This article is going to look into the what, when and how much of corporate taxes in Romania. We will begin by understanding the different taxes that citizens are liable to pay.
Standard Tax Rates
For both Romanian and foreign companies that are permanent establishments in Romania (PE), there is a profit tax rate of 16%. If no double tax treaty is established, companies must pay taxes on income earned worldwide. Those companies that are non-resident must pay taxes on income that is obtained from Romanian taxpayers both in Romania and overseas.
Nightclubs and gambling operations have two different tax rates, 5% of the revenue earned from their activity or 16% of the taxable profit, depending on which is higher.
Micro-company Tax Rates
A micro-company is one that generates no more than 1 million euros at the end of the previous year. It also includes newly founded businesses for the first fiscal year. These companies must pay an obligatory revenue tax rate. This rate is set at 1% if the company has one or more employees. If the company has no employees the rate is 3%.
There is one opportunity for applying profit tax for micro-companies. In order to do so, the micro-company must have a subscribed share capital of a minimum of 45,000RON and have a minimum of two employees.
Taxes for micro-companies are calculated and paid quarterly. This must be done by the 25th day of the month preceding the quarter.
The Fiscal Year in Romania
Most companies follow the calendar year. If a company chooses an alternative fiscal year they have the choice to align the tax year with the financial year. Any changes to a company’s fiscal period but be communicated to the relevant tax authorities within 15 days of the new fiscal year.
Taxpayers are required to pay taxes quarterly, by the 25th of the following month (e.g. The 25th of April for the first quarter). This excludes the final quarter in which most companies have until the 25th of the third month after the end of the fiscal year.
Banks, non-profit organizations, those who receive their income from agriculture, and other companies stated by law, may have different systems. Banks and branches of foreign banks, for example, have to use the advance quarterly profit tax payment. This applies to new businesses, including newly-established banks and foreign branches in Romania.
As the payments are in advance, the taxes are calculated based on the previous year’s profit tax plus the inflation rate of the consumer price index (CPI). The CPI is set by the Order of Ministry of Finance and is announced by the 15th of April of the same year of the advanced tax payments. The consumer index rate in 2018 was 103.1%.
If a company suffers a loss, the taxes are calculated based on the income for the quarter that has just passed.
Non-profit organizations and those who receive a major part of their income from crop production are obliged to pay profit taxes annually, by the 25th of the next year.
Advanced payments must be declared and paid before the 25th of the last month of said fiscal year.
Late Payment Fees
There is a late payment interest rate of 0.02% daily. On top of that, there is a penalty of 0.01% for each day the payment is delayed. If a company doesn’t declare their income, or if there are errors, there will be a daily non-declaration fee of 0.08%.
Non-Resident Companies in Romania
There is a 16% profit tax for non-resident companies that obtain income from selling real estate in Romania or from the sale of shares in a Romanian company. Tax agents can be appointed for non-residents but if the company is a Romanian PE, it’s the buyer who must declare and pay the annual profit tax.
To complete a capital gains tax declaration as well as carrying out the payment, quarterly statements must be submitted. These statements start from the 25th day after the first quarter when the non-resident began earning capita gains that are taxable in Romania. An annual profit tax return must also be submitted.
Regardless of whether the activity is in progress, the quarterly statements and the annual return has to be submitted while the non-resident company is registered with the tax authorities in Romania.
A Tax Audit in Romania
Any legal person can be subject to tax inspections. The same tax period cannot be investigated again unless there is new information that wasn’t present during the first inspection. The taxpayer will receive written notice of the inspection beforehand. Generally speaking, there is a maximum of six months for the inspection to be completed. A report will be drawn up and presented to the taxpayer 30 days after the inspection has been completed.
Statute of Limitations
In the majority of situations, there is a 5-year statute of limitations starting on the 1st of July of the year after the related tax year.