment contract, the contract is considered to be concluded for full time.

These types of contracts, in turn, can be concluded either for an indefinite period or for a fixed period.

Place of activity

On-site

An employment contract is considered concluded for on-site work if the employee must perform his activity either at the employer’s headquarters or one of its workstations.

Work-from-home

The work-from-home contract is regulated by art. 108 para. (1) of the Labor Code and implies that the employees must perform their duties at their domicile or place of residence. In this case, the employee sets his own work schedule, observing the deadlines and the number of hours provided in the contract.

The work-from-home employment contract is concluded only in written form and must contain, apart from the provisions specified in art. 17 para. (3) of the Labor Code, the following:

1. the express statement that the employee works at home;
2. the program within which the employer is entitled to control the activity of his employee and
   the concrete way of carrying out the control; and
3. the employer’s obligation to ensure the transport to and from the employee’s home of the
   resources and materials they use in their activity, as well as of the finished products they
   make.

Teleworking

Telework is the type of work organization through which the employee, on a regular and voluntary basis, fulfils the duties required by their position, occupation or job they hold in a place other than the workplace organized by the employer, using information and communication technology, as regulated by the provisions of art. 2 of Law no. 81/2018 on the regulation of telework activity.

In the case of telecommuting, the individual employment contract contains, apart from the elements provided for in art. 17 para. (3) of Law no. 53/2003, republished, with subsequent amendments and additions, the following:

1. the express statement that the employee fulfils their duty in telework regime;
2. the period and/or days in which the teleworker carries out his/her activity at a workplace
   organized by the employer;
3. the location(s) of the telemarketing activity, as agreed by the parties;
4. the program within which the employer is entitled to verify the activity of the teleworker and
   the specific way of carrying out the control;
5. the method of highlighting the working hours provided by the teleworker;
6. the responsibilities of the parties depending on the place/places of the telework activity,
   including the health and safety responsibilities, in accordance with the provisions of art. 7
   and 8;
7. the employer’s obligation to ensure the transport to and from the place of the telework
   activity of the materials that the teleworker uses in his activity, as the case may be;
8. the employer’s obligation to inform the teleworker about the provisions of the legal
   regulations, from the applicable collective labour agreement and/or the internal regulation, in
   the matter of personal data protection, as well as the teleworker’s obligation to comply with
   these provisions;
9. the measures taken by the employer so that the teleworker is not isolated from the rest of
   the employees, which ensures him the opportunity to meet with his colleagues on a regular
   basis;
10. the conditions under which the employer bears the expenses related to the telecommuting
    activity.

An employment contract that does not require the physical presence of the employee at the employer’s premises gives the employee the same rights as those who work at the employer’s premises.

In Romania, there is another type of individual employment contract, namely the apprenticeship contract. This type of the contract is regulated by the provisions of art. 208-210 of the Labour Code. In this case, the employer will pay the employee a salary, but will also undertake to provide him with the necessary training for the job qualification, for a certain period.

Not least, art. 88 of the Labour Code, regulates one more type of work, namely work through a temporary work agent. In this situation, the work is performed by a temporary employee who performs the work for a final beneficiary, following the disposition of the temporary work agent.

In Romania, the beneficiaries of income from salaries and salary assimilated income owe a monthly, final tax, which is computed and withheld at source by the payers of the income amounting to 10% of the Beneficiary’s income, computed according to the provisions of art. 78 of the Fiscal Code.

According to art. 80 of the Fiscal Code, payers of salaries and salary assimilated income have the obligation to compute and withhold the tax related to the incomes of each month on the date of payment of these incomes, as well as to pay it to the state budget up to and including the 25th of the month following the one for which these revenues are paid.

In accordance with the provisions of art. 81 of the Fiscal Code, payers of salaries and salary assimilated income have the obligation to file a monthly tax return for each income beneficiary, until the monthly deadline i.e., up to and including the 25th of the month following the one for which the taxes are paid.

An individual is considered a tax resident under the following conditions:

• they have a permanent home in Romania, which can be owned or rented or remain in any way available for said person and/or his/her family;
• they have residence in Romania;
• they are present in Romania for a period (or more periods) exceeding a total of 183 days, during any 12 consecutive months, ending in the current calendar year;
• they are a Romanian citizen working abroad, as an official or employee of Romania in a foreign state;
• they have the centre of their vital interests in Romania.

Other elements that are considered when establishing residency in Romania but only together with the elements mentioned above:

According to art. 61 of the Romanian Fiscal Code, the types of income that are taxable in Romania are the following:

• income obtained from independent activities, as defined by art. 67;
• income obtained from intellectual property rights, as defined by art. 70;
• income obtained from salaries and salary assimilated income, as defined by art. 76;
• income obtained from rents, as defined by art. 83;
• income obtained from capital gains, as defined by art. 91;
• income obtained from pensions, as defined by art. 99;
• income obtained from agricultural activities, forestry and fishery, as defined by art. 103;
• income obtained from prizes and gambling, as defined by art. 108;
• income obtained from real estate transactions, as defined by art. 111;
• income obtained from other sources.

The rate of the social security contributions, paid by the employer in Romania is not applicable.

25% is the rate of the social security contributions paid by the employee in Romania in accordance with the provisions of art. 138 of the Fiscal Code.

The employers have the obligation to calculate and withhold the tax related to the social insurance contribution owed by natural person who obtains income from salary and incomes assimilated to salary.

The rate of the health insurance contributions, paid by the employer in Romania is not applicable.

10% is the rate of the health insurance in accordance with the provision of art. 158 of the Fiscal Code.

The employers have the obligation to calculate and withhold the tax related to the health insurance contribution owed by natural person who obtains income from salary and incomes assimilated to salary.

Corporate income tax (CIT) – rates

The standard corporate income tax rate is 16%.

Taxpayers that are carrying on activities such as gambling and nightclubs are either subject to 5% rate of the revenue obtained from such activities or to 16% of the taxable profit, depending on which is higher.

Companies with a turnover higher than EUR 50,000,000 in the previous year and which in the concerning year determine a corporate income tax lower than the minimum tax on turnover are required to pay corporate income tax at the level of a minimum tax on turnover. The minimum tax on turnover is determined as 1% of total income to which certain tax adjustments are made.

Corporate income tax – general information

Residence

Taxable income

Resident companies are taxable on their worldwide income, unless a double tax treaty stipulates otherwise.

The taxable profit of a company is calculated as a difference between the revenues and expenses registered according to the applicable accounting regulations, adjusted by deducting non-taxable revenues and tax deductions and by adding non-deductible expenses. Also, elements similar to revenues and expenses are taken into account when calculating the taxable profit.

Non-resident companies that are carrying on activities in Romania through a permanent establishment are required to pay corporate income tax for the taxable profit attributable to the permanent establishment.

Tax period

Tax returns and assessment

As a general rule, the corporate income tax is calculated quarterly. For the first three quarters the filing and the payment of the corporate income tax is performed quarterly, until 25^th of the first month following the end of the quarters. The final computation and payment of the corporate income tax for the whole calendar year is to be performed until March 25^th of the following year.

There are exemptions from the above general rule that apply to companies such as:

• Companies that have chosen the fiscal year different from the calendar year have to declare and pay the annual corporate income tax until 25^th of third month after the ending of the fiscal year changed.
• Non-profit organizations, companies that obtain revenues mainly from agricultural activities, educational units, religious cults and other taxpayers specifically mentioned by law have to declare and pay the annual corporate income tax by February 25^th of the following year.
• Credit institutions and branches of foreign credit institutions in Romania are required to apply the system of quarterly advance payments.

Advance payments

Taxpayers, except those who are specifically mentioned by law, may opt to declare and pay the annual corporate income tax by making quarterly advance payments. The anticipated quarterly advance payments are computed as ¼ of the previous annual corporate income tax updated by the consumer price index and are due by the 25^th of the month following the end of the quarter. By exception, the quarterly advance payments related to fourth quarter are due by December 25^th, respectively until the 25^th of the last month of the changed fiscal year.

Deductions

As a general rule, are considered deductible expenses those expenses which are incurred for the purpose of carrying on the business activity, unless they are specifically mentioned by law as limited deductibility expenses or non-deductible expenses.

Carry forward of losses

Annual tax losses determined by way of the corporate income tax return, beginning with 2024/amended tax year beginning in 2024, as the case may be, shall be recovered from the taxable profits realized up to maximum 70%, in the following 5 consecutive years. Recovery of losses will be made in the order in which they are incurred, at each income tax payment date.

Research and Development (R&D)

Companies can benefit from an additional deduction of 50% of the eligible expenses for their Research and Development (R&D) activities. Furthermore, accelerated depreciation for devices and equipment used in the R&D activities may be applied.

The 50% additional deduction from the R&D expenses will not be recomputed in case the objectives of the project are not met.

In order to benefit from these incentives, the eligible R&D activities should be from the applicative research categories and/or technological development relevant to the company activity and the activities should be performed in Romania, as well as in the European Union or in other states – member states of the European Economic Area.

Incentives are granted separately for R&D activities of each project.

Tax exemptions for reinvested profit

The profit invested in new and specific technological equipment manufactured and/or purchased released for use is exempt from income tax. In order to benefit from this incentive, the technological equipment should be used by the company for the purpose of carrying on the business activity for more than half of its useful life, but for no longer than five years. The companies benefiting from this incentive cannot use the accelerated depreciation method for the respective technological equipment.

It is also exempt from corporate income tax, the profit invested in supporting vocational-dual education by ensuring the practical training and quality training of students.

Withholding tax

Domestic dividend tax

As a general rule, dividends paid by a Romanian company to another Romanian company are subject to 8% tax. However, the dividends paid are non-taxable if the beneficiary of the dividend has held, at the time of the distribution, a minimum of 10% of the Romanian company for an uninterrupted period of at least one year.

WHT for non-resident companies

The applicable WHT rates in relation with non-resident companies are:

• 5% for the revenues obtained from dividends
• 50% for payments made by Romanian companies into non-resident companies bank accounts that are open in countries that do not have an information exchange agreement concluded with Romania and only if such payments result from artificial transactions
• 16% in case of any other revenues obtained from Romania

Dividends paid

As a general rule, dividends paid to non-resident companies are subject to 8% withholding tax.

However, as Romania is an EU member state, the EU Parent-Subsidiary directive can be applied. Therefore, dividends paid by Romanian companies to resident companies in one of the EU member states are exempt from taxation if the beneficiary of the dividend has held, at the time of distribution, a minimum of 10% of the shares of the Romanian company for an uninterrupted period of at least one year.

Interest

As a general rule, the interest paid to non-resident companies is subject to 16% withholding tax.

However, as Romania is an EU member state, the EU Interest and Royalties Directive can be applied. Therefore, interest paid by Romanian companies to resident companies in one of the EU member states are exempt from taxation if the beneficiary of the interest has held, prior to the time of payment, at least 25% of the share capital of the Romanian company for an uninterrupted period of at least two years.

Royalties

As a general rule, royalties paid to non-resident companies are subject to 16% withholding tax.

However, as Romania is an EU member state, the EU Interest and Royalties Directive can be applied. Therefore, royalties paid by Romanian companies to resident companies in one of the EU member states are exempt from taxation if the beneficiary of the interest has held, prior to payment time, at least 25% of the Romanian company´s share capital for an uninterrupted period of at least two years.

Anti-avoidance rules

Thin capitalization rules have been repealed as of 2018. Therefore, as of January 1, 2018, the Tax Code introduces a new concept – exceeding borrowing costs – defined as the difference between interest expense and interest income as well as other equivalent expenses/income.The total exceeding borrowing costs resulting from transactions/operations carried out both with related and non-related parties may not exceed the deductible ceiling represented by the RON equivalent of the amount of EUR 1,000,000. However, exceeding borrowing costs resulting from transactions/operations which do not finance the acquisition/production of fixed assets under construction/assets established according to the law and which are carried out with related parties, are deductible, in a tax period, up to the deductible ceiling represented by the RON equivalent of EUR 500,000.

The exceeding borrowing costs exceeding the threshold of EUR 1,000,000 may benefit from an extra deduction, limited to 30% of the accounting profit adjusted negatively with non-taxable income and positively with income tax expenses, exceeding borrowing costs and deductible tax depreciation. If the resulting base is zero or negative, the exceeding borrowing costs is non-deductible in the current period, but can be recovered for an unlimited period of time and can be deducted in subsequent periods applying the same mechanism.

Controlled foreign company

A corporate taxpayer who controls a foreign company includes in its taxable base undistributed income derived from: interest, royalties, dividends, income from the transfer of shares, income from financial leasing, insurance income, banking activities, etc.

An entity is considered a controlled foreign company if the following conditions are met:

• The taxpayer liable for corporate income tax owns, alone or together with its associated enterprises, directly or indirectly, more than 50% of the voting rights or capital of the controlled foreign entity or is entitled to receive more than 50% of its profits;
• The corporate income tax actually paid by the entity is less than the difference between the corporate income tax that would have been paid if the rules of the Romanian Tax Code had been applied and the corporate income tax actually paid.

Transfer pricing

A legal entity is related with another legal entity if at least one of the cases below is applicable:

• The first legal entity holds, directly or indirectly, a minimum of 25% of the participation titles or voting rights at the other legal entity or if it effectively controls the legal entity.
• The second legal entity holds, directly or indirectly, a minimum of 25% of the participation titles or voting rights at the first legal entity.
• A third-party legal entity holds, directly or indirectly, a minimum of 25% of the participation titles or voting rights at both the first and the second legal entity.

Transactions between related parties should use the arm’s-length principle. In case the transfer prices are not set at arm’s length, the fiscal authorities have the right to adjust the amount of revenue and expense in order to reflect the market value.

International aspects-double tax treaties

In order to apply the provisions of the relevant Double Taxation Treaty (DTT), the non-resident recipient of the income should provide to the Romanian payer a tax residence certificate attesting its tax residency for the purpose of the DTT.

In case the tax rates mentioned in the domestic legislation differ from the rates mentioned in the applicable DTT, then the most favourable rate will apply.

Personal income tax

At this moment, incomes obtained by individuals are taxed with 10%.

Legislation

Personal income tax regarding incomes from salaries is governed by the Fiscal Code (Law 227/2015).

Exemption from the taxation

Romanian State established as income tax free several categories of employees:

Tax period

Deductions

Personal deduction

The personal deduction comprises the basic personal deduction and the additional personal deduction and is granted within the limit of the monthly taxable income earned.

The basic personal deduction is granted to individuals who have a gross monthly income of up to 2000 lei above the level of the minimum gross basic salary in force in the month of income. The Tax Code also introduces changes to the methodology for calculating the personal deduction.

The additional personal deduction is granted as follows:

• 15% of the basic gross national minimum wage guaranteed in payment for individuals up to 26 years of age who earn up to 2,000 lei above the basic gross minimum wage;
• 100 lei per month for each child up to the age of 18, if the child is enrolled in an educational establishment.

Other deductible amounts

For example, voluntary health insurance premiums, and private pensions, incurred by employees shall be deductible for payroll tax up to EUR 400 per year for each category.

Allowances

Per Diem

During the period of delegation, employees are entitled to payment of travel and accommodation expenses and a delegation allowance.

Delegation is the temporary performance by an employee, at the employer’s request, of work or tasks corresponding to the employee’s duties outside the workplace.

The delegation allowance or daily subsistence allowance, as it is also known in practice, is the daily amount granted, for example, to cover the cost of food, the usual incidental expenses and the cost of transport within the locality where the employee works.

Limits for daily allowance

The maximum deductible limit applicable for daily allowances granted by the Company, inside Romania or abroad represents 2.5* the daily subsistence allowance of the legal level established for the delegation/posting allowance, by Government decision, for staff of public authorities and institutions, up the maximum value of 3 basic salaries..

The values that exceed the maximum limit mentioned above are considered benefits and must be included in the category of income salaries and salary-related income.

International aspects  ̶  residence

Individuals who meet at least one of the following conditions are considered to be resident individuals in Romania:

• Have their domicile in Romania
• The centre of vital interests is in Romania
• They are present in Romania for a period exceeding 183 days during any period of 12 consecutive months ending in the calendar year concerned.

All other individuals are considered to be non-residents. EU residents are subject to the rules of EC Regulation 883/2004 on social and health security for cross-border activities.

Micro-enterprise tax

Starting 1 January 2024, in order to be eligible for the micro-enterprise income tax, the following cumulative conditions must be met at 31 December 2023:

• turnover lower than €500,000 (including income of related micro-enterprises);
• its share capital is held by persons other than the State and administrative-territorial units;
• it is not undergoing in dissolution followed by liquidation;
• % of revenues other than consultancy and/or management services is higher than 80% of total revenues;
• has at least one employee;
• has shareholders directly or indirectly owning more than 25% of the shares and the taxpayer is the only legal entity selected by the shareholders to apply the microenterprise tax;
• the financial statements have been timely submitted.

Tax period

Tax returns and assessment

Payment of the tax and filing of the returns is made quarterly, by the 25^th day of the month following the end of the quarter for which the tax is calculated.

Property taxes

Building tax

• Between 0.08% and 0.2% of the buildings tax value for residential buildings
• Between 0.2% and 1.3% of the buildings tax value for non-residential buildings
• 5% in case the building owner has not updated the taxable value of the building in the last 3 previous years

Building tax is paid annually in two equal instalments, until March 31^st and September 30^th.

The building tax is due for the entire tax year by the person who owns the building as of December 31^st of the prior tax year.

Tax on plots of land

Tax on plots of land is paid annually in two equal instalments, until March 31^st and September 30^th.

The tax is due for the entire tax year by the person who owns the land as of December 31^st of the prior tax year.

Tax on transportation means

The tax rate varies from RON 8 to RON 290 depending on the cylindrical capacity of each vehicle, for each 200 cm³ or a fraction thereof.

The tax on transportation means is paid annually in two equal instalments, until March 31^st and September 30^th.

The tax on transportation means is due for the entire tax year by the person who owns the mean of transportation as of December 31^st of the prior tax year.

Other business-related taxes

Excise duties

The following products are subject to excise duties: alcohol and alcoholic beverages, manufactured tobacco products, energy products and electricity.

Customs duties

Any Romanian taxpayer that carries out transactions with related parties, for both domestic and cross border transactions, is subject to Transfer Pricing rules.

1. An individual is affiliated with another individual if such person is spouse or relative up to the third degree, inclusive. Between affiliated persons, the price at which tangible or intangible goods are transferred or services are rendered is transfer price.
2. An individual is affiliated with a company if the individual owns, directly or indirectly, including holdings of affiliated persons, a minimum of 25% from the value/number of shares or from the voting rights in the company, or effectively controls the company.
3. A company is affiliated with another company if at least:

• The first company owns, directly or indirectly, including holdings of affiliated persons, a minimum of 25% of the value/number of shares or voting rights in the other company, or if it controls the company;
• The second company owns, directly or indirectly, including holdings of affiliated persons, a minimum of 25% from the value/number of shares or voting rights in the first company;
• A third company owns, directly or indirectly, including holdings of affiliated persons, a minimum of 25% by the value/number of shares or voting rights both in the first and in the second company.

Any traditional and other Transfer Pricing methods according to OECD Transfer Pricing Guidelines can be used while the principle of the best method shall be applied. Also, a combination of more methods is possible if necessary. If appropriate, other methods may be used, too.

Methods based on comparison of prices

Methods based on comparison of profits

The type of business forms available in Romania are summarized below with their specific information: the minimum share capital, the liability of the shareholders/stockholders, the minimum number of shareholders/stockholders.

The most common forms of business used in Romania are the Limited Liability Company along with the Joint Stock Company and Branches.

General Partnership (Societate in nume colectiv | S.N.C.)

Limited Partnership (Societate in comandita simpla | S.C.S.)

Limited Liability Company (Societate cu raspundere limitata | S.R.L.)

Joint Stock Company (Societate pe actiuni | S.A.)

Company Limited by Shares (Societate in comandita pe actiuni | S.C.A.)

Branch (Sucursala)

Sole Entrepreneur (Persoana Fizica Autorizata)

The incorporation procedure of a Romanian company consists mainly in:

• reserving the name of the company
• drafting the relevant documents (mainly articles of incorporation of the company and shareholders and directors’ statements)
• filling the registration application within the Trade Register

The registration of a company is mandatory in Romania.

• The incorporation procedure must be initiated by request.
• The registration request must be filed with the competent Trade Register Office.
• Company registration request may be submitted with qualified electronic signature via the Trade Register portal or at any of the Trade Register offices.

The same term applies also for approval of mentions (e.g. update of the Articles of Incorporation, revocation of directors, appointing of directors, relocation of headquarter).

A newly registered company must also register with the Social Security Authorities and Labour Authorities (in case it has employees).

This procedure consists in 2 steps. First, the General Shareholder Meeting resolution will be published in the Official Gazette in order to be brought to the attention of the public and, afterwards, the interested parties may submit an opposition to the liquidation request.

Regarding the shareholders of different forms of companies in Romania:

• The shareholders of General Partnership or stockholders of the Joint Stock Company are severally liable for the social obligations.
• In the LLC’s case, the number of shareholders cannot be higher than 50 and the shareholders are liable only up to the subscribed share capital.

Local statutory representation for VAT

Statutory language

Communication with authorities

A taxable person may communicate with the tax authorities in electronic format, through the virtual space of the taxpayer, or on the online platform of the tax authority.

Tax period and deadline for VAT return filing

In Romania, the standard fiscal period is the calendar month.

For taxable persons whose previous year-end turnover is lower than EUR 100,000 and did not perform intra-community transactions, the fiscal period is the calendar quarter.

EC sales list and other documents

The EC list shall be filed until the 25^th day following the respective tax period. In addition, the informative return for domestic transactions should be provided as well.