Taxation in Romania
Romania’s taxation framework is a complex system that forms a fundamental part of the country’s economic strategy, aiming to balance revenue collection with encouragement for growth and investment. This framework includes various taxes, each managed by an intricate array of regulations and rates. It is crucial for businesses, investors, and individuals to have a thorough understanding of this environment for effective financial management and compliance.
Taxation system
Romania’s taxation system is structured to harmonize with national fiscal policies as well as international commitments, providing both a systematic and flexible approach to taxation. It may include a mix of flat rates, progressive scales, and specific exemptions, which reflect the nation’s economic goals and social aims. Grasping the complexities of these tax mechanisms is essential for maximizing financial results, ensuring adherence to regulations, and taking advantage of opportunities within the legal framework.
Capital gains tax
Romania operates a dual-rate structure for capital gains, applying a tax of 10% for individuals and 16% for corporate entities. Non-residents typically face the same tax rates as residents for capital gains. The tax framework allows for various exemptions and reductions, especially for long-term investments, participation exemptions, and primary residences. Additionally, double taxation treaties may affect the tax rates in question and offer non-residents relief from double taxation. Taxpayers are required to adhere to specific filing obligations, and penalties may be imposed for failing to comply or for late submissions.
Corporate taxation
Romania has a corporate income tax established at a standard rate of 16% on profits. Micro-enterprises with a turnover below EUR 500,000 can choose to pay either a 1% or 3% tax on their revenue, depending on their employee count. There is no trade tax in the country, and some partnership types are also liable for corporate income tax. The tax framework addresses taxation based on either turnover or profit, providing adaptable tax requirements for smaller enterprises.
Personal income taxation
Romania implements a flat personal income tax rate of 10%, which is among the lowest in the European Union. This rate applies to all types of personal income, such as salaries, pensions, self-employment income, and rental earnings. Certain categories like capital gains, dividends, and specific real estate transactions may be subject to distinct tax rates. The tax framework promotes compliance by having simple reporting obligations and low rates.
Dividend taxation
Romania applies a uniform dividend tax of 8%. The entity that distributes the dividends withholds this tax at the source. This tax is applicable to recipients of dividends, whether corporate or individual. Recent updates have lowered the dividend tax rate, enhancing its competitive edge within the EU. The system streamlines tax collection by obligating companies to withhold and directly remit the tax.
Property tax
In Romania, property tax is charged on non-residential buildings, with rates ranging from 0.5% to 1.3% of the assessed value of the property. Local authorities set the specific rate depending on the property’s type and use. Residential properties face a reduced tax rate. The tax is paid once a year, and municipalities handle the collection of the tax.
Inheritance taxation
Romania typically does not charge inheritance tax, with some exceptions. An inheritance is tax-exempt if the legal process is completed within two years following the decedent’s death. However, if the process takes longer than two years, a 1% income tax is applied to the value of the estate.
International taxation
Romania’s international tax framework is applicable to income generated by non-residents from Romanian sources as well as to the global income of Romanian residents. This system is structured around a uniform tax rate of 10% for the majority of income types, such as income from employment and self-employment, whereas corporate income is subject to a tax rate of 16%. To prevent double taxation, Romania has established double taxation treaties (DTTs) with more than 80 nations, enabling the use of tax credits and exemptions.
Cryptocurrency taxation
In Romania, income from cryptocurrency is classified as income from other sources for tax purposes. Individuals are subject to a flat 10% tax on capital gains resulting from cryptocurrency transactions. This tax rate also applies to profits from trading, mining, and staking activities. Additionally, if total income surpasses a specific limit, social security contributions may be enforced.
VAT system
Romania’s VAT system is implemented for the sale of goods and services domestically. The standard VAT rate set at 19% is complemented by reduced rates of 9% for items such as food, medicines, and hotel services. Additionally, a further reduced rate of 5% is designated for select social housing initiatives, cultural services, and books. This VAT system adheres to EU directives and incorporates the reverse charge mechanism for transactions within the EU.
Our taxation solutions
In a tax landscape that is continuously changing, professional advice is essential. Our firm provides a range of specialized tax services customized to address the varied needs of individuals, companies, and investors in Romania. Our offerings aim to manage the intricacies of the tax code, reduce liabilities, and guarantee complete compliance with regulations.
- Personal tax advisory: Tailored advice to minimize tax exposure while ensuring legal compliance.
- Corporate tax strategy: Comprehensive planning to maximize tax efficiency and leverage incentives.
- Capital gains optimization: Expert guidance to manage and reduce taxes on capital gains.
- International tax planning: Advanced strategies for optimizing cross-border tax outcomes.
- Cryptocurrency advisory: Compliant tax strategies for both individual and corporate crypto activities.
- Inheritance and estate planning: Strategic planning for efficient wealth transfer and reduced inheritance taxes.
- VAT compliance: Full-service support for VAT registration, reporting, and optimization.
Book a consultation
Navigating the intricate realm of taxation can be challenging, and expert guidance can greatly impact your outcomes. Get in touch with us today to arrange a meeting with our team of tax specialists. We will collaborate with you to create a customized tax strategy that meets your goals and guarantees complete adherence to the regulatory environment in Romania.
Disclaimer
Tax laws and regulations continually evolve and can differ depending on individual situations. The information presented here serves as general guidance and might not represent the latest changes. It is strongly advised to seek the counsel of a qualified tax professional for specific and current advice tailored to your circumstances.