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Capital gains taxation and tax system in Romania

To comprehend capital gains taxation in Romania, it’s essential to have a thorough understanding of the local tax system, compliance duties, and avenues for optimizing taxes. Regardless of whether your business is a resident or a non-resident entity, familiarity with Romania’s capital gains tax rules is vital for maintaining compliance and improving your financial position. This guide offers a summary of the capital gains tax environment in Romania, outlining tax rates, filing requirements, and available services to assist you in effectively handling your capital gains tax responsibilities.

Capital gains tax system

Romania operates a dual-rate taxation system for capital gains, imposing a 10% tax on individuals and a 16% tax on corporate entities. Non-residents typically face the same tax rates as residents on capital gains. The tax framework allows for certain exemptions and reductions, especially concerning long-term holdings, participation exemptions, and primary residences. The existence of double taxation treaties may affect the tax rates and offer relief from double taxation for non-residents. Taxpayers are required to adhere to specific filing obligations, and penalties may be incurred for failing to comply or for late submissions.

Tax exempt

Income earned by a Romanian legal entity from selling shares in a Romanian or foreign legal entity (located in a country that has a Double Tax Treaty with Romania) is exempt if the holdings are at least 10% and have been maintained for a minimum of one year. Gains from the sale of real estate are typically subject to tax unless the property served as the taxpayer’s main residence and has been owned for a minimum of three years. Certain additional exemptions might be available under specific circumstances, such as for minor transactions or reinvestments.

Tax return

Residents of Romania are required to declare all sources of income, which encompasses capital gains, on their annual tax return. The return must provide information on all pertinent transactions, determine the taxable amount, and remit any taxes due. Generally, the filing deadline is by the end of March for the prior year. For non-residents, they must also submit a tax return in Romania if they receive taxable income from Romanian sources. They are subject to the same taxation rates and must adhere to local filing regulations, including deadlines and required documentation. Non-residents might have to present extra forms to take advantage of tax treaty benefits, if applicable.

Tax compliance and reporting obligations

It is crucial for businesses to manage the intricacies of capital gains tax compliance to prevent penalties and maintain seamless operations. Companies are required to follow reporting standards, keep precise records, and ensure that all tax returns are submitted in line with both local and international regulations. Accurate reporting not only meets legal responsibilities but also significantly contributes to the financial stability of the business.

Our services are tailored to assist your business in effectively managing these responsibilities, making sure that all submissions are correct, punctual, and completely adhere to the required tax regulations.

Capital gains tax for non-residents

Non-residents face the same tax rates as residents, which are 16% for corporate entities and 10% for individuals. Capital gains earned by non-residents from real estate in Romania or from selling participation titles in a Romanian company or a foreign company that is tax resident in Romania are taxed at the 16% corporate income tax rate. An exemption may be available for selling participation titles if the ownership is at least 10% for a continuous period of no less than one year, and the entity is tax resident in a country with a double taxation treaty. These capital gains might also benefit from treaty protection.

Managing capital gains tax risks

Managing capital gains tax risks efficiently is crucial for maintaining your business’s financial health and regulatory compliance. These tax risks may stem from shifts in legislation, cross-border transactions, and intricate tax systems. Inadequate handling of these risks can result in unforeseen liabilities and penalties.

To reduce these risks, companies should frequently evaluate their tax practices, keep up to date with legislative changes, and adhere to all applicable regulations. Creating a strong tax risk management strategy that involves detailed documentation and proactive modifications to business structures can assist in preventing expensive problems.

We help your business recognize and handle capital gains tax risks, ensuring that you stay compliant and safeguarded in a constantly changing tax landscape.

Capital gains tax services

Our team of specialists provides an extensive selection of capital gains tax services designed to cater to the unique requirements of businesses linked to Romania. We help with tax compliance, strategic planning, navigating international tax treaties, and reducing tax liabilities. Our offerings encompass the preparation and filing of capital gains tax returns, representation in interactions with tax authorities, and continuous advisory support to ensure your business adheres to Romania’s tax laws. Additionally, we assist you in utilizing tax incentives, handling cross-border tax responsibilities, and enhancing your overall tax strategy to align with your business objectives.

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If you’re looking to fulfill Romania’s capital gains tax requirements while maximizing your tax strategy, we can assist you. Reach out for additional details about our services or to arrange a consultation with one of our tax specialists. We are here to help you understand the intricacies of capital gains taxation in Romania, so you can concentrate on what is most important—expanding your business.

Disclaimer

Tax laws and regulations are always evolving and may differ depending on personal circumstances. The information offered here serves as general guidance and might not represent the latest changes. It is strongly advised to seek the counsel of a qualified tax expert for specific and current advice tailored to your situation.

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