Double Taxation Avoidance Conventions signed with Romania

Romania has signed a large number of Treaties for the avoidance of double taxation even before 1989. Partner-countries range from the United Kingdom and Germany to Thailand, Ecuador, Kuweit etc.

The structure and some of the stipulations of these treaties are similar. To be able to exemplify, we have analyzed Romania’s treaty signed with the United Kingdom of Great Britain and Northern Ireland. This Treaty refers to the following taxes: a) in Romania – income tax obtained from natural persons and legal entities, profit tax for mixed companies (Romanian and foreign), income tax obtained from agricultural activities and b) in the UK and Northern Ireland: income tax, corporate tax, tax on capital gain. This list is not limitative.

Dividends obtained from a Romanian company by a person residing in the United Kingdom can be taxed in the United Kingdom. Dividends can also be taxed in Romania, but when they belong to a UK resident these shall not exceed:
a) 10% of the gross amount if the beneficiary is a company owning at least 25% of the Romanian company’s shares;
b) 15% in all other cases.
• Certain exceptions do apply according to the Treaty of February 12th 1976 between Romania and the United Kingdom.
 

Interest gained in one of the countries can be taxed in the other country, however if taxed in the country of origin per the legislation of the respective State, it cannot exceed 10% of the gross amount.
• Certain exceptions do apply according to the Treaty of February 12th 1976 between Romania and the United Kingdom.

Dues gained in one of the countries can be taxed in the other country, however if taxed in the country of origin per the legislation of the respective State, it cannot exceed 15% of the gross amount. It is to be noted that dues related to copyrights of literary, drama, artistic work and scientific work, the tax established by the State where these dues originate from, shall not exceed 10% of the gross amount.

Commission-fees can also be taxed in the country of origin however in this case 12,5% of the gross amount has to be taxed.

It is to be noted that gains obtained from the sale of real estate property (this also includes the sale of related rights as per the stipulation of Art. 6 of the Convention) shall be taxed in the State where these properties are located.

Conventions for the Avoidance of Double-Taxation usually also contains stipulations on the taxation of capital gain, independent professions, pensions etc. It is important to be noted for those investors originating from member-states that the stipulations of these Conventions must also be corroborated with EU regulations (applicable in Romania through the Fiscal Code).