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Withholding tax (“withholding tax”) applies in Romania when a non-resident obtains interest income from Romania. The legislation outlines the applicable withholding tax rates, reporting deadlines, but also the conditions for reducing the withholding tax rate or even obtaining the withholding tax exemption under the EU Interest & Royalties Directive.
If your company receives interest from Romanian sources, it’s important to understand the local rules, in order to correctly apply the Romanian legislation and, if the case, to be able to benefit from any withholding tax reduction/ exemption.
This article provides a quick overview of the key rules around withholding tax on interest in Romania, helping non-resident companies stay compliant and in control with the Romanian legislation.
Withholding tax on interest in Romania is a key concern for non-resident companies obtaining interest from Romanian sources. Whether you’re financing a local subsidiary or are involved in certain international investments structures, it is important to understand how the local tax rules apply.
This topic is particularly relevant for:
Foreign holding companies and/or parent companies lending to Romanian subsidiaries
Financial institutions and/or lenders receiving interest from Romanian entities
Private equity and investment funds involved in acquisition financing or shareholder loans
Real estate and infrastructure investors earning interest through Romanian project companies
If your business operates in one of these areas, it’s worth reviewing your withholding tax setup in Romania to avoid compliance risks and improve tax efficiency.
On the taxation of interests paid to tax non-residents
There is the possibility to have the 16% withholding tax rate reduced under the more favourable rates regulated by the Conventions for the avoidance of double taxation (provided certain conditions are met, such as tax residence certificate and beneficial ownership criteria) or even exempt from withholding tax under the EU Interest & Royalties Directive (provided certain conditions, as mentioned below, are met).
On the taxation of interests paid to tax non-residents
The maximum withholding tax rate is applicable only for interest paid towards foreign entities resulting from artificial transactions (without economic purposes) and only if the recipients are residing in jurisdictions with which Romania does not have signed an exchange of information instrument.
The standard 16% withholding tax rate could be reduced under the more favourable withholding tax rates stipulated by the Conventions for the avoidance of double taxation, if the interest recipient provides a valid tax residence certificate upon the payment moment and proves it is the beneficial owner of the funds so received.
The withholding tax exemption for interest payments could be obtained if the minimum 25% shareholding for at least 2 consecutive years condition is met (together with the conditions related to the legal forms and taxpayer status of the companies involved). Also, a valid tax residence certificate and a standard affidavit must be presented by the non-resident to the Romanian payer.
The Romanian payer should fulfil the specific withholding tax reporting (monthly and annual) in Romania, while the non-resident should ensure it has a valid tax ID in Romania, needed for such reporting.
Withholding tax on interest in Romania can vary based on the type of transaction, the recipient’s tax jurisdiction and whether certain exemptions or treaty benefits are available to be applied. Even small differences in how the rules are applied can impact your company’s tax burden.
Without the right knowledge, non-resident businesses may face unnecessary taxation, missed reporting obligations or compliance issues. Understanding the Romanian rules helps you stay on track, reduce risks and better manage your international financing.
“The proof on the beneficial ownership criteria is becoming a necessity in order to achieve any withholding tax reduction/ exemption (from the standard 16% withholding tax rated in Romania), as regulated by either the Conventions for the avoidance of double taxation or the EU Interest & Royalties Directive”. Anca Ghizdavu | Tax Director, Accace Romania.
At Accace Romania, we support companies with practical solutions for managing withholding tax and related cross-border tax matters. Whether you’re setting up financing structures or handling interest payments to non-residents, our experts can guide you through every step.
Our services include:
With solid experience and a hands-on approach, we make sure your company stays tax-compliant, efficient and prepared for changing regulations.
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 approximately 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 60 jurisdictions with more than 7,000 professionals, we support over 80,000 customers, mostly mid-size and international Fortune 500 companies from various sectors, and process at least 800,000 pay slips globally.
