Starting or running a business?

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Tax

Which taxes does an entrepreneur have to pay? How much?

Legal entities in Romania are taxed according to the Romanian Tax Code (Law 571/2003) which came into force on January 1st 2004. Please click here for an overview of the taxes in Romania. The taxes commonly applicable for entrepreneurs are:

Corporate Tax (CIT) – 16%

Also known as a business tax, is a tax imposed on businesses incorporated in Romania and which derive income from within Romania. The standard CIT rate in Romania is 16%.

Micro-companies  can choose to apply a special fiscal regime, with a tax rate of 3% of the total revenues earned, no matter the expenses. A Romanian legal entity is considered to be a microenterprise if:

  • It obtains income other than through activities in the following areas: Banking, insurance and reinsurance, Capital markets (except for persons who carry out brokerage activities in such areas), Gambling, Consultancy and management (more than of total revenues)

  • It has an income that is less than the equivalent in RON of EUR 65.000

  • It has an annual turnover less than EUR 100.000

  • Its share capital is held by persons other than the state and the local authorities

  • It is not registered as a dissolution by liquidation.

Capital gains tax – 16%

Capital gains obtained by a Romanian company are included in ordinary profit and taxed at 16%.

Value Added Tax (VAT) – 24%

VAT is an indirect tax on the consumption of goods and services. A person that is registered for VAT is called vendor. VAT must be included in the selling price of every taxable supply of goods or services made by a vendor. The current standard VAT rate in Romania is 24%. Companies have to register for VAT when having a turnover that exceeds EUR 35.000

  • Good imported into Romania are also subject to VAT.

  • VAT rate of 9% applies for medicines, books, bread and bakery products, newspapers and periodicals, accommodation in hotels or in places with a similar function, cinema tickets, admission fees at museums and the supply of prostheses and orthopedic products

  • For the creation of private houses (maximum 120 square meters) and social buildings as part of the social policy a VAT rate of 5% applies.

  • The transfer of business (total or partial) is outside the scope of VAT

  • The following goods are exempt from VAT:

    • Exports of goods

    • Transport and related services

    • International transport of passengers

    • Certain operations performed in free trade zones and free warehouses

    • Supply of foreign goods which are placed under temporary custom regimes

    • Supply of goods and services to diplomatic missions, international organisations and

    • NATO forces.

Employees Tax – 16%

Employers are required to withhold employees’ income tax from their salary which is 16%. Romanian individuals domiciled in Romania are subject to taxation on their worldwide income, except for salaries received from abroad for services performed abroad. Romanians not domiciled in Romania and foreign individuals are subject to taxation only for income sourced in Romania. Income earned by non-residents is subject to a 16% withholding tax.

Withholding Tax – 16%

Non-resident companies are subject to a 16% withholding tax on other revenues derived from Romania, such as interest royalties, revenues from services performed in Romania, dividends, revenues from management and consultancy services irrespective of where the services were performed, commissions and revenues derived from liquidation of a Romanian legal entity.

Excise

The Romanian Fiscal Code distinguishes between harmonized excisable products (alcoholic beverages, tobacco products and energy products, electrical power) and non-harmonized excisable products which are specific for Romania (coffee, natural fur products, jewellery, perfumery, yachts and leisure motor boats and hunting guns). For harmonized excisable products, excises duties are due when the products are released for consumption. For other excisable products, excises duties are due when the actual delivery takes place. The excise duty for motor cars and motor vehicles has been replaced by a special registration tax that must be paid when the first registration in Romania is made. This tax depends on the cylinder capacity and age of the vehicle.

Stamp duty

A stamp duty between 1% and 10% applies on the transfer of securities. The ultimate rate depends on the value of the shares.

Local Tax

The building tax rate is between 0.25–1.5% on the entry value of the building.

This percentage is increased:

  • Between 10–20% if the building has not been revaluated for accounting purposes only in the last three years

  • Between 30–40% if the building has not been revaluated for accounting purposes only in the last five years.

Owners of land are subject to land tax which is established at a fixed amount per square meter, depending on the rank of the locality where the land is located and the category of use of the land. Other local taxes:

  • Duty on means of transport

  • Duty for the issue of certificates, advisory opinions and authorizations

  • Duty for using means of advertising and publicity

  • Tax on performing activities (2% - 5%)

  • Hotel duty

  • Special duties

Social Security System

In Romania, all employers and employees (as well as other categories of taxpayer) must contribute to the state’s social, health and unemployment security system.

Employee’s contributions as a percentage of gross salary:

  • Social Security Contribution of 10.5%

  • Unemployment fund contribution is 0.5%

  • Health fund contribution amounts 5.5%.

Employers’ contributions are:

  • Social security fund – 20.8%, 25.8% or 30.8%, depending on working conditions

  • Health fund – 5.2%

  • Contribution for medical leave – 0.85%

  • Salaries Guarantee fund – 0.25%

  • Unemployment fund – 0.5%

  • Work accidents insurance fund is between 0.15–0.85%.

Employers calculate and withhold income tax and social contributions when paying salaries. State budget contributions are payable by the 25th of the month following the month to which the salaries relate.

When do I pay for my tax?

Corporate Income Tax

Corporate Income Tax is paid on a quarterly basis. Quarterly payments are due by the 25th of the month following the reporting quarter which is only applicable for the first three quarters. At year-end te annual corporate income tax must be paid by 25th of March of the year following the financial tax year.

VAT

VAT is due monthly on the 25th of the month following the reporting month. For companies that have revenues of less than EUR 100.000 are considered ‘small companies’ and have to pay their VAT quarterly by the 25th of the first month following the reporting quarter.

Excise duty

Excise duties are payable on the 25th of the month following the one in which the excise became chargeable.

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