RomaniaTax Obligations Detailed

In Romania, employers navigate various tax obligations, including income tax withholding, social security contributions, and specific sector-based taxes.

Income Tax

• Rate: A flat rate of 10% is applied to employee income.
• Withholding: Employers withhold income tax from employee salaries.
• Due Date: Payment and filing of the declaration are due by the 25th of the following month.

Social Security Contributions

• Employee Contributions:
  • Pension insurance: 25% of gross income.
  • Health insurance: 10% of gross income.
• Employer Contributions:

  • Social insurance:

    • 4% for particular working conditions.
    • 8% for special working conditions.
    • 0% for normal working conditions.

  • Labor insurance (accident insurance): 2.25% of gross salary.

• Due Date: Employer and employee social security contributions are due by the 25th of the following month.

Other Taxes and Regulations

• Dividend Tax: 10% on dividends distributed starting January 1, 2025.
• Construction Tax: 1% of the value of existing constructions as of December 31 of the previous year (reintroduced in 2025). Payable in two installments by June 30 and October 31.
• Micro-enterprise Tax: Applicable to businesses with annual turnover up to EUR 250,000 (reduced from EUR 500,000 in 2025). Rates are 1% for businesses with employees and 3% for those without employees.
• Minimum Wage: Varies by sector; for example, RON 4,582 in construction and RON 4,050 in agriculture/food industry as of January 2025.
• Tax Exemption for Low Salaries: RON 300 per month is non-taxable under specific conditions until December 31, 2025.
• Elimination of Tax Incentives: Certain tax incentives previously applicable to employees in IT, construction, agriculture, and the food industry have been removed as of January 2025.

Additional Employer Responsibilities

• Annual Salary Certificate: Must be provided to employees upon request.
• Reporting: Employers must file monthly tax returns (Declaration 112) by the 25th of the following month.

It's important to note that this information is current as of February 5, 2025, and might be subject to change due to legislative updates. Always consult with a tax advisor for the most recent information.

In Romania, employee tax deductions encompass mandatory social security contributions, income tax, and certain allowable deductions for specific expenses and personal circumstances.

Social Security Contributions

• Pension Insurance: 25% of gross salary.
• Health Insurance: 10% of gross salary.
• Exemption: A RON 300 deduction from the calculation base for these contributions applies to full-time employees earning between RON 4050 (minimum gross salary) and RON 4300. This is applicable as of 2025.

Income Tax

• Rate: 10% of the taxable income (gross income after social security contributions and other deductions).
• Deductions: Several categories of personal deductions based on the number of dependents decrease as gross salary increases. Deductions are only available for monthly income of up to RON 5300. Employees with disabilities might be fully exempt from income tax.

Other Deductible Expenses

• Voluntary Pension Funds: Contributions up to the RON equivalent of EUR 400 annually.
• Private Health Insurance: Premiums and subscriptions up to the RON equivalent of EUR 400 annually.
• Trade Union Fees: Monthly membership fees.
• Sports Facility Subscriptions: Up to the RON equivalent of EUR 100 annually.
• Charitable Donations: Up to 3.5% of annual income tax can be directed to charitable causes.
• Tax Incentives Removal (2025): Tax incentives like income tax exemptions or reduced contributions previously available to sectors like IT, construction, and agriculture are eliminated for income earned starting January 2025.
• Minimum Wages (2025): Minimum wage in the construction sector is set at RON 4,582, while the minimum wage for the food and agricultural sector is RON 4,050.
• Meal Vouchers/Food Allowance: Employees may receive these benefits, but they are factored into the calculation for the RON 4300 threshold for the RON 300 deduction. This is specific to 2025.

General Tax Information

• Taxation is based on worldwide income for Romanian tax residents, and on Romanian-sourced income for non-residents.
• Specific rules apply regarding reimbursements for travel expenses and utilities for teleworkers (up to RON 400 monthly).

In Romania, Value Added Tax (VAT), known locally as Taxa pe Valoarea Adăugată (TVA), is a consumption tax applied to most goods and services.

VAT Rates

• Standard Rate: 19% (applicable to most goods and services not eligible for reduced rates or exemptions). As of February 5, 2025, there is no indication of a planned VAT rate rise, despite earlier reports.
• Reduced Rate 1: 9% (applicable to certain food products, water, hotel accommodations, medical equipment for disabled persons, and other specified goods/services).
• Reduced Rate 2: 5% (applicable to books, newspapers, certain medicines, social housing, access to cultural events, restaurant and catering services, and other specified goods/services).
• Zero Rate: 0% (applicable to intra-community supplies, exports, and international passenger transport).

VAT Registration

• Threshold for Established Businesses: RON 300,000 annual turnover. Businesses may opt to register even if below this threshold if they engage in specific activities like importing goods or real estate transactions. Non-established entities carrying out specific activities like Intra-Community transactions or exports are obligated to register for VAT, regardless of their turnover.
• Threshold for Distance Selling (Intra-EU): EUR 10,000 annual turnover. This applies to businesses selling goods online to consumers in Romania.
• Threshold for Non-EU Businesses: No threshold. These businesses providing taxable supplies in Romania are required to register for VAT and must appoint a fiscal representative.
• Registration Process: Businesses can register with the National Agency for Fiscal Administration (ANAF). Non-EU businesses must register through a fiscal representative.

VAT Filing and Payment

• Filing Frequency: Monthly for most businesses. Businesses with annual turnovers up to RON 500,000 and no intra-community acquisitions may file quarterly.
• Filing Deadline: 25th of the month following the reporting period.
• Payment Deadline: 25th of the month following the reporting period. Payments must be made in RON.
• Electronic Filing: Mandatory for medium and large businesses (annual turnover over RON 7 million). Most taxpayers are required to file electronically.

VAT Exemptions

• Exempt without Credit: Certain banking and financial operations, medical services provided by public institutions, educational services by authorized entities, and public postal services. For these exemptions, input VAT is not recoverable.
• Exempt with Credit: Includes exports of goods outside the EU, intra-community supplies of goods, international transport of passengers, and goods placed in free trade zones or bonded warehouses. Input VAT related to these supplies is generally recoverable.

SAF-T Reporting

• SAF-T (Standard Audit File for Tax): This digital reporting requirement applies to all taxpayers in Romania, including non-established businesses, according to the following schedule based on company size : Large taxpayers from January 1, 2022, medium taxpayers from January 1, 2023, and small and non-established taxpayers from January 1, 2025.

E-Invoicing

• E-Invoicing through RO e-Factura: Mandatory for B2B and B2G transactions between Romanian VAT-registered businesses for transactions occurring within Romania, commencing after June 30, 2024. Simplified invoices (generally those under EUR 100) will be included in the e-invoicing mandate from January 2025. Transactions with a place of supply outside Romania (including intra-community supplies with a valid EU VAT number) are excluded. For B2C transactions without a VAT ID, a 13-digit placeholder of zeros is used.

E-Transport

• E-Transport Reporting: Mandatory for international transport. Penalties for non-compliance are postponed for Authorized Economic Operators (AEOs) until March 31, 2025.

E-VAT

Compliance notifications and related penalties under the e-VAT mandate are postponed to July 2025.

Romania offers various tax incentives to stimulate investment and economic growth. As of January 1, 2025, several changes have been implemented, impacting existing incentives and introducing new ones.

Corporate Tax Incentives

• Reinvested Profit: Profits reinvested in new technological equipment used for production, processing, and refurbishment activities are exempt from corporate tax. This includes computers, peripherals, cash registers, control and invoicing machinery, and software. It's important to note that equipment under this incentive cannot be depreciated using the accelerated method.
• Research and Development (R&D): Companies engaged in R&D activities can benefit from an additional 50% deduction on eligible R&D expenses. Accelerated depreciation may also be applied to devices and equipment used in R&D. To qualify, activities must be classified as applicative research or technological development relevant to the taxpayer's activity and performed within Romania or the EU/EEA.
• Innovation and R&D Exemption: Taxpayers exclusively engaged in innovation and R&D activities related to scientific research and technological development are exempt from corporate tax for their first ten years of operation.
• Industrial Parks: Businesses located in industrial, scientific, or technological parks benefit from exemptions on land tax, building tax, and urban planning tax. They are also exempt from taxes associated with changing land destination for plots within these parks.

Other Tax Incentives and Changes

• Dividend Tax: The dividend tax has increased from 8% to 10% for all taxpayers (companies, individuals, and non-residents).
• Micro-enterprise Tax: The annual turnover threshold for micro-enterprise taxation has been reduced to €250,000 for 2025 and will further decrease to €100,000 in 2026. The disqualifying condition of having more than 20% of income from consultancy and management services has been removed. NACE codes determining the 1% or 3% micro-enterprise tax rate have been updated.
• Construction Tax: A 1% construction tax has been reintroduced on the value of existing constructions on a taxpayer's balance sheet as of December 31 of the previous year, excluding buildings subject to building tax. Public institutions, national research and development institutes, non-profits, and other specific entities are exempt.
• Elimination of Specific Incentives: Tax incentives, including income tax exemptions and reduced pension contributions for salaries below RON 10,000, previously applicable to IT, construction, agriculture, and food industries, have been eliminated as of January 2025.
• Foreign Tax Credit: Romania offers a foreign tax credit for taxes paid in foreign jurisdictions, provided there's a double tax treaty between Romania and the respective country and proper documentation. The credit is limited to the Romanian tax payable on that income.
• Participation Exemption: Dividends received by a Romanian resident company from an EU/EEA member state or a treaty country are tax-exempt if the Romanian company holds at least 10% of the payer's shares for a minimum of one year.

It is important to consult with a tax professional for the most current and personalized guidance on Romanian tax incentives. Regulations can be complex and subject to change, so up-to-date expert advice is crucial for accurate tax planning and compliance.