Expatriate tax ebook - Romania

What taxes?

Capital gains tax
Inheritance, estate and gift taxes
Investment income
Local taxes
Real estate taxes
Social security taxes
Stock options
Wealth taxes
Other specific taxes

Capital gains tax
Capital gains tax applies in Romania. Non-resident individuals obtaining capital gains in Romania are subject to the same tax treatment as that for applied to the Romanian individuals.

The income tax rate for capital gains obtained from transfers of shares of an Romanian unlisted companies and limited liability companies is 16%; the income tax is calculates after each transaction.

Other capital gains are taxed from a 1% at a 16% tax rate.

Subject to capital gains tax could be: constructions of any type, parts of such constructions, the land corresponding to such constructions, land of any type; participation titles (any share or other social part in a joint stock company, limited liability company, partnership, limited partnership by shares, limited partnership, or other legal person or an open investment fund); any other financial instrument that is qualified as such by the National Commission of Securities, including the financial derivatives and social parts.

Inheritance, estate & gift taxes
Generally inheritance and gifts are tax-exempt. There are exceptions (e.g. real-estates). 

When the ownership right over the land and constructions of any type is acquired by inheritance or donation between relatives up to the third degree, inclusively, and between spouses, generally there are tax-exempt.

Investment income
For foreign nationals, income from interest and dividends paid by Romanian resident companies represents Romanian taxable income from investments. The payer of the income generally withholds taxation at source. Applicable double tax treaties may reduce or eliminate the tax, depending on the tax residence of the recipient.

In Romania, investment income is generally taxed with a rate of 16%. Dividends are taxed at a 16% flat tax rate.

As of 1 of July 2010 interest income earned from deposits in Romania banks, or other saving instruments, is taxed at 16%.

The following are considered investment income: dividends; interest; gains from the transfer of shares/ participation titles/ social parts; gains from sale-purchase operations of foreign currency on deadline, based on a contract; incomes from liquidation/dissolution without liquidation of a legal person.

Local taxes
Main local taxes: tax on land (based on the surface, zone and category of use of the land), tax on buildings (based on constructed area, urban/rural area, construction materials etc.), tax for means of transport (based on the cylinder capacity); fee for the issuance of certificates, permits and authorizations.

Real estate tax 
For income from rent, the same individual income tax rate (16%) applies. However, there is a deemed expense equal to 25% of the rental income which is considered as deductible for income tax calculation purposes (no supporting documents are needed).

Income from the transfer of real estate (for the transfer of the right of ownership to constructions and land), the tax that is computed as follows:

a) for properties owned for less than 3 years:

• 3% up to the amount of 200,000 RON, inclusive;
• exceeding 200,000 RON, 6000 RON + 2% of the value exceeding 200,000 RON.

b) for properties owned for more than 3 years:

• 2% up to the amount of 200,000 RON, inclusive;
• exceeding 200,000 RON, 4000 RON + 1% of the value exceeding 200,000 RON.

Income tax due for transfer of ownership is to be calculated at the value declared by the parties in the transfer documents and is withheld by the public notary. If the value declared by the parties is lower than the estimated value established by the expert appraisal conducted by the Chamber of the Notaries Public, the income tax is calculated at the reference value. The tax is to be remitted by the twenty-fifth of the month following that in which the income was withheld.

Social security taxes
Social security contributions apply in Romania as well. Please find below the contribution chart.

The above mentioned taxes apply to the gross salary of the employee.

In terms of social contribution, for EU/EEA individuals the EU social security regulations apply. For non-EU/EEA individuals, where no bilateral social security convention is in place, Romanian law applies.

Stock options
Incentive plans (stock options) are now specifically regulated by current individual income tax legislation. Under the Romanian Fiscal Code, some stock options benefits are not taxable at granting or exercising; rather, the moment of taxation arises upon disposal of the shares.

The tax treatment of other forms of stock option plans (such as RSUs) varies, depending on the terms and conditions of the specific incentive plan.

As the tax rules are rather complicated and in some cases subject to interpretations, we would recommend to contact us to discuss the tax treatment of your specific plan before any type of event.

Wealth tax
There is no wealth tax in Romania

Information about Romania:

• introduction
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities