MAZARS ROMANIA S.R.L
6E Dimitrie Pompeiu Str
0040 21 528 57 57
Partner, Tax Advisory
0040 21 528 57 57
691 20 70 58
The general corporate income tax is a flat rate of 16% in Romania. In order to compute the taxable profit, the accounting profit is adjusted upwards (with non-deductible expenses) or downwards (with non-taxable revenues). A maximum 50% additional deduction can be applied for certain R&D expenses. The loss recorded by a company can be carried forward for 7 years. Starting with 1 January 2013, the loss can be carried forward as well by companies resulting from an M&A or spin-off operation.
Thin capitalization rules are applicable when considering interest and foreign exchange differences. Capital gains arising from the sale of the participations held in a state with whom Romania has concluded a DTT are non-taxable (certain conditions apply). No CFC rules are applicable in Romania.
Romania has an international treaty network consisting of approximately 85 double tax treaties. Capital gains are subject to a 16% tax, except for gains resulting from holding or performing transactions with government bonds. Dividends and interest paid by a Romanian company to companies located in other EU member states are not taxable, provided that certain conditions are fulfilled. In all other relations for withholding tax the general tax rate and the relevant double tax treaty are applicable.
A compulsory small company scheme is applicable for companies obtaining revenues lower than EUR 500,000 as follows:
However, companies engaged in certain types of activities (e.g. banking, insurance, consultancy, etc.) are excluded from this scheme.
There is a tax on special constructions (pipes, roads, and special constructions). The constructions that were subject to tax on buildings are exempted. The amount of this tax is calculated by applying the 1% rate to the carrying value of the respective construction, as recorded in the account books on 31 December of the previous year.
The general rate is 19%. Reduced rates are 9% (e.g. for medicines, bread, flour, food etc.) and 5% (applied to residential sales under certain conditions, for journals, books). The following options/limits based on the EU Directive are presented in the Romanian VAT legislation:
VAT-exempted activities consist of hospital and medical services, financial and banking services, insurance and reinsurance, sale and rental of real estate, certain types of educational and training activities, and other activities of public interest. The VAT cash accounting system is optional for companies having an annual adjusted turnover of less than RON 2,250,000 (approx. EUR 500,000). The following options/limits based on the EU Directive are presented in the Romanian VAT legislation:
Other indirect taxes applicable in Romania include excise tax and environmental tax.
Romania applies a 16% flat tax rate to revenues obtained from dependent activities (e.g. employment or activities assimilated to employment), independent activities (e.g. freelancers). Dividends are subject to a 5% tax rate.
Dependent activities are subject to SSC at both the employee (16.5%) and the employer level (most common around 23% but subject to changes for special working conditions). Freelancers pay SSC at 31%. Starting with 1st of February 2017 the cap on the SSC taxable base has been eliminated.