Category: Uncategorized

Here is a glimpse at Taxation and Investment in Romania – 2019.

1. Ways of Doing Business /Legal Forms of Companies

Romanian legislation defines 5 forms of legal entities: (1) Joint Stock Company (SA); (2) Limited Liability Company (SRL); (3) General Partnership (SNC); (4) Limited Partnership (SCS) and (5) Limited Partnership by Shares (SCA). Foreign companies can also register branches, permanent establishments or representative offices in Romania.

2. Corporate Taxation       

Corporate income tax is payable by the following taxpayers: Romanian companies; legal persons set up according to European law and who are registered in Romania; foreign companies with permanent establishments/branches in Romania; foreign companies with their place of effective management in Romania; foreign companies obtaining revenues from real estate located in Romania, from transactions with shares of Romanian companies or from the exploration of natural resources in Romania. 

3. Double TaxationAgreements

Ifa taxpayer is resident in a country with which Romania has concluded a double taxtreaty (DTT), the tax rate applicable to the income obtained by the respectivetaxpayer from Romania will be the most favourable rate between the ratestipulated by local legislation and the rate stipulated by the DTT, providedthat a certificate of fiscal residency is provided.

If the taxpayer is also an EU resident, the provisions of EU directives are applicable, provided that the required conditions are fulfilled and proper documentation is available.

4. Transfer Pricing

The arm’s length principle isapplicable to all transactions with related parties, including those between aforeign legal entity and its Romanian permanent establishment. Also, related-partytransactions carried out between two Romanian companies are subject to a transferpricing analysis.

Romanian taxpayers are required to prepare transfer pricing documentation as follows to document the observance of the arm’s length principle for transactions performed with affiliates.

5. Anti-avoidance Measures

In Romania, anti-avoidance controls are performed by the National Agency of Fiscal Administration.

6. Taxation of Individuals /Social Security Contributions

Individuals who are Romanian tax residents are subject to income tax on their worldwide income. Individuals who are non-residents of Romania for tax purposes are subject to tax in Romania only on their income earned in Romania.

7. Indirect Taxes

Indirect taxes include VAT, excise duties and custom duties.

8. Property Taxes

Propertytaxes are payable by the owners of buildings, land and vehicles and are paid tolocal authorities. Local taxes are assessed yearly and are payable in two equalinstalments during the year, by 31 March and 30 September. 

Other local taxes are payable for outdoor advertising, and tax for obtaining different authorisations.

For the complete brochure, please access

Ensight Finance SRL provides tax, accounting and financial business advisory services to resident and non-resident
companies doing business in Romania.

Ensight Finance SRL is a member of WTS Global for Romania.

Following the evaluations made by the analysts of Coface Romania, through the service Companies Evaluation and Business Information, and by The Chamber of Commerce and Industry Bucharest, the company Ensight Finance is one of the most performant companies in the local market.

As a result, Ensight Finance received the Certificate Excellent Small and Medium Enterprises.

In Romania, only 20% of the companies register low risk, qualifying for the Certificate Excellent SME.

The Fiscal Code was amended again in the last 2 weeks by Law no. 30/2019 regarding the approval of the Government Emergency Ordinance no. 25/2018 (Law 30/2019 was published in the Official Gazette 44 / 17.01.2019). We hereby present below the most important points.

1. From January 1, 2019, the interest deductibility limitshave been increased for corporate income tax purposes. Thus, the excess costsof indebtedness (the difference between borrowing costs and interest revenues)are deductible if they are less than EUR 1,000,000 (instead of EUR 200,000, theold limit), RON equivalent.

The amount exceeding the EUR 1,000,000 ceiling may bededucted up to 30% (instead of 10%) of the following computation basis:revenues minus expenses minus non-taxable revenues plus profit tax, plus theexcess costs of indebtedness, plus tax depreciation.

The non-deductible interest expenses can be carried forwardalso by companies involved in merger or spin-off processes or the successors ofthese companies.

2. Starting April 1, 2019, corporate income tax payers ormicroenterprise tax payers can use the sponsorship tax credit only forsponsorships made to non-profit entities who are listed in a register ofentities for which tax deductions are granted, register organized by ANAF (thenational tax authorities).

3. The above register can contain only the non-profitentities who operate in the area for which they have been set up, who fulfilledtheir declaratory tax obligations, who have no outstanding tax obligationsolder than 90 days, who filed in annual financial statements, who were notdeclared inactive.

4. As of January 20, 2019, the taxation of the income earnedby individuals from transfers of virtual currency was regulated by consideringthe profits from these transactions to be subject to the 10% income tax rate.

5. As from 1 January 2019, in the case where the performeddeliveries cannot be cashed due to the bankruptcy of the beneficiary or as aresult of a reorganization plan, the VAT base may be adjusted from the date ofthe sentence or of the closing judgement regarding the beginning of thebankruptcy procedure.

6. Also with the same date, the VAT rate of 5% can beapplied for the delivery of dwellings in the case of the purchase of severaldwellings by the same individual (so far, the 5% VAT rate was possible only forthe first delivery to an individual).

Starting with January 2019, Government Emergency Ordinance 114/2018 has brought several amendments to the Fiscal Code, out of which the most important concern the construction companies and the treatment of value tickets.

1. Changes regarding the taxation of construction companies

The following fiscal incentives are valid for the period2019-2028 for employees of construction companies / such companies:

– salary tax exemption

– reduced social contribution from 25% to 21.25% (thepublished legislation does not mention explicitly the reduction, so arectification should be expected)

– exemption from health contribution – the employees areinsured for health services without the payment of the contribution

– the employers are exempted for social contribution forparticular working conditions, respectively special working conditions

– reduced work insurance contribution from 2.25% to 0.3375%.

The conditions to be fulfilled by these employees /employers for the application of the incentives are:

a) the employers carry out activities in the constructionsector which include:

(i) construction activity definedby NACE code 41.42.43 – section F – Construction;

(ii) production of buildingmaterials, defined by the following NACE codes: 2312 – Processing and shapingof flat glass; 2331 – Manufacture of ceramic tiles and slabs; 2332 –Manufacture of bricks, tiles and other construction products of burned clay;2361 – Manufacture of concrete products for construction; 2362 – Manufacture ofplaster products for construction; 2363 – Manufacture of concrete; 2364 –Manufacture of mortar; 2369 – Manufacture of other articles of concrete, cementand plaster; 2370 – Cutting, shaping and finishing of stone; 2223 – Manufactureof articles of plastics for construction; 1623 – Manufacture of other builders’carpentry; 2512 – Manufacture of metal doors and windows; 2511 – Manufacture ofmetal structures and parts of metal structures; 0811 – Extraction of ornamentaland building stone, extraction of limestone, gypsum, chalk and slate; 0812 –Gravel and sand extraction; 711 – Architectural, engineering and technicalconsultancy services;

b) the employers achieve the turnover from the aboveactivities within the limit of at least 80% of the total turnover, calculatedcumulatively from the beginning of the year, including the month in which theexemption applies;

c) the salary monthly gross incomes are between 3,000 and30,000 lei per month inclusive and are obtained on the basis of the individuallabor agreement;

d) the exemption is applicable on the basis of furtherinstructions (to be issued) and Declaration 112 represents a declaration on ownresponsibility for the fulfillment of the above conditions.

Separately, for the period 01.01 – 31.12.2019, the minimumgross monthly salary for construction workers (for the above-mentioned areas ofactivity) is of RON 3,000, regardless of the positions held by the respectiveemployees (e.g. accountant or secretary), the new legislation making norestrictions in this regard.

2. The taxation of value tickets

The fiscal treatment of the value tickets granted toemployees has been unified, so that gift tickets, meal tickets, holidayvouchers, nursery vouchers and cultural vouchers are subject to 10% income tax,but they are not included in the computation of social contributions.

3. Extension of the validity of VAT simplification measures

The application of VAT simplification measures was extendeduntil June 30, 2022 for certain operations (such as cereal delivery), as thesupplier issues the invoice without VAT, whereas the buyer registers the VATthrough the reverse charge mechanism.

4. Separately from the above modifications of the FiscalCode, the electrical energy license holders will owe a contribution of 2% fromtheir turnover.

5. Also in addition to the fiscal modifications, the bankinginstitutions will owe  a tax on their financial assets in case thequarterly ROBOR (Romanian inter-banking interest rate) will exceed 2%. The taxon the financial assets will be computed by applying quarterly a rate to thefinancial assets of the banking institution as follows: a rate of 0.1 % if thequarterly ROBOR is between 2% and 2.5%; a rate of 0.2 % if the quarterly ROBORis between 2.5% and 3%; a rate of 0.3 % if the quarterly ROBOR is between 3%and 3.5%; a rate of 0.4 % if the quarterly ROBOR is between 3.5% and 4%; a rateof 0.5 % if the quarterly ROBOR is above 4%.