Romania operates a progressive tax system for individuals, though employment income is subject to a flat rate after mandatory social contributions are deducted. The system involves significant social security contributions from both employers and employees, alongside a flat income tax rate applied to the net salary base. Employers play a crucial role in the collection and remittance of these taxes and contributions through the payroll process, ensuring compliance with national regulations. Understanding these obligations is essential for any company employing staff in Romania, whether local or foreign.
Managing payroll and tax compliance in Romania requires careful attention to detail, as rules and rates can be subject to change. Employers are responsible for calculating, withholding, and paying various contributions and income tax on behalf of their employees, as well as making their own employer-specific contributions.
Employer Social Security and Payroll Tax Obligations
Employers in Romania are required to contribute to several social security funds based on their employees' gross salaries. The primary employer contributions are for the Work Risk and Accident Insurance Contribution (CAM). The calculation basis for these contributions is generally the employee's gross monthly salary, up to certain ceilings for specific contributions.
The standard employer contribution rates expected for 2025 are as follows:
| Contribution Type | Abbreviation | Rate (Expected 2025) | Calculation Basis | Notes |
|---|---|---|---|---|
| Work Risk and Accident Insurance Contribution | CAM | 2.25% | Gross salary | Rate varies based on the employer's activity risk class (0.15% - 0.85%) |
Note: The 2.25% rate for CAM is a general rate often cited; the specific rate depends on the company's NACE code and associated risk class, ranging from 0.15% to 0.85%. The table above uses the general reference.
Employers must also ensure that employee contributions (CAS and CASS) are correctly calculated and withheld from the gross salary before paying the net salary.
Income Tax Withholding Requirements
Employers are responsible for withholding income tax from their employees' salaries. The standard income tax rate applied to employment income in Romania is a flat 10%.
The taxable base for income tax is calculated by deducting mandatory employee social security contributions (CAS and CASS) from the gross monthly salary. Certain personal deductions and allowances may further reduce this taxable base before the 10% tax is applied.
The employer calculates the gross salary, subtracts the employee's mandatory social contributions (CAS and CASS), subtracts any applicable personal deductions, and then applies the 10% income tax rate to the resulting amount to determine the income tax to be withheld.
Employee Tax Deductions and Allowances
Employees in Romania are subject to mandatory social security contributions and income tax. These are typically withheld by the employer from the gross salary.
The main employee contributions expected for 2025 are:
| Contribution Type | Abbreviation | Rate (Expected 2025) | Calculation Basis | Notes |
|---|---|---|---|---|
| Social Insurance Contribution | CAS | 25% | Gross salary (up to a ceiling) | Ceiling is 24 times the national gross minimum wage per month |
| Social Health Insurance Contribution | CASS | 10% | Gross salary (no ceiling for employment income) |
Note: Specific exemptions or reduced rates may apply for certain sectors (e.g., IT, construction, agriculture, food industry) under specific conditions. The rates above are general rates.
Employees may also benefit from personal deductions that reduce their taxable income base for the 10% income tax calculation. The basic personal deduction applies to individuals with a gross monthly income below a certain threshold. This deduction amount varies based on the gross income level and increases for employees with dependents.
Expected personal deduction thresholds and amounts for 2025 (based on current regulations):
| Gross Monthly Income Threshold (RON) | Basic Personal Deduction (RON) | Additional Deduction per Dependent (RON) |
|---|---|---|
| Up to 2,000 | 500 | 150 |
| 2,001 - 3,000 | Decreasing from 500 to 0 | 150 |
| Above 3,000 | 0 | 150 |
Note: The basic personal deduction decreases linearly for gross incomes between 2,001 RON and 3,000 RON, reaching zero at 3,000 RON. The additional deduction for dependents (spouse, children, or other supported family members) is fixed per dependent, regardless of the employee's income level, but only applies if the employee's gross income is below 3,000 RON.
Tax Compliance and Reporting Deadlines
Employers in Romania are responsible for timely calculation, withholding, declaration, and payment of payroll taxes and social contributions. The primary declaration used for this purpose is Form 112, the "Declaration regarding the obligations for the payment of social contributions, income tax and the nominal record of insured persons."
Form 112 must be submitted monthly by the 25th of the month following the reporting period (i.e., the 25th of February for January payroll). The corresponding payments for social contributions and income tax withheld must also be made by the same deadline.
Annual reporting obligations also exist, summarizing the income and taxes paid to employees throughout the year. Employers must maintain accurate payroll records, including details of gross salary, contributions, deductions, and net pay for each employee.
Special Tax Considerations for Foreign Workers and Companies
Employing foreign workers or operating as a foreign company in Romania introduces specific tax considerations.
Tax Residency: An individual's tax obligations in Romania depend on their tax residency status. Generally, individuals who are tax residents in Romania are taxed on their worldwide income, while non-residents are taxed only on income sourced in Romania. A foreign worker may become a Romanian tax resident if they meet certain criteria, such as having their domicile in Romania or being present in the country for more than 183 days in any 12-month period.
Double Taxation Treaties: Romania has an extensive network of double taxation treaties with other countries. These treaties aim to prevent the same income from being taxed in two different jurisdictions and may provide relief or specific rules regarding the taxation of employment income for foreign workers. The provisions of a relevant treaty can override domestic tax law in certain circumstances.
Foreign Companies: A foreign company employing staff in Romania may trigger the creation of a permanent establishment (PE) for tax purposes, depending on the nature and duration of its activities. If a PE is created, the foreign company becomes subject to Romanian corporate income tax on the profits attributable to the PE. Even without a PE, a foreign company employing residents in Romania is generally required to register as an employer for payroll tax and social contribution purposes and fulfill all associated obligations, including withholding and reporting. Utilizing an Employer of Record service can help foreign companies manage these complex payroll and compliance requirements without establishing a local entity or PE.
