Updated March 2014
Overview of Romanian fiscal code
Romanian corporate tax
The corporate tax rate is 16% (as of January 1, 2005).
At the moment, there is no other associated tax (such as a professional tax or wealth tax) to corporate income after the corporate flat rate tax was repealed (see below).
Business expenses for meals, gifts, etc. are deductible up to 2% of the company's revenue.
The current Romanian VAT rate is generally 24%.
Certain activities are nevertheless taxable at a rate of 9% (such as certain hotel facilities) or 5% (certain real estate sales).
As a member of the European Union, Romania applies the regulations on the VAT directive. Below, we have highlighted some of them:
- Intra-communitary delivery of merchandise or services for a recipient located in a foreign country are not subject to VAT in Romania.
- Intra-communitary acquisitions of merchandise or services by Romanian recipients require these companies to self-assess the VAT.
Tax obligations for companies
Companies must complete two balance sheets per year:
The annual balance sheet on December 31 of each year;
A balance sheet of the company's situation due on June 30 of each year.
The financial year corresponds to the calendar year (some exceptions are possible, but only where companies form part of an international group).
Tax on physical persons
Physical persons are taxed at a rate of 16%.
Companies who employ Romanian personnel must withhold tax on their employees' salaries (at a rate of 16%) and must make a direct payment to the relevant departments of the Romanian governement (such as social security payments).
Distribution of dividends
Dividend payments are usually subject to a withholding tax at a rate of 16%.
The withholding tax rate can however be lowered by certain tax conventions when the beneficiary is living abroad (for example it is 10% if the beneficiary is living in France).
Dividend payments within the same group of companies are exempt from the withholding tax in Romania when the beneficiary of the dividend is a company which has been domiciled in the European Union for at least one years.
Dividend distributions profiting beneficiaries who are not residents of a country which has signed a Romanian tax treaty are subject to a withholding tax at a rate of 50%.
Romanian companies may merge without tax repercussions as the gains detected when reconciling accounts can be tax deferred.
Micro-company tax rates
Micro-company tax rates apply to companies with a turnover of less than 65,000 EUR per year (for the total income including investment income) and less than 20% of their revenue from the consulting activities. These companies are taxed on their turnover at a rate of 3%, rather than their profit at a rate of 16%.