Tax & Residency Guide in Romania

# Comprehensive Tax Guide for Romania

## Residency Triggers in Romania

In Romania, an individual is considered a tax resident if they spend more than 183 days in the country in a calendar year. Additionally, if an individual's center of vital interests is in Romania, they may also be deemed a tax resident, even if they do not meet the 183-day threshold.

## Tax System Type in Romania

Romania operates under a progressive tax system, with tax rates ranging from 10% to 50%. Individuals are taxed on their worldwide income, while non-residents are only subject to tax on their Romanian-source income.

## Tax Treaties in Romania

Romania has an extensive network of double tax treaties with numerous countries to prevent double taxation and provide relief to taxpayers. These treaties typically cover aspects such as residency status, withholding taxes, and tax credits.

## Entity Options in Romania

For businesses operating in Romania, the most common entity options include limited liability companies (SRL), joint-stock companies (SA), and partnerships. Each type of entity has its own tax implications, legal requirements, and liability structures.

## Filing Requirements in Romania

Individuals in Romania must file an annual tax return by May 25th of the following year. Companies are required to file monthly, quarterly, and annual tax returns, depending on their size and revenue.

## Tax Rates in Romania

The tax rates in Romania are progressive, with the following income tax brackets for individuals:

- Up to 22,800 RON: 10% - 22,801 - 48,000 RON: 16% - 48,001 - 88,500 RON: 25% - 88,501 - 165,000 RON: 35% - Over 165,000 RON: 50%

## Deductions in Romania

Common deductions for individuals in Romania include contributions to private pension funds, health insurance expenses, and charitable donations. Businesses can deduct expenses related to salaries, utilities, and professional services.

## When to Hire an Advisor in Romania

Hiring a tax advisor in Romania is recommended for individuals and businesses to ensure compliance with the complex tax laws and regulations. An advisor can help optimize tax liabilities, maximize deductions, and navigate any tax disputes or audits.

## Country-Specific Tax Strategies for Romania

1.

Take Advantage of Tax Incentives

Romania offers various tax incentives for businesses in certain sectors, such as IT, research & development, and renewable energy. Understanding and leveraging these incentives can significantly reduce tax liabilities.

2.

Utilize Holding Structures

Setting up a holding company in Romania can provide tax advantages, such as exemption from capital gains tax on the sale of shares in certain circumstances.

3.

Optimize Transfer Pricing

Companies operating in Romania should carefully manage their transfer pricing policies to comply with regulations and avoid penalties. Proper documentation and arm's length pricing are crucial in this regard.

4.

Plan for Succession

Individuals with significant assets in Romania should consider estate planning and succession strategies to minimize inheritance tax liabilities for their heirs.

In conclusion, navigating the tax system in Romania requires a thorough understanding of residency rules, filing requirements, tax rates, and deductions. Seeking professional advice and implementing country-specific tax strategies can help individuals and businesses optimize their tax position and ensure compliance with Romanian tax laws.