1. What are the current tax rates in Romania?

As of 2021, the headline corporate tax rate in Romania is 16%, while the standard personal income tax rate is a flat rate of 10%.

2. Are there different tax rates for different types of income?

There are different tax rates for different sources of income in Romania. The standard personal income tax rate of 10% applies to most types of income, including employment income, rental income, and capital gains from the sale of real estate or other assets. However, there are lower tax rates or exemptions for certain types of income, such as dividends (5%) and interest (0%).

3. Are there any regional variations in tax rates?

No, there are no regional variations in tax rates in Romania.

4. Are there any special deductions or credits available?

Yes, there are various deductions and credits available for taxpayers in Romania. Some common ones include the standard deduction for employment income (equivalent to one monthly minimum wage), deductions for dependents and childcare expenses, deductions for charitable donations, and tax credits for investments in research and development.

5. Is VAT applied on all goods and services?

Yes, Value-Added Tax (VAT) is applied on all goods and services in Romania at a standard rate of 19%. However, some goods and services may be eligible for reduced rates of VAT (9% or 5%) or exemptions.

6. Are there any other taxes besides income taxes?

Yes, there are several other taxes besides income taxes that individuals and businesses may be subject to in Romania. These include social security contributions, property taxes (local taxes on buildings), motor vehicle taxes, inheritance and gift taxes, and various excise taxes on specific goods such as alcohol and tobacco.

7. Is taxation progressive or regressive in Romania?

Taxation in Romania is generally considered progressive since those with higher incomes tend to pay a higher percentage of their income in taxes compared to those with lower incomes. For example, the top income tax rate of 10% applies to all income above a certain threshold, while lower-income individuals may pay less or no tax due to deductions and exemptions. However, there are some regressive elements to the tax system in Romania, such as the flat rate of social security contributions and the flat rate of 5% applied on interest income.

8. Are there any tax incentives for foreign investors?

Yes, there are various tax incentives and benefits available for foreign investors in Romania. These include reduced corporate income tax rates (3%) for companies operating in certain industries or regions, exemptions from capital gains taxation on certain investments, and special economic zones with favorable tax treatment for businesses.

9. Is there a double taxation agreement with other countries?

Yes, Romania has double taxation agreements with numerous countries to avoid taxing the same income twice in different jurisdictions. These agreements also provide rules for determining which country has the primary right to tax specific types of income.

10. Are taxes withheld from salary payments?

Yes, taxes are generally withheld from salary payments in Romania by employers. This includes both personal income tax and social security contributions. Self-employed individuals must also make regular estimated payments for these taxes throughout the year.

2. How does Romania determine income tax for individuals and businesses?

In Romania, income tax for individuals and businesses is determined based on their taxable income and applicable tax rates.

For individuals, the taxable income is calculated by subtracting any deductions or allowances from their gross income. The tax rates vary between 10% and 45%, depending on the level of taxable income.

For businesses, the taxable income is determined by deducting business expenses from their revenue. The standard corporate income tax rate in Romania is 16%, but certain industries may have reduced tax rates or exemptions.

Additionally, both individuals and businesses may also be subject to social security contributions, which are paid on top of their income tax.

The Romanian Tax Authority (ANAF) is responsible for administering and collecting these taxes. Individuals must file an annual personal income tax return, while businesses must file monthly or quarterly corporate income tax returns. Non-residents who earn Romanian-source income must also pay taxes in Romania and file a non-resident tax return.

3. Are there any tax relief programs or deductions available for taxpayers in Romania?

Yes, there are several tax relief programs and deductions available for taxpayers in Romania. These include:

1. Personal deduction: This is a standard deduction available to all individuals, regardless of their income level or tax residence status.

2. Dependent deduction: Taxpayers can claim a deduction for each dependent child or adult they support, subject to certain conditions.

3. Health insurance premiums deduction: Taxpayers can deduct the amount they pay for health insurance premiums from their taxable income.

4. Education expenses deduction: Taxpayers can claim a deduction for educational expenses, such as tuition fees and textbooks, for themselves or their dependents.

5. Social security contributions deduction: Employees can deduct 25% of their social security contributions from their taxable income.

6. Pension contributions deduction: Taxpayers can deduct the amount they contribute to an approved pension plan from their taxable income.

7. Donations and sponsorships deduction: Taxpayers can claim a deduction for donations made to approved non-profit organizations or charities.

8. Home office expenses deduction: Self-employed individuals can deduct a portion of their home office expenses from their taxable income.

9. R&D expenses deduction: Businesses can claim a tax credit of up to 50% of eligible research and development expenses incurred during the year.

10. Incentives for small and medium-sized enterprises (SMEs): SMEs may be eligible for reduced corporate tax rates or exemptions based on specific criteria set by the government.

It is important to note that these tax relief programs and deductions may have specific eligibility criteria and limitations, so it is recommended to consult with a tax advisor or the tax authorities for more information and guidance.

4. What are the major types of taxes collected in Romania, and how much revenue do they generate?

1) Income tax: This is the main type of tax collected in Romania, ranging from 10% to 45% depending on the income level. In 2019, it generated approximately 28.4 billion Euros in revenue.

2) Value-added tax (VAT): A standard rate of 19% is applied to most goods and services, with reduced rates of 9% and 5% for certain essentials such as food and medical supplies. In 2019, VAT generated around 37.8 billion Euros.

3) Social security contributions: These are paid by both employers and employees to fund social security benefits such as health care, pension, and unemployment. The total contribution rate is around 42%, with a cap on the maximum base for calculation. In 2019, it generated approximately 22.6 billion Euros.

4) Excise taxes: These are applied to various products such as alcohol, tobacco, energy, and luxury goods. In 2019, excise taxes generated around 5 billion Euros.

5) Property tax: This is levied on real estate properties at a local level, with rates varying between different municipalities. In 2019, it generated approximately 1.2 billion Euros.

6) Corporate income tax: Companies are subject to a flat corporate income tax rate of 16%. In 2019, it generated around .07 billion Euros.

7) Capital gains tax: This applies to profits made from the sale of assets such as shares or real estate properties. The rate is currently set at flat rate of 16%.

In total, these taxes generate around half of Romania’s annual budget revenue.

5. How does sales tax and value-added tax (VAT) work in Romania?

Sales tax and value-added tax (VAT) are both types of consumption taxes imposed on the sale of goods and services in Romania. However, they work differently in terms of their application and calculation.

1. Sales tax: In Romania, sales tax is known as the “Tax on Turnover” and is applicable to most goods and services sold within the country. The standard rate for this tax is 19%, with a reduced rate of 9% for certain essential goods such as food, water, pharmaceutical products, books, newspapers, and magazines.

2. Value-Added Tax (VAT): VAT is a type of consumption tax applied at each stage of production or distribution. In Romania, the standard VAT rate is also 19%, although there are some reduced rates for certain products such as agricultural products (9%), tourism services (5%), and medical supplies (5%).

Collection:
Sales tax: Sales tax is collected by the Romanian government at the point of sale by the seller. This means that the final consumer pays this tax when purchasing goods or services.

VAT: VAT is collected throughout the production or distribution process from businesses registered for VAT purposes. These businesses charge VAT to their customers on top of their selling price and then pay this amount to the government after deducting any VAT paid on their purchases.

Refunds:
In Romania, both sales tax and VAT can be refunded in certain circumstances:

1. Sales Tax: A foreign individual who has purchased goods in Romania may request a partial refund of sales tax if they export these goods outside the country.

2. VAT: Businesses registered for VAT can claim refunds for any excess input VAT (VAT paid on purchases) that they have paid compared to output VAT (VAT charged on sales).

Therefore, while both sales tax and VAT are similar in terms of being consumption taxes, they differ in terms of application, collection process, and refund policies in Romania.

6. Are there any tax treaties in place between Romania and other countries to avoid double taxation for individuals and businesses?

Yes, Romania has tax treaties in place with over 80 countries. These treaties aim to avoid double taxation and promote cooperation between countries in areas such as exchange of information, assistance in tax collection, and prevention of fiscal evasion. Some of the countries that have tax treaties with Romania include the United States, Canada, Germany, France, China, Japan, Russia, and many others. These treaties generally provide for reduced or eliminated withholding taxes on dividends, interest, and royalties paid between the two countries. They also often contain provisions for resolving disputes related to taxation between the two countries. Individuals and businesses can consult these treaties to determine their tax obligations when conducting business or earning income in both Romania and another country.

7. What is the process for filing taxes in Romania? Is it mandatory for all citizens/residents to file a tax return?

The process for filing taxes in Romania varies depending on whether you are an individual or a business.

For individuals, the tax year in Romania is the same as the calendar year, from January 1st to December 31st. All individuals who have earned income in Romania are required to file a tax return with the National Agency for Fiscal Administration (ANAF). This includes Romanian citizens, permanent residents, and non-residents who have generated income in Romania.

To file a tax return, individuals must obtain a unique taxpayer identification number (CNP) from ANAF. This can be done online or at any ANAF office. The taxpayer then needs to declare their income, deductions, and any other relevant information on a standard form provided by ANAF. The deadline for filing individual tax returns is May 25th of the following year.

For businesses, the tax year is also the same as the calendar year. They are required to file their corporate tax return by March 31st of the following year. Businesses must register with ANAF and obtain a unique identification code (CUI) before they can file their taxes.

It is mandatory for all citizens and residents of Romania who have generated income to file a tax return. Failure to do so can result in penalties and fines from ANAF. Exceptions may be made for individuals who have earned below a certain threshold or those whose income has been taxed at source (such as employees).

Additionally, those who own property in Romania but do not generate any income may still need to file an annual property tax return with their local administration office.

8. How does payroll or employment taxation work in Romania? Are employers responsible for paying certain taxes on behalf of employees?

In Romania, both employers and employees are responsible for paying taxes related to employment. Employers are required to withhold income tax (known as “personal income tax” or “PIT”) from their employees’ salaries each month and pay it to the state budget. The specific rate of PIT varies depending on the employee’s salary level, with higher earners typically subject to a higher tax rate.

Employers are also responsible for paying social security contributions on behalf of their employees. These contributions fund state-run programs such as health care, pensions, and unemployment insurance. As of 2021, the total employer contribution rate is 25% of an employee’s gross salary.

Employees in Romania also have certain personal deductions and allowances that can reduce their taxable income. For example, they can deduct certain medical expenses, childcare expenses, or housing costs from their taxable income.

It is important for employers to accurately calculate and withhold these taxes from employees’ salaries each month. Failure to do so can result in penalties or legal consequences.

Additionally, self-employed individuals in Romania are also responsible for paying their own taxes and contributions based on their income. They must register for a Unique Registration Number (known as “CUI”) with the Romanian Tax Authority and declare their earnings through quarterly or annual tax returns.

In summary, both employers and employees have responsibilities when it comes to payroll and employment taxation in Romania. Employers must withhold and pay income tax and social security contributions on behalf of their employees, while self-employed individuals must take care of their own tax obligations. It is important for both parties to understand these requirements in order to comply with Romanian tax laws.

9. Are there any specific tax incentives offered by the government to encourage certain industries or investments in Romania?

Yes, the Romanian government offers several tax incentives to encourage investments in certain industries and areas, such as:

1. Corporate Income Tax Reduction: Companies operating in designated disadvantaged or underdeveloped areas can benefit from a 50% reduction of corporate income tax for a period of 10 years.

2. Investment Deduction: Businesses investing in new assets or technologies can deduct from their taxable income up to 50% of the value of the investment in the year it was made.

3. Research & Development Deduction: Companies engaged in research and development activities can benefit from a deduction of up to 50% of the expenses incurred for these activities.

4. Incentives for Start-ups: Newly established companies can benefit from a reduced corporate income tax rate of 1% for the first 24 months of operation, provided they meet certain criteria.

5. VAT Exemptions: Certain goods and services, such as medical equipment, education and training services, and cultural events, are eligible for VAT exemptions.

6. Customs Duty Exemptions: Certain goods imported for industrial use or for research and development purposes may be exempted from customs duties.

7. Loss Carryforward: Companies can carry forward losses for up to seven years to offset against future profits.

8. Double Taxation Agreements: Romania has signed double taxation agreements with over 80 countries, allowing businesses to avoid getting taxed twice on their income if they operate internationally.

9. Special Economic Zones (SEZs): SEZs offer tax incentives such as reduced corporate income tax rates (between 1-16%), VAT exemptions on imports, and lower social contributions for specific industries located within these zones.

It is recommended that investors consult with a local accountant or financial advisor to explore all available tax incentives that may apply to their particular industry or investment in Romania.

10. Is there a progressive or flat tax system in place in Romania? How do different income levels affect the amount of taxes paid?

Romania has a progressive tax system, where the percentage of taxes paid increases as income levels increase.

As of 2021, there are three income tax rates in Romania:

– 10% for annual income up to 28,000 Romanian lei (approximately $6,800 USD)
– 16% for annual income between 28,001 and 170.000 Romanian lei (approximately $41,500 USD)
– 25% for annual income over 170.000 Romanian lei.

In addition to these income taxes, all taxpayers must pay a flat rate of 10% on any dividends or interest earned from investments.

This means that individuals with higher incomes will generally pay more in taxes compared to those with lower incomes. However, there are also various deductions and exemptions available that can reduce the amount of taxes owed for lower-income earners. For example, individuals earning less than the equivalent of $2,500 USD per year are exempt from paying any personal income tax.

Overall, the progressive tax system in Romania aims to distribute the tax burden fairly based on an individual’s ability to pay.

11. What is the role of the national tax authority in collecting and enforcing taxes in Romania?

The main role of the national tax authority in Romania is to collect and enforce taxes in a fair, efficient, and transparent manner. This includes:

1. Tax administration: The national tax authority, also known as the National Agency for Fiscal Administration (ANAF), is responsible for administering all taxes levied by the government of Romania. This includes collecting and managing tax contributions, issuing tax certificates, and providing taxpayers with information and guidance on their tax obligations.

2. Tax collection: ANAF is responsible for collecting taxes from individuals and businesses through various channels such as electronic payment systems, bank transfers, and physical collection points.

3. Tax audit: ANAF conducts regular audits to ensure compliance with tax laws and regulations. They have the authority to investigate taxpayers’ records, verify income, expenses, deductions claimed, and assess any potential discrepancies or discrepancies.

4. Enforcement of tax laws: ANAF has the power to impose penalties on taxpayers who fail to comply with their tax obligations or participate in fraudulent activities to avoid paying taxes.

5. Judicial action: In cases where taxpayers do not pay their taxes or refuse to cooperate during an audit, ANAF can take legal action against them through administrative procedures or criminal prosecution.

6. Tax education and assistance: ANAF offers educational programs and resources to help taxpayers better understand their tax duties and responsibilities. They also provide assistance in filling out tax forms and answering any questions related to taxation.

7. International cooperation: As a member of the European Union (EU) and other international organizations, ANAF works closely with its counterparts in other countries for the exchange of information and mutual assistance in enforcing tax laws.

In summary, the role of the national tax authority in Romania is crucial in ensuring that all citizens pay their fair share of taxes according to the country’s laws and regulations.

12. How often do tax laws change in Romania, and how can individuals/businesses stay updated on new regulations?

Tax laws in Romania can change frequently, especially during budget discussions and political changes. The government usually sets the tax legislation annually in December for the following year, but changes can also occur throughout the year.

Individuals and businesses can stay updated on new tax regulations by regularly checking the official websites of relevant government agencies such as the National Agency for Fiscal Administration (ANAF) and Ministry of Finance. These websites often provide updates on tax policies and regulations.

Additionally, individuals and businesses can also seek advice from tax consultants or accounting firms who closely monitor changes in tax legislation. Attending seminars or conferences related to taxation may also provide valuable insights into new regulations.

13. Are there any special considerations for foreign investors or expatriates living/working in Romania regarding taxation?

Foreign investors and expatriates living or working in Romania may be subject to different taxation rules depending on their residency status and the type of income they receive.

For foreign investors, taxation may differ depending on whether they are considered resident or non-resident for tax purposes. Resident investors are taxed on their worldwide income, while non-resident investors are generally only taxed on their Romanian-source income.

Expatriates living and working in Romania may also face different tax regulations, depending on their residency status and the type of income they receive. In general, expats who are resident in Romania are subject to similar tax rates as Romanian citizens. Non-resident expats may be subject to a flat-rate tax on their Romanian-source income.

Additionally, there may be specific deductions, exemptions, or other allowances available for foreign investors and expatriates in certain situations. It is recommended to consult with a local tax advisor for more specific information regarding individual circumstances.

14. Can taxpayers appeal their tax assessments or challenge any errors made by the national tax authority?

Yes, taxpayers can appeal their tax assessments or challenge any errors made by the national tax authority. This process typically involves completing a form and providing supporting documentation to show why the assessment is incorrect or unfair. The specifics of the appeals process may vary based on the laws and procedures of each country. In some cases, taxpayers may also be able to request a review or audit by an independent body if they are not satisfied with the outcome of their appeal.

15. Are capital gains taxed differently than regular income in Romania? If so, what are the rules and rates applied?

Capital gains are taxed differently than regular income in Romania. The rules and rates applied depend on the type of asset being sold and the duration of ownership.

1. Real estate: Capital gains from the sale of real estate are treated as income and taxed at a flat rate of 16%.

2. Stocks and other securities: Gains from selling stocks or other securities are also subject to a flat tax rate of 16%. However, if the securities have been held for at least one year, they may be exempt from taxation.

3. Other assets: For other types of assets, such as vehicles or art, capital gains are added to regular income and taxed at the applicable personal income tax rate, ranging from 10% to 50%. Any depreciation or costs associated with acquiring or maintaining the asset can be deducted from the capital gain.

In general, non-residents are subject to the same rules and rates for capital gains as residents. However, there may be some exemptions or reduced rates available through tax treaties between Romania and other countries. It is recommended that non-residents consult with a tax professional for specific guidance on their particular situation.

16. Does inheritance or gift taxation exist in Romania, and if yes, what are the applicable rates?

Yes, inheritance and gift taxation exists in Romania. The applicable rates vary depending on the relationship between the donor and the recipient, as well as the value of the inheritance or gift.

Inheritance taxes are applied on assets received through an estate after someone passes away. In Romania, there are four tax rates for inheritance based on the relationship between the deceased and the beneficiary:

1. 0% for direct descendants (such as children, grandchildren) and spouses;
2. 1% for siblings, nieces/nephews, aunts/uncles, other relatives up to third degree;
3. 5% for other relatives up to sixth degree;
4. 10% for other individuals (non-relatives).

Gift taxes are applied on assets received during one’s lifetime without receiving anything in return. The tax rates for gifts in Romania are also based on the relationship between the donor and recipient:

1. 0% for direct descendants/spouses if the gift is worth less than €100,000;
2. 3% if gifted to parents/grandparents;
3. 5% if gifted to siblings/nieces/nephews/aunts/uncles/other relatives up to third degree;
4. 10% if gifted to other individuals (non-relatives).

It’s important to note that there are exemptions and limitations on both inheritance and gift taxes in Romania, depending on factors such as the value of the assets and if they are used for specific purposes (such as education or medical expenses). It is recommended to consult with a tax professional or legal advisor for specific information regarding your situation.

17. How is property taxed in Romania, both residential and commercial? And are there any exemptions available?

Property in Romania is taxed through the property tax, also known as the “impozit pe proprietate”. Both residential and commercial properties are subject to this tax, which is calculated based on the value of the property and its location.

The tax rate for residential properties varies from 0.08% to 0.20%, depending on the municipality where the property is located. Commercial properties have a higher tax rate, ranging from 0.2% to 1%, also depending on location.

Exemptions from property tax are available for certain categories of properties, such as historical monuments, buildings used for religious or educational purposes, or buildings that are part of an agricultural enterprise.

Additionally, individuals who own one residential property (their main residence) are exempt from paying property tax on that property. This exemption does not apply to secondary residences or rental properties.

18. Are there any local or municipal taxes in addition to national taxes in Romania? How much do they contribute to overall tax revenue?

Yes, there are local and municipal taxes in addition to national taxes in Romania. These include property tax, local taxes on vehicles, environmental taxes, and others.

In 2021, local and municipal taxes accounted for approximately 10% of the overall tax revenue in Romania.

19. How do individual states/provinces within Romania handle taxes, and is there a uniform tax code across the entire country?

Individual states/provinces within Romania are called “counties” and each county has its own local tax office. The counties follow the national tax laws set by the Romanian government, but they may also have their own specific regulations and rates for certain taxes.

There is a uniform tax code across the entire country, called the Romanian Fiscal Code, which governs all aspects of taxation in Romania. This code includes rules for income taxes, value-added tax, corporate taxes, property taxes, and more.

Each county also has its own council that is responsible for setting local taxes and fees, such as property tax rates and local business taxes. These local rates can vary slightly between counties, but they must still comply with the overall guidelines set by the national tax code.

20. What are the plans for future tax reforms in Romania, and how will they impact taxpayers?

The Romanian government has implemented several tax reforms in recent years, and there are plans for further reforms in the future. These reforms aim to simplify the tax system, spur economic growth, and improve the country’s overall competitiveness.

One major reform that is currently being considered is a shift from a flat tax rate of 16% on personal income to a progressive tax system with two or three brackets. This change would likely impact high-income individuals, who would see an increase in their tax rate, while low- and middle-income individuals could potentially benefit from lower rates.

Another proposed change is the introduction of a minimum corporate tax for large companies, which would ensure that all businesses pay at least some amount of taxes regardless of their profits. This measure aims to increase revenue for the government and make the tax system more equitable for small and medium-sized enterprises.

There are also plans to reduce bureaucracy and simplify tax procedures by implementing an online platform where taxpayers can file their returns and communicate with the tax authorities. Additionally, there are discussions about implementing a VAT cash accounting system, which would allow small businesses to pay VAT based on when they receive payment rather than when they issue invoices.

Overall, these reforms have the potential to impact taxpayers by changing their tax obligations and increasing efficiency in filing taxes. It is important for taxpayers to stay informed about any changes to the tax system so they can properly plan for their financial obligations.