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With a marketplace of nearly 20 million people, 37 million acres of arable land, breath-taking landscapes, an expanding economy, a well-educated workforce with more than 50,000 specialists in information technology, access to the Black Sea and Asia, Romania offers significant opportunities to foreign businesses.
After joining the European Union in January 2007, Romania went through a series of government reforms in order to satisfy the conditions of EU membership. Nowadays, the requirements of membership – including EU directives – are one of the driving forces in Romania’s program of reform, modernization and investment in infrastructure. More significantly, these directives are accompanied by funding from the EU in the form of Structural Adjustment Funds and other programs, which enable the new members to align their economies with the rest of the EU.
Romania is a market with excellent potential, a strategic location, and an increasingly solid business climate. While careful evaluation of the market is needed in order to seize business opportunities, exporting to or investing in Romania is gradually becoming less challenging than in previous years in terms of business environment predictability.
Its economy is among the EU’s fastest growing members, with a 4.9% GDP growth in 2022, 5% for 2018 and 4% in 2019 primarily driven by consumption and investment.
We hope the new Tax Guideline for Romania will provide all the necessary information for those who consider doing business in Romania, as well as for already existing businesses.
EU and EEA citizens can buy real estate properties (land and buildings) in the same conditions as Romanian citizens.
Non-UE/EEA citizens may acquire buildings in Romania, while land may be acquired only if there is an international agreement in place which also allows Romanian citizens to acquire land in the respective countries.
Before starting the investment in the Romanian market, the investors have to decide upon the legal form of business which will be used.
The types of business forms are stipulated by Law no. 31/1990 as republished and subsequently modified and completed, and there are compiled in the next table with 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.
| The form of business | Minimum capital (approx. in EUR) | Shareholders´ liability | Number of shareholders | |
| English | Romanian | |||
| General Partnership | Societate in nume colectiv (S.N.C.) | N/A | The shareholders have unlimited and joint liability for social contributions. | No less than 2 |
| Limited Partnership | Societate in comandita simpla (S.C.S.) | EUR 0.4 | The limited partners have no management authority and they are not responsible for the debts of the partnership. They respond in the limit of the subscribed shares.
The general partners have management control and they have joint and several liabilities. |
At least one limited partner and at least one general partner. |
| Limited Liability Company | Societate cu raspundere limitata (S.R.L.) | EUR 0.2 | The shareholders respond in the limit of the contribution to the share capital. | 1 – 50 |
| Joint Stock Company | Societate pe actiuni (S.A.) | No less than EUR 25,000 | The stockholders respond in the limit of the subscribed shares. | No less than 2 |
| Company limited by shares | Societate in comandita pe actiuni (S.C.A.) | No less than EUR 25,000 | The limited partners have no management authority and they are not responsible for the debts of the partnership. They respond in the limit of the subscribed shares.
The general partners have management control and they have joint and several liabilities. |
No less than 2 |
| Branch | Sucursala | N/A | The Mother Company is liable for its branch. | N/A |
| Sole entrepreneur | Persoana fizica autorizata (P.F.A.) | N/A | The sole entrepreneur is also the sole responsible. | N/A |
Social security and health insurance assessment base of an employee in Romania is derived from salary income.
| Payrolls and Contribution | Employee | Employer |
| Income tax | 10% | N/A |
| Health insurance contribution | 10% | N/A |
| Social (Pension) insurance contribution | 25% | N/A |
| Work insurance contribution | N/A | 2.25% |
* For the construction field, agriculture, food industry and IT, there are special provisions applied regarding due taxes and exemptions by case.
Residents of the EU are covered by the provisions of EC Regulation 883/2004 regulating social security and health insurance rules in case of cross-border activities.
| Main features of employment relationship | Applicable law | |
| Contract type | Individual labour agreement for definite period, indefinite period, home-based work, telework, part-time or full-time work, temporary staffing, etc. | Law No. 53/2003 Labour Code |
| Contract must include | Parties, duration of the contract date of the contract conclusion, work conditions, the place where the work is performed, evaluation criteria of the employee, the occupation, the risks of the job, number of vacation days, number of days applicable for the notice, number of working hours per day and/or per week, probationary period and its conditions if any, the date of commencement of work, base salary, other elements constituting the salary income, separately recorded, periodicity of payment of the salary to which the employee is entitled and method of payment, etc.
(The contract must be concluded in writing) |
|
| Working time | Full time employees – 8 hours/day and/or 40 hours/week
Part time employees – the number of normal working hours, calculated weekly or as a monthly average, is less than the number of normal working hours of a comparable full-time employee. The working time is determined by the daily norm thus weekly norm represents daily norm*no. of working days (5 days). Working time is any period during which the employee performs work, is at the employer’s disposal and fulfils his/her tasks and duties, in accordance with the provisions of the individual employment contract, the applicable collective labour contract and/or the legislation in force. |
|
| Holiday entitlement per year | Minimum 20 working days per year | |
| Trial period | For indefinite labour agreements depending on the nature of the position:
For definite labour agreements:
|
|
| Notice Period |
|
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.
A company is considered as resident in Romania if it is set-up under Romanian law, has its legal seat or its place of effective management in Romania.
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.
The calendar year or the fiscal year for the companies that have chosen, according to the applicable accounting regulations, to apply a fiscal year different from the calendar year.
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 25th 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 25th of the following year.
There are exemptions from the above general rule that apply to companies such as:
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 25th of the month following the end of the quarter. By exception, the quarterly advance payments related to fourth quarter are due by December 25th, respectively until the 25th of the last month of the changed fiscal year.
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.
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.
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.
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.
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.
The applicable WHT rates in relation with non-resident companies are:
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.
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.
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.
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.
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:
Transactions performed between two Romanian related persons, as well as between related Romanian persons and non-resident persons, are subject to transfer pricing rules.
A legal entity is related with another legal entity if at least one of the cases below is applicable:
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.
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.
At this moment, incomes obtained by individuals are taxed with 10%.
Personal income tax regarding incomes from salaries is governed by the Fiscal Code (Law 227/2015).
Romanian State established as income tax free several categories of employees:
IT specialists – up to 10,000 Lei gross per month, if certain conditions are met according to the law.
Employees with disabilities – the tax exemption is granted only under strict conditions verified by Romanian medical system.
Employees who work in Research and Development (R&D) or Technological Development field – the tax exemption is granted if certain conditions are met as per law provisions.
Employees who work in construction field, agriculture and the food industry, up to 10,000 Lei gross per month, if certain conditions are met according to the law.
The tax period equals the calendar year.
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:
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.
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.
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.
| Daily allowance in EU countries (with some exceptions) | ||
| Interval | Minimum | Maximum tax deductible up to |
| 01.12.2012 – present | EUR 35 | EUR 87.50 |
| Daily allowance in Romania | ||
| Interval | Minimum | Maximum tax deductible up to |
| 01.04.2023 – present | RON 23 | RON 57.5 |
Individuals who meet at least one of the following conditions are considered to be resident individuals in Romania:
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.
The standard VAT rate in Romania is 19%.
A reduced rate of 9% applies to water, food & beverage industry (save for certain items specifically excluded by the law), medical treatments and prosthesis, hotel accommodation, restaurant and catering services, provision of social housing under certain conditions, entrance fees to sports events, castles, museums and cinemas
Extra-reduced rate of 5% applies to schoolbooks, newspapers, magazines, including those recorded on electromagnetic or other media.
VAT rules are based on the principles of the Council Directive 2006/112/EC on the Common System of Value Added Tax. The Directive is implemented in the Romanian law by Law No 227/2015 and related Methodological Norms.
Legal entities and individuals that carry on independently an economic activity.
Taxable event:
Total consideration charged for the supply, excluding VAT but including any excise duties or other taxes and fees. In some cases, between related parties, the taxable amount consists of the market value.
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 acquisitions of goods, the fiscal period is the calendar quarter.
Periodical VAT returns (monthly or quarterly, by the 25th day of the following month) and the Local Sales and Purchases List (monthly, by the 25th day of the following month). The payable VAT liability consists of the output VAT, due on supply of goods and services carried out, less the input VAT of the same period (monthly or quarterly, by the 25th day of the following month). The refundable VAT (when input VAT is higher than output VAT) can be requested for refund or carried forward until the statute of limitation period expires (5 years).
In addition, taxable persons carrying out intra-Community operations with goods or services with the place of supply according to the basic rule for “business to business” services have to file an EC Sales List (that shows the VAT identification numbers of his business partners and the total value of all the supplies of goods and services performed by the entrepreneur) on a monthly basis depending on the situation.
Submission through electronic means is available.
All above tax statements are to be prepared based on the information presented in the VAT Sales and Purchase Ledgers.
Reverse charge applies for the intra-Community acquisitions, where both parties are registered for VAT purposes. Local reverse charge is applicable in some cases between two Romanian VAT payers, for example:
The system is optional for taxpayers with a previous year turnover lower than RON 4,500,000and for the newly set-up companies. The right to deduct the input VAT for the acquisitions of goods/services from companies applying the system is deferred until the payment is performed.
Starting 1st of January 2024, B2B e-invoicing has become mandatory.
The mandatory VAT registration for taxable persons having the place of business activity in Romania should be performed when the annual turnover of EUR 88,500 (RON 300,000) is exceeded. 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 without observing the above threshold. However, a VAT number must be in place before the commencement of the economic activity.
A foreign taxable person that makes long-distance sales (mail order business) to any non-taxable person or that is not registered for VAT in Romania must register for VAT in Romania if the total annual value of the goods/supplies reaches EUR 35,000 (RON 118,000).
Taxable person not registered for normal VAT purposes in Romania and not required to register are liable to register as an identified person (special VAT registration) in the following situations:
Companies that are legally independent but are closely related financially, economically and from an organisational point of view may form a tax group, if administered by the same tax office and having the same tax period. Transactions between the members of the group will still fall within the scope of VAT.
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:
The tax period equals the calendar year.
Payment of the tax and filing of the returns is made quarterly, by the 25th day of the month following the end of the quarter for which the tax is calculated.
For buildings owned by companies, the following tax rates are applicable:
Building tax is paid annually in two equal instalments, until March 31st and September 30th.
The building tax is due for the entire tax year by the person who owns the building as of December 31st of the prior tax year.
The owners of land are subject to tax on plots of lands. The Local Council establishes a fixed amount per square metre, depending on the rank of the area where the land is located and the category of land use.
Tax on plots of land is paid annually in two equal instalments, until March 31st and September 30th.
The tax is due for the entire tax year by the person who owns the land as of December 31st of the prior tax year.
The tax on transportation means in Romania is paid by any person that owns a mean of transportation.
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 31st and September 30th.
The tax on transportation means is due for the entire tax year by the person who owns the mean of transportation as of December 31st of the prior tax year.
The following products are subject to excise duties: alcohol and alcoholic beverages, manufactured tobacco products, energy products and electricity.
Goods imported from non-EU countries are subject to import customs clearance.
Individuals working as IT specialists or in the Research & Development field may benefit from an exemption from the standard 10% income tax, under certain conditions expressly mentioned in the Romanian domestic legislation.
Companies doing business in Romania could benefit from the following incentives:
About Accace
Accace is a proactive consultancy and outsourcing partner who bridges the gap between needs and solutions. Combining smart and streamlined technology with a holistic approach, we provide an all-round care to clients and consider their matters as our own. With over 800 experts and more than 2,000 customers, we have vast experience with facilitating the smooth operation and growth of small to large-scale, global businesses.
About Accace Circle
Accace operates internationally as Accace Circle, a co-created business community of like-minded BPO providers and advisors who deliver outstanding services with elevated customer experience and erase the borders of service delivery. Covering over 50 jurisdictions with nearly 2,500 professionals, we support more than 15,000 customers, mostly mid-size and international Fortune 500 companies from various sectors, and process at least 200,000 pay slips globally.
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