by Vlad Cuc
Upon deciding to invest in Romania (directly or through a Romanian company) one must take into account all the fiscal regulations of the country in order to be able to come up with financial predictions as accurate as possible. The following must be considered: the Romanian corporate income tax and dividend tax, country of origin for the foreign investor, EU or non-EU origin, existence of double taxtion treaties, eventual applicable witholding taxes in Romania.
- Who are considered foreign tax payers per the Romanian law?
Non-residents who have income taxable in Romania are required to pay tax (referred to in this articlecle) and are referred to as tax payers. It is very important to note that a Romanian company 100% owned by a foreign company or person is considered a Romanian resident. Therefore all fiscal regulations will applicable accordingly. Nevertheless the foreign company or person owning shares in the Romanian company shall pay dividend tax for instance in accordance to the Romanian law; the laws and regulations described in this article shall therefore apply.
- What is to be taxed?
Tax provided by this chapter, hereinafter tax revenues from Romania by non-residents apply on taxable gross income obtained from Romania. This includes for instance: a) dividends from a resident; b) interest from a resident; c) interest from a non-resident has a permanent establishment in Romania, if the interest is an expense of the permanent / permanent establishment designated; d) royalties from a resident; e) royalties from a non-resident has a permanent establishment in Romania, where the fee is an expense of the permanent / permanent establishment designated. Pelase note that this list is not complete, but rather shown as an example.
- What is the amount of payable tax in Romania?
The tax payable by non-resident taxable income obtained from Romania is calculated , withheld and paid to the state budget by the payers of income tax. The tax payable is calculated by applying the following rates to the gross income as per the below:
a) 25% for income from gambling (in certain conditions mentioned by the Romanian Fiscal Code)
b) 50% for off the revenues are paid into a state with which Romania has not concluded a legal instrument under which to carry out the exchange of information (double taxation treaties for instance). These provisions apply only when the income of a certain nature mentioned by law. This is a rather recent regulations of the Romanian fiscal regulations. c) 16% for all other taxable income obtained from Romania.
- Are there any special rules for EU investors or signatories of Double Taxation Avoidance Treaties?
Yes. If a taxpayer is a resident of a country with which Romania has concluded a convention for the avoidance of double taxation , the tax rate applying to taxable income derived by that taxpayer in Romania shall not exceed the percentage provided for in the Convention applying the that income. Where are the different rates of taxation law or double taxation conventions apply more favorable tax rates . If a taxpayer is resident in a European Union country , the tax rate applying to taxable income derived by that taxpayer in Romania is more favorable share in the domestic law , EU law or double taxation conventions . EU legislation applies Romania’s relations with the European Union member states , ie states with which the EU has concluded agreements providing for measures equivalent. norms
Pursuant to the provisions of the Convention for the avoidance of double taxation and EU legislation , non-resident is required to submit income payer in time of income tax residence certificate issued by the competent authority of its State of residence , and where appropriate , an affidavit indicating the condition of the beneficiary in case of application of European Union law . If the tax residence certificate , statement will indicate that a beneficiary is not present within this period, the provisions of Title V. At the time of submission of tax residence and, where appropriate , the statement that indicates a beneficiary applies provisions of a double taxation convention or EU legislation and tax regulation is within the statutory period of limitation . In this sense , the tax residence certificate must state that the recipient has income in the period of limitation , resident in the Contracting State that is complete agreement on avoidance of double taxation in an EU Member State or a State that the European Union has concluded an agreement establishing equivalent measures for the entire period in which revenues were realized in Romania. A beneficiary for the purposes of European Union legislation will be evidenced by a certificate of tax residence and, where appropriate , his affidavit the cumulative fulfillment of conditions relating to : the minimum holding period , provided the minimum participation in Romanian legal person , employment in one of the forms set out in Title II or Title V , as appropriate , the quality of taxpayer paying tax or similar tax , without the possibility of an option or of being exempt . Tax residence certificate presented during the year for which payments are made available for the first 60 calendar days of the following year, unless conditions change residence.
Important Notes:
- Any resident may, personally or through an agent, a request to the competent tax authority, which will apply for the certificate of tax paid to the state budget by himself or by another person on his behalf. norms
- The competent fiscal authority is obliged to issue the certificate of tax paid by non-residents.
- The application form and the certificate of tax paid by non-resident, and conditions for the submission, that the release is determined by rules.