The income tax represents one of the main taxes that are applied by the Romanian authorities at a national level. The income tax is applicable to natural persons obtaining a taxable income in Romania, as well as to corporate entities. The rates for income tax in Romania vary based on the nature of the taxed entity and the amount due can also vary based on the tax residency.
Thus, natural persons and legal entities that have their tax residency in Romania are charged for their worldwide income, while foreign entities, which are tax residents of other countries, are taxed with the income tax in Romania only for the taxable amount obtained from activities carried out here. More information on the legislation applicable here can be obtained from our Romanian law firm, which can also provide legal representation to those who need to register for taxation here.
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What is the personal income tax in Romania?
The personal income tax represents the tax that is charged to natural persons, for the income they have obtained in this country. Romania applies one of the lowest personal income taxes applicable at the level of the European Union (EU), of only 10%. However, it must be noted that certain categories of persons are exempted from the payment of this tax.
Some of the main categories that are exempted from the payment of the tax are IT specialists, persons who are employed and who have various disabilities, persons who work in the field of research and development or persons who have an employment contract signed for a period of 12 months with companies that carry out seasonal work.
It is also worth knowing that the construction sector benefits from this exemption, as the employees in this field do not have to pay the income tax for the period of 1st of January 2019 to 31st of December 2028. Our Romanian law firm can offer more details on other tax benefits that can apply to this sector.
What is the corporate tax in Romania?
The corporate tax in Romania is charged to all legal entities registered in this country, but also to foreign companies operating on the local market. This applies regardless if the foreign company has set up a new, separate legal entity, or if the company operates through a permanent establishment. With regards to the corporate tax, investors should that the following apply:
- the standard corporate income tax in Romania is charged at a rate of 16%;
- gambling activities and companies operating as nightclubs can be charged with the 16% tax rate, or they can be imposed with a 5% on their revenues (the amount with a higher value will be selected);
- Romania also applies a separate income tax for micro-companies, which can be charged at a rate of 1% or 3%;
- the 1% income tax will apply if the company has at least 1 employee;
- the 3% income tax will apply to micro-companies with no employees and another basic condition, for both situations, is to have a revenue of maximum EUR 1 million at the end of the previous financial year.
What are the fiscal obligations of companies in Romania?
Companies in Romania need to submit tax returns as per the requirements of the law; our team of Romanian lawyers can assist you with in-depth advice on this matter. With regards to the payment of the corporate income tax, it must be noted that the Romanian accounting procedures stipulate that the tax should be calculated on a quarterly basis. Such procedures must be done by licensed accountants, which are recognized by the Body of Expert and Licensed Accountants of Romania.
The tax has to be calculated no later than the 25th of the next month after the end of each quarter. This regulation applies for the first three quarters of the year. In the last quarter, a company is allowed to calculate the corporate tax and to submit the required returns by 25th of March of the following year.
Several categories of companies and non-profit organizations can opt for different methods when filing tax returns. Our law firm in Romania can present the list of entities included in this category and can provide information on the tax compliance applicable in this case.
Please note that corporate entities that are liable to the payment of the income tax are entitled to making advance payments. The advanced corporate tax payments can be done on a quarterly basis and they take into consideration the value of the annual corporate income tax the company had to pay in the previous financial year.
For more details on the income tax in Romania, you are invited to contact our Romanian law firm. Our team of lawyers in Romania can provide in-depth assistance on any matter related to the corporate taxation in this country and can also assist natural persons who need more details on the Romanian tax system.