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Income Tax in Romania

Income Tax in Romania

16% represents the standard income tax rate in Romania for companies with activities in this country. The tax rate in Romania is relatively low compared to other European countries, but for more details on this topic, you can discuss it with one of our Romanian accountants. Our specialists can help international entrepreneurs register for taxation in Romania and can handle a series of formalities.

Details about Romanian income tax

As mentioned at the beginning of this article, the corporate income tax in Romania is set at a 16% rate. There is some tax exemption in Romania and most of them involve companies carrying out gambling activities in Romania. Below is information about the Romanian income tax rate:

  1. If a foreign company has a place of business in Romania, such a company is considered a taxpayer.
  2. The difference between the revenues and expenses is the calculation base for the taxable profit of a company in Romania. More about income tax calculators can be discussed with our Romanian accountants.
  3. In the case the income tax applies to worldwide income, the double taxation treaty signed by Romania applies.
  4. The income tax in Romania is calculated every quarter. Such tax is normally paid until the 25th of the first month that follows the end of the quarters, according to the Fiscal Code in Romania.

Our Romanian accountants can tell you more about Romanian income tax, mentioning that assistance for tax registration and compliance can be offered on request.

Is there any tax exemption in Romania?

Yes, according to the Romanian Fiscal Code, there is no income tax imposed for non-profit organizations established in Romania. The same tax exemption in Romania applies to specific companies having activities in the agricultural sector or generating revenues as religious cults or educational entities.

Can companies apply for corporate income tax advanced payments?

Yes, Romanian income tax can be paid in advance, whether for the entire year or quarterly advanced payments, as stipulated by the same Fiscal Code. If you would like to discuss further details about the Romanian income tax rate, feel free to get in touch with our Romanian accountants and ask for a free case evaluation.

Romania’s income tax rate for residence and non-residence citizens

The current Romanian income tax rate imposed for residents and non-residents in Romania is set at 10%. To align with this important tax rule, it is important to understand the definition of a tax resident in this country, especially by foreigners. As such, persons with domiciliation in Romania for more than 183 days are considered tax residents. However, there is also an exception that directs citizens of Romania working outside the country, but for the Romanian government. In this situation, such employees continue to have the status of Romanian tax residents and therefore, are subject to the same personal income tax in Romania.

The same applies to foreigners living in Romania but working for the government in their countries, with the mention that the personal income tax varies. It is essential to note that non-residents living in Romania and generating incomes in this country will pay taxes only on the incomes registered here. We invite you to talk to our accountants in Romania and discuss about the personal income tax in Romania.

What happens if I no longer live in Romania? Do I need to pay taxes?

Foreigners who decide to leave Romania must notify the tax authorities within 30 days prior to the departure and declare if they remain fully taxable or not. If they close the work contracts in Romania, this means that the authorities will remove them from the tax records. Feel free to ask our specialists about the Romanian income tax calculator and find out information about the taxes you need to pay in this country. The same team can tell you more about the personal income tax in Romania.

Income tax calculator in Romania 

The income tax calculator for Romania provides the option to specify the frequency of your payroll payments within a year, which can be 12 (one per month), 13 (including bonuses), 14 (with additional payments), or even more. You have the flexibility to select the number of payroll disbursements in the year to generate an annual income tax assessment. The Romania income tax calculator has been updated for the 2023 tax year, incorporating the most recent tax tables released by the Romanian Government. Let’s explore some of the key functionalities of this tax calculator:

  • Select the number of payments you receive during a specific period, such as 2 payments per month, 12 payments annually, or more. This income tax calculator in Romania accommodates various payroll payment scenarios.
  • Determine your residency status for tax purposes in Romania.
  • Utilize advanced features to customize your working hours, workdays, income, expenses, and family situation.
  • Automatically incorporate relevant tax credits and personal income tax allowances applicable in Romania.
  • You can generate a printable or email-ready Romanian income tax calculation for future reference.

You can learn more about this tax calculator just like all our payroll, and salary calculators. And if you have any questions about using the Romanian income tax calculator, please get in touch with our accountants.  Along with this, they can also offer you guidance related to personal income tax in Romania.

Why use an income tax calculator in Romania?

Income tax calculators in Romania are helpful tools for individuals and businesses in several ways, for instance:

  • Estimating tax liability: Income tax calculators in Romania help individuals and businesses estimate how much income tax they are likely to owe in a given tax year. This can be especially useful for planning purposes, budgeting, and setting aside funds to cover tax obligations;
  • Tax planning: By using an income tax calculator in Romania, individuals and businesses can explore different scenarios and make informed decisions about their financial activities. For example, they can assess the tax implications of taking on additional income, making certain deductions, or changing their filing status. Our accountants can assist you with tax planning and guide you about the current income tax rate in Romania;
  • Filing accuracy: Romanian income tax calculators can assist in ensuring that tax returns are accurate. By entering income, deductions, and credits into the calculator, individuals and businesses can double-check their math and reduce the likelihood of errors on their tax returns;
  • Understanding tax breaks: Income tax calculators often include options to input deductions, credits, and other tax breaks that may apply to a particular taxpayer’s situation. This helps users understand which tax incentives they qualify for and how they can reduce their tax liability. You can also get help from our Romanian accountants to learn if you are qualified for any tax reductions;
  • Long-term planning: Income tax calculators in Romania can also be used for long-term financial planning. By projecting tax liabilities over multiple years, individuals and businesses can make strategic decisions regarding investments, retirement savings, and other financial goals;
  • Quick assessments: Tax calculators provide a quick way to gauge the impact of various financial decisions, making it easier to decide on investment options, job changes, or other financial moves that could affect taxable income;
  • Educational tool: Romania’s income tax calculators can serve as educational tools to help individuals and businesses understand how the tax system works. They can learn about different tax brackets, rates, and rules by experimenting with the calculator. Our accountants in Romania can also help you understand these calculators;
  • Cost savings: By using an income tax calculator, individuals and businesses can potentially identify ways to minimize their tax liability legally, which can result in cost savings.

Overall, Romanian income tax calculators are valuable tools for both individuals and businesses to make informed financial decisions, comply with tax laws, and optimize their tax outcomes. However, it’s essential to remember that these calculators are typically meant for estimation purposes, and professional advice may be necessary for complex tax situations or for making significant financial decisions. If you face any complexities, please consult with our accountants in Romania.

Who are considered tax residents in Romania?

Romanian and foreign citizens domiciled in Romania are considered tax residents. This means that the income recorded in this country is subject to taxation. The exception is the income registered abroad, by a citizen residing in Romania, who is not subject to taxation. Another important aspect of the note is the fact that Romanian citizens with tax residence in a foreign country that has not concluded a double tax treaty with Romania must pay the related taxes in Romania for worldwide income.

These aspects must be understood from the very beginning, in order to give you an idea about the taxation system in Romania. Companies established in this country can benefit from complete accounting services, by calling on our accounting firm. We offer all the necessary support in terms of taxes, starting with the registration at the related institutions.

Taxable compensations for workers

What is important to note is that the types of pay and benefits received by an employee for the work they perform are taxable regardless of where they are paid or received. However, there are exceptions in this situation, if the respective remunerations are exempt from taxation and if this is mentioned by the Romanian Fiscal Code.

The expatriate compensation package involves cost-of-living allowances benefits in cash and kind and premiums allowances for jobs in Romania. We remind you that our Romanian accountants are at your disposal with complete information about personal income tax in Romania.

Are there any exempt incomes?

Yes, there are tax-exempt incomes, but considering a few conditions that must be met. Exempt income applies to repayable loans for employees free of interest or with lower interest compared to the market. Also, exempt personal income tax in Romania applies to income derived from foreign employers if the work is performed outside Romania unless the income is paid by an employer in Romania.

Tax-exempt incomes also apply to private health insurance, up to EUR 400 per year, but also to contributions to voluntary pension funds. Discuss with our accountants in Romania what are tax exemptions for specific incomes. We are here to help you with advice and support to better understand the Romanian tax system.

Taxation for incomes earned from working abroad

An important aspect regarding the incomes of workers living in Romania, but working outside this country is the lack of taxes. Therefore, if the payment of income is not made by a company resident in Romania, then there is no question of taxation. Employees who earn money outside the borders of Romania, but who are residents in this country will be taxed in the country where the respective incomes are registered.

Investment income and taxation in Romania

Another aspect related to personal income tax in Romania refers to the taxation of investment income and capital gains. Thus, the residents must pay the tax for them if they are registered in Romania. As for non-residents, they must pay withholding tax on capital gains and investment income, if the source of income is registered in Romania.

What is important to note is the fact that Romania has signed a series of protocols to avoid double taxation and even reduce certain taxes, where appropriate. If you want to know more about this topic and the taxation system in Romania, we invite you to talk to our team of accountants in Romania. We are with you if you want to register the company for the payment of taxes and collaborate in terms of accounting with a team of experts.

What does relief for foreign taxes mean?

As we mentioned earlier, Romania has signed a series of double taxation agreements to avoid overtaxing revenues. These agreements also mention the Foreign Tax Credit or FTC, which comes into play if a resident has paid double income tax. We mention that such a loan must not be lower or exceed the extra fee paid. Don’t forget that you can rely on our specialists if you want extra details about personal income tax in Romania.

Working with our Romanian accountants

It is essential to rely on the help of a team of specialized accountants when setting up a company in Romania. Foreigners who want to take this step must understand from the beginning how the taxation is done, and the respective income and profits must be declared. You can rely on efficiency, accountability, and transparency when working with us, so feel free to contact our experts.

Taxation of microenterprises starting with 2023

The Fiscal Code in Romania continues to change, and the latest news refers to the taxation of micro-enterprises in Romania. If you find yourself in this situation, we recommend that you read the following lines to get an idea about the taxation of micro-enterprises in Romania:

  • A 1% tax is imposed for companies with a turnover of EUR 500,000 (reduced from EUR 1 million) and at least one employee.
  • The same tax applies if stockholders own more than 25% of the social capital in 3 companies.
  • If the company has other income sources apart from consulting and management, in a range of more than 80% of total income, then the 1% tax is applied.

But to find out all the changes brought by the law in this direction, please contact our accountants in Romania. They can explain in detail the aspects that interest you in updating the company from a fiscal point of view.

News regarding taxation in Romania

According to the changes brought by the law in 2022, the exception from paying income tax for salary-related income of individuals with activities based on an employment agreement for 12 months with Romanian companies and seasonal activities was eliminated. Also, the field of construction has changed.

For example, fiscal facilities are now limited to assimilated salaries of up to 10,000 RON and not up to 30,000 RON, as it was until recently. We also mention that no reduced social contributions and no income tax are due for salary assimilated income of 10,000 RON gross. We recommend that you talk with our accountants in Romania and find out all the information on this matter, in order to be aware of the fiscal changes brought by the law.

Some aspects related to the Romanian economy

According to the latest data, GDP in Romania grew by 4% year-on-year in Q3 of 2022, thus marking the sixth consecutive quarterly increase. It is also mentioned that Romania’s economy grew by approximately 1.3%, in the current social and political context. Positioned at approximately 11.8%, inflation registered a significant increase, but according to estimates, it will decrease significantly in the next two years.

While the unemployment rate is somewhere around 5.4%, the gross public debt is approximately 47.9% of the total recorded GDP. Even if the agricultural sector and the chemical industry were affected in the direction of development in 2022, EU funds are expected to inflow, and GDP growth to be supported by gross fixed capital and the Recovery and Resilience Facility. But what will impact inflation until it stabilizes, will be the price of gas and energy, but changes in this sense will be registered starting from 2023.

If you want to find out how the new economic directions and changes in the tax legislation affect your business, we recommend that you contact our specialists. We can provide you with information about the taxes in force and the changes made, as well as help with the implementation of the new tax rules and tax exemption in Romania.

Investing in Romania

Romania offers numerous investment opportunities for international players who want to access a free and competitive market. In addition to the favorable tax system and the experienced workforce, Romania offers other advantages to local and foreign investors, such as simplified company registration procedures, economic connections with major international markets, the opportunity to generate profits in areas such as IT, production, agriculture, tourism, and cars. Here are some statistics that outline the economic direction of Romania:

  • The 2020 Doing Business report ranked Romania 55th out of 190 worldwide economies for simplified business procedures and more.
  • Statistics provided by the National Bank indicate that Romania experienced a 9% year-on-year growth in foreign direct investment inflows, reaching a total of EUR 9.6 billion in 2022.
  • Germany, Austria, the Netherlands, Cyprus, and Italy are the key investor partners of Romania.

Interested in more about the Romanian income tax calculator? Would you like further details about the Romanian income tax rate? You can contact our Romanian accountants and see how you can be helped.