Tax Law Romania
Paying Taxes in Romania - Taxpayers
In accordance with the Fiscal Code, the following are treated as taxable subjects:
- Romanian authorized business, for the taxable revenue obtained from any source, both in Romania and abroad;
- overseas authorized businesses that carry out activities through stable registration in Romania, for the connected revenues;
- overseas authorized businesses and non-resident individuals that perform activity in Romania in an association without legal personality, for the portion of the taxable revenue of the association attributable to each person;
- overseas authorized businesses making revenue from immovable property located in Romania or from the sale/assignment of shares of a Romanian legal business for the taxable profit related to such revenues;
- Romanian authorized businesses and resident individuals, for the income obtained both in Romania and overseas from associations without legal personality for the taxable profit of the association attributable to the resident individuals. Standard quota The standard profit tax rate applicable to taxable profit amounts to 16%. Taxpayers making activities as night-bars, casinos, disco, private clubs or sports betting and for which the profit tax owed is less than 5 % of the respective incomes have to pay a tax of 5 % of the incomes realized from such activities. Businesses having an annual turnover of up to EUR 100,000 and having one to nine employees (so called micro-enterprises) are taxed at 2% in 2007, 2,5% in 2008, and 3% in 2009 of their income, consequently not of their profit.
Calculation of taxable profit.
The taxable profit, according to taxation Romania regulations, is computed as the difference obtained from any source and expenses incurred for the purpose of obtaining the year, from which non-taxable incomes are deducted and to which non-deductible According to Fiscal Code, the following incomes are deemed as non-taxable:
The dividends obtained from an overseas legal company resident within a member state of the European Union won’t be taxable given that the Romanian legal body company no less than a quarter of the participation titles of the particular overseas legal corporation for an continuous interval of at least 2 years finished on the date of paying the dividend; in whichever other situation, the tax on dividends is 16% and is commonly retained by the issuer previous the compensation of shareholders.
Positive value distinctions for participation titles inventoried as a consequence of registering the emergency supplies, profits or issuance premiums by the legal corporation where the participation titles are possess, along with the plus from long-term monetary ventures’ reassessment. This kind of plusses are chargeable on the date of their transfer for free, allocation, withdrawal of the participation titles in addition to the date of withdrawing the share capital of the legal entity in which the participation titles are kept;
Paying Taxes in Romania - Deductible Outflows
An outflow is tax deductible given that it is incurred with the intention of producing taxable income counting that which is offered by authorized operational ratification. As stated by the Fiscal Code the following outflows are regarded to be incurred with the intention of obtaining revenues:
- management’s training and improvement expenses, IT systems, running, upholding and upgrading of quality management systems, acquiring quality standards certifications;
- environment protection costs as well as the conservation of resources;
- buying packages type of cots of long-term products, established by the taxpayer;
- work protection type of outflows realized, as stated by the law and outflows realized for labor accidents’ prevention as well as professional illness;
- subscription costs, charges and compulsory payments, according to the legal endorsements in force, in addition to assistance to the fund for negotiating the collective labor accord;
- qualified instruction costs;
- labor accidents insurance’ contributions for insurance against and as well as professional disease, professional danger insurance premiums;
- media hype and promotion type of costs realized for advertise the company, products or services, based on a written contract, as well as costs associated with the production of materials necessary for dissemination of publicity messages;
- shipping and lodgings costs within the borders and overseas carried out by members of staff and managers, given that the business documentation profit in that year or the preceding ones;
- costs related to the advertising, promotion and marketing on old or new markets, market research, participation in fairs and exhibitions, leaflets and advertising materials, business exercise;
- innovation, research and development costs which are not considered intangible possessions;
- deficits appeared from the result of erasing writing-off non-cashed receivables, in the subsequent situations:
a. the death of the nonpayer and the debts can not be received from the descendants;
b. the debtors’ liquidation course of action has been finished based on a court decision;
c. the nonpayer is dissolved in case of the limited liability company with a single shareholder or is closed without descendant;
d. the nonpayer has big economic problems affecting its entire patrimony.
Limited deductibility expenses -The next costs cover limited deductibility:
- costs for the functioning, preservation and fixing related to the establishment within a private residence, utilized for individual uses, deductible within the limit matching to the sections made available to the company on account of agreements signed in this sense; and expenses of functioning, preservation and fixing related to cars used by employees with executive or running hierarchical positions of the legal person, deductible taking into consideration the law: one car for each employee. Only justified with officially authorized papers such expenses become deductible for tax purposes.
- return of the staff’s voyage allowances in Romania as well as abroad, inside the limit of 2.5 times the officially authorized level set up for public institutions, on condition that the taxpayer achieves profit in the present and/or preceding years; if this isn’t the case, then such costs are deductible up to the level set up for public institutions;
- costs for interest and differences in the exchange rate, within specified boundaries;
- decline, within specified boundaries;
- costs realized on behalf of an staff for optional professional retirement fund schemes, within the limit of the equivalent in ROL of EURO 200 within a fiscal year for each member;
- etiquette and protocol costs inside the 2% limit as the difference between total taxable incomes and total expenses related to taxable revenues, different than protocol costs and profit tax expense costs for personal health insurance premiums, in the limit of the equivalent in ROL of EURO 200 within a fiscal year per one member;
- costs for the functioning, preservation and fixing of job residences situated in the company’s office registration town or the secondary offices are established, deductible within the edge corresponding to the built perimeters according to the law on residences, which is augmented (from a fiscal perspective) by 10%. The non-deductible difference must be recuperated from receiver/users;
- social expenses, inside the limit of up to 2% of the salary deposit achieved.
- perishables, within the limits set up by specialized organisms of the central administration, in cooperation with specialized institutions, with the consent of the Ministry of Public Finance;
- expenses for food tickets accorded to staff;
- costs for fees and dues to professional organizations and NGOs, annually amounting to maximum value of the ROL equal of 2,000 euro;
- in certain limits, costs for provisions and stocks;
- Fiscal depreciation. The expenses linked to the purchase, manufacture, building, assembly, setting up or upgrading of depreciable fixed assets are fiscally recuperated by deducting depreciation expenses. The depreciation system for a depreciable fixed asset must be determined in accordance with the subsequent regulations:
- in the buildings situation, the straight-line method of depreciation musr be applied;
- in the technological equipment situation, correspondingly machines, tools and installations, plus computers and equipment peripheral to computers, the taxpayer may decide the straight-line method, the declining balance method or the accelerated depreciation method; and
- in the situation of another depreciable fixed asset, the taxpayer could decide to use the straight-line method of depreciation or the declining balance method of depreciation.
Paying Taxes in Romania - Fiscal losses
Yearly deficit, as mentioned by the profit tax return and according to taxation Romania regulations, will be recuperated from the taxable profits acquired throughout the next five successive years. The recuperation of deficits will be made only if these losses are registered, at every time limit for the imbursement of the profit tax, according to the legal updated stipulations for the year when such deficit is proved.
VALUE ADDED TAX - VAT Romania
The regular VAT percentage is of 24 % applicable for any taxable procedure, except the ones who does not meet the criteria for a discharge or for the VAT reduced quota. The reduced VAT quota is of 9 % and applies for the following supplies of services and/or distribution of goods:
entry permissions to museums, memorial houses, historical monuments, palaces, architectural and archeological monuments, zoos, botanical gardens, fairs, exhibitions;
release of books, newspapers and magazines, school manuals, except those meant entirely for publicity;
providing of any type of prostheses and accessories, apart from dental prostheses;
deliveries of orthopedic items for consumption;
human and veterinarian drugs ; and
lodgings within the hotel sector or in similar areas, as well as the fee of land for camping use.
Taxation base for import. The taxation base for an import of merchandise is the customs value of the respective goods, established in relation with the customs legislation in force, to which are added customs taxes, customs commissions, excises and other import fees exclusive of the VAT. The taxation base should include ancillary expenses, for instance commissions, packaging, transport and insurance costs that are incurred up to the first place of destination of the merchandise in Romania, to the extent that such expenses are not otherwise included in the base of taxation. The exports or other similar operations and international transport are excepted from the VAT Romania obligation.
Regime of deductions. The deduction’s right occurs when the deductible VAT becomes taxable. If the acquired goods and services are meant for use for one’s taxable operations, any taxable person registered as a VAT payer has the right to deduct:
- the VAT due or paid related to goods delivered or to be delivered and for services supplied or to be supplied by another taxable person
- the VAT paid for imported goods.
Exoneration from the VAT payment. The genuine VAT Romania fee is not to be made to the customs authorities by a person registered as a VAT payer that has obtained an exoneration permit for the subsequent cases:
- import of technological equipment, installations, industrial machines, equipments, measurement and control devices, automations, meant to perform investments, in addition to the import of agricultural machines and transportation means intended to perform productive conduct; and
- import of raw materials and consumable materials that are not created or are in short supply in the usage country for economic activity of the person performing the import.
Social Security Contributions
According to the Law no. 19/2000, contributions to the State social security budget are approved for the following categories of taxpayers :
- on a case by case basis insured persons;
- legal bodies employing the following insured persons: persons occupying elective positions or people appointed in executive, legislative or judicial authorities, during their mandates, as well as members of a an organization of artisan’s cooperative;
- the National Agency for Labor Force Occupancy;
- people concluding optional social insurance agreements.
- No social security contribution will be paid regarding the following amounts:
- social security services borne from the social security fund or employer’s funds and which are directly paid by the employer, according to law;
- proceeds paid under the law upon termination of individual labor agreements, of the mandate or co-operative membership and upon termination of professional relations of public officers;
- travel and delegation daily payments, delegation, and transfer payments, in addition to copyright royalties;
- revenues representing employees’ participation to corporate profit;
- rewards and other rights exempted by distinctive laws.
- The revenues exempted from the payment of the social security contribution mentioned above under points 2-4, shall not be taken into account when instituting the amount of social security services the beneficiary is entitled to. Social security contribution rates are established on an annual basis through the law approving the national social security budget.
Under a labor contract at the individual’s level, the employee owes the following Social Security Contributions:
For any further details or information please do not hesitate to contact us.
- Social Security payments - 9.5% of the monthly gross salary;
- Health Fund Contribution – 6.5% applied on the monthly gross salary;
- Unemployment Fund Contribution – 1% applied on monthly gross salary.
- Social security contributions owed by the employer are as follows:
- Social Security contributions: flanked by 31.5 % and 41.5 % (depending on the work conditions) of the gross monthly revenue, which is limit at the level of five times the national average salary multiplied by the average number of employees;
- National Insurance Fund for Labor Accidents and Professional Diseases: the contribution will vary flanked by 0.5 % and 4 % of the total salary fund;
- Labor Chamber commission: 0.25 or 0.75 % of total salary fund, conditional on whether the company or the Labor Chamber holds the work books.
- Health Fund: 7 % of total salary fund;
- Unemployment Fund: 3% of total salary fund;
by Cristian Darie