Romania Tax Laws and Regulations

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Romania Tax Laws

Bradford Jacobs draws on over 20 years of experience in the front rank of international payroll providers, and we ensure our clients comply with every aspect of tax legislation across the world. Our local knowledge and global experience are vital for international companies expanding into Romania and then further afield into the European Union.

Dealing with tax, payroll, and employment regulations for your staff from overseas always poses complications that demand expert guidance for both personal and corporate taxes.

Foreign companies must incorporate a legal entity in Romania to hire staff and operate their payroll, typically opening a limited liability company (LLC) as a small or medium-sized subsidiary to gain a foothold in the economy. The subsidiary operates as an independent legal entity under Romania’s Companies Law, registering with the revenue and social insurance authorities … the first of many steps in employing staff

Overview of Taxes in Romania

* Romania is a member of the European Union but is not in the Eurozone and uses the leu (RON) as its currency.

Personal Income Tax (PIT): Residents and non-residents pay at a flat rate of 10%.

Social Insurance Taxes: Employees contribute 10% of gross income to healthcare and 25% to social insurance, pensions and unemployment provision. Employers contribute 2.25% of their payroll to labor insurance. Employers do not contribute towards pension social insurance where regular working conditions apply, but 4% is levied for particular working conditions and 8% in the case of special working conditions.

Corporate Income Tax (CIT): Local and foreign companies with a permanent establishment in Romania pay 16% CIT on their profits. Resident companies are taxed on worldwide income unless a double tax treaty applies. Start-ups are automatically considered micro-enterprises with tax rates of 1% or 3%, depending on conditions, until revenue reaches one million euros.

Withholding Tax (WHT): Non-resident companies are liable for 16% WHT on such as dividends, royalties and interest.

Value Added Tax (VAT): The standard rate is 17% on goods and services and all imported goods. Reduced rates of 9% apply to such as medicines and foodstuffs, with 5% applied to newspapers, books, catering, leisure services and other categories. The VAT registration threshold for companies is RON 300,000 (€60,620, US$66,583).

Romania Individual Tax – Single, Married

The tax year is from January 1 until December 31. Married couples submit returns independently as joint returns are not permitted under Romania’s tax laws. Individuals residing for more than 183 days in 12 consecutive months and those domiciled or having their commercial center of interest in Romania are tax residents. Non-residents are considered tax residents from the first day they are domiciled in Romania, or from the first day of the 183-day period once that total has been reached. Withheld taxes and social insurance contributions are remitted to the authorities by the 25th of the following month. Residents are generally taxed on their worldwide income.

* Romania is a member of the European Union but is not in the Eurozone and uses the leu (RON) as its currency.

Residents and non-residents Personal Income Tax (PIT): A flat rate of 10% applies to both.

Monthly tax-free allowances are RON 510 (€103, US$113) for individuals with no dependents; RON 670 (€135, US$148) with one dependent; RON 830 (€167, US$184) for two dependents; RON 990 (€200, US$220) for three dependents; RON 1,310 (€264, US$290) for four or more dependents.

Employees’ Social Insurance Taxes: The total employee rate is 35%, comprising 25% into general social insurance and 10% into health insurance.