Tax Code in Romania
Tax Code in RomaniaUpdated on Monday 04th February 2019
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In Romania, the taxes are based on the regulations from the Tax Code (Codul fiscal). As all Romanian accountants know, all companies must pay to the state budget the profit tax, which is obtained by subtracting all deductible expenses from the taxable income. Generally, the tax rate on taxable profits is 16%, according to the Romanian Tax Code. Of course, there are a few exceptions, such as zero tax for some state-owned companies or a maximum 3% tax rate for any revenue of micro-businesses.
The Romanian Tax Code - indirect taxes
Any Romanian accountant knows that some inland special taxes (excise duties) are applicable on the consumers in the case of the domestically-produced or imported goods such as wine, beer or any fermented beverages, processed tobacco, ethyl alcohol, energy products and electricity, and intermediate products.
The payment of VAT in Romania
Another indirect tax is the value added tax (or VAT), which is paid to the state budget. Generally, the standard VAT rate in Romania is 19%. As an exception, there is a reduced rate of VAT (9%), applied to some services or goods, such as bread. In cases well known by Romanian accountants, companies which provide services for individuals may choose not to pay VAT. If foreign entrepreneurs are trading goods or providing services in Romania that are subject to Romanian VAT, they must register for VAT purposes. There are some exceptions - only if the chargeable person for paying the tax is the same as the one which receives the goods or the services. According to Romanian Tax Code, registering for VAT purposes is compulsory for all the foreign traders who are buying goods from the EU countries and bring them in Romania.
In Romania, foreign entrepreneurs established in the countries of EU can directly register for VAT purposes with the authorities which are managing non-resident taxpayers or at the institution responsible for managing the fiscal representative. You can find other detailed information and the contact dates of the different departments on the National Agency for Tax Administration website (www.anaf.ro).
The Romanian Tax Code - payment of taxes
The payment of taxes can be made by bank card, in cash, by payment order or by postal payment order at the banks, treasury offices, and other authorized institutions. In the Tax and Social Contributions Register and in the Non-Fiscal Duties and Fees Register websites, you can find more information about the deadlines and types of paying taxes and duties.
The social security contributions in Romania
According to the Fiscal Code in Romania, the social security contributions are paid by employees and employers in Romania as follows. The employees are obliged to pay the 10% rate of health insurance. Moreover, the employer is entitled to pay a series of contributions like sick leave, unemployment, the professional risk at a rate of 2.25%. We remind that an employer grants by the contract the payments for funeral aid, birth aid, transportation, treatment costs in the case of incurable diseases or financial help in the case of natural disasters and household losses. There are also non-taxable gifts for employees as long as they don’t exceed 300 lei, as stipulated by the Fiscal Code. The same set of laws stipulates that the personal allowance is deductible in the case of taxpayers with no dependents and a salary income of 510 lei. The same thing is available for taxpayers with one dependent and a salary income of 670 lei. The personal deduction is not granted in the case of employees with a monthly income surpassing 3.600 lei.
What are the taxes for companies in Romania?
According to the Tax Code in Romania, all companies, including branches and subsidiaries will have to align with the tax requirements established through this important set of laws as follows:
- • the corporate tax is set at 16% on profits generated in Romania with the mention that a 5% rate is applicable in certain circumstances and for different activities;
- • the interests, dividends, and royalties are levied with a withholding tax of 16% rate;
- • the VAT rate is set at 19% for goods and services for sale purposes, and at 9% for foodstuff and other categories;
- • micro-enterprises with registered revenues of around EUR 1 million are subject to taxation.
It is good to know that according to the Tax Code in Romania, the reinvested profits of a company in Romania are not subject to taxation since 2018. Also, the double taxation agreements signed by Romania with countries worldwide help companies avoiding the double taxation on profits. Additional information in this matter can be provided on request by our team of accountants in Romania.
The differentiated minimum wage in Romania
The conditions to obtain the minimum wage in Romania suffered a few modifications at the time the OUG 96/2018 was adopted. In this direction, the authorities decided on new rules to establish the gross minimum wage in compliance with the educational level and the work experience. Since December 2018, the minimum wage grew by 2.080 lei. For persons with higher education and at least 15 years of experience in the work field, the minimum wage was set up at 2.350 lei. Since January 2019, the gross minimum wage of 1.900 lei is established for all individuals, no matter the level of education.
Other tax rules in Romania
Since 2018, the incomes derived from dividends of a company are no longer subject to taxation. The same thing is available for the technological equipment for which there is no need to pay taxes. According to the Fiscal Code in Romania, all taxpayers need to comply with the tax calendar and the fiscal year. This means that the corporate tax is paid quarterly until the 25th day of the month, with the mention that companies can also make advanced payments. Penalties of 0.03% are imposed for each day of payment delays. We remind that Romania signed a series of double taxation conventions with countries worldwide to avoid the double taxation of incomes of companies with establishments in this country. In this sense, the exemption method applies, meaning that the generated revenues of a company in Romania will not be levied if the taxes are paid in the country of origin. As for the credit method, this involved the deduction of the corporate income tax in the state the company performs its operations through credit in order to deduct the tax paid in the country of origin. Romania signed double taxation treaties with countries like Poland, Armenia, Croatia, Austria, San Marino, Italy, Pakistan, Spain, Singapore, Egypt, Russia, Spain, Estonia, Finland, Bulgaria, France, Canada, Iceland, India, Sri Lanka, Syria, Tunisia, Turkey, Georgia, Belarus, South Korea, China, and many more. We kindly invite you to solicit complete information about the Tax Code in Romania and about the requirements you need to bear in mind when opening a business in this country. Our team of accountants in Romania are at your disposal at any time and can also provide information and assistance if you are interested in tax minimization methods for your company.
It is good to know that the National Agency for Fiscal Administration (ANAF) is the institution that collects the taxes, contributions and other amounts for the state budget in Romania. By accessing e-guvernare.ro portal, any trader can file some tax declarations online, but he must first obtain a digital certificate for electronic signature.
For more information about corporate tax, Romanian Tax Code, VAT registration or accounting, you can contact our accounting firm in Romania.