Any Romanian legal entity, a legal entity setup under the European law with its legal seat in Romania or a foreign legal entity whose place of effective management is in Romania will be treated as residents in Romania for tax purposes.

Resident

An entity that is a resident for tax purposes in Romania is subject to Romanian corporate income tax on its worldwide income.

Foreign

Foreign legal entities are generally subject to Romanian tax if:

• They have a permanent establishment in Romania
• They have a place of effective management in Romania
• They derive income from the transfer of a real estate property located in Romania or from the disposition of any rights related to such real estate property or from the exploitation of natural resources located in Romania or

• They derive income from the transfer of the participation titles in a Romanian legal entity or

• They receive certain categories of income from Romanian entities

Tax treaties can reduce or eliminate part of these taxes. Romania has an extensive network of treaties signed with over 90 countries.

Resident

The taxable income of a resident legal entity is represented by the difference between all gross income, less any non-taxable income and all expenses, less any non-deductible expenses, to which supplementary taxable or deductible items may be added or subtracted, as the case may be.

Foreign

Taxable profits attributed to a Romanian branch or any other Romanian permanent establishment are subject to corporate income tax under similar rules as applicable to a Romanian tax resident entity.

The taxable profit derived from the transfer of a real estate property located in Romania or from the disposition of any rights related to such real estate property are also subject to the standard corporate income tax rate.

Foreign entities may also be taxed in Romania for the taxable profits derived from the transfer of participation titles in a Romanian legal entity if the minimum holding conditions are not met.

Tax treaties can reduce or eliminate part of these taxes, provided that the required documentation to apply such treaties is available locally.

Romanian legal entities can be subject of 1 of the following tax systems:

Corporate income tax regime

Romanian tax resident entities and local permanent establishments of foreign entities are subject to 16 percent tax on their profits, computed/allocated as described above.

Companies with an annual turnover of at least EUR50 million during the previous financial year will also apply a tax based on the higher amount of:

• The 16 percent corporate income tax applied to the taxable profit; or
• 1 percent applied to the annual turnover less certain deductions related to investments.

Micro-enterprise tax regime

Newly incorporated legal entities and companies that register a cumulative level of their taxable revenues (as listed by the tax legislation) lower than the RON equivalent of EUR0.25 million may apply the micro-enterprise taxation regime. The micro-enterprise tax applies to revenues derived by the entity and is 1 percent for entities that have an annual turnover of no more than EUR60,000, and 3 percent for entities that exceed this threshold or are engaged in activities under specific NACE rev. 2 codes (ie, related to software development and the hospitality industry).

After the EUR250,000 threshold is exceeded, the legal entity automatically shifts to the corporate income tax regime.

Specific tax system for certain industries

Casinos are obligated to apply the corporate income tax regime and pay a tax no lower than 5 percent of revenues related to gambling activities.

Credit institutions are obligated to pay, besides the standard corporate income tax, an additional tax calculated as 2 percent of the annual turnover. The rate will drop to 1 percent starting 2026.

Companies in the oil and gas industry are obligated to pay, besides the standard corporate income tax, an additional tax calculated 0.5 percent applied to the annual turnover less certain deductions related to their investments.

Specific building tax

Starting 2025, a 1 percent annual tax will be due on the value of all buildings that are not subject to local taxes or exempt from such taxation. More details on the calculation basis are to be provided via application norms.

For entities whose fiscal year is the calendar year, the annual domestic corporate income tax returns are due on March 25 of the following year, with few exceptions applicable to some industries. Quarterly corporate income tax returns should also be submitted by the 25 of the 1st month following each quarter, except for the last quarter. Romanian companies that qualify as micro-companies for tax purposes have only quarterly tax reporting obligations.

As an exception, up to and including 2025 the deadline for the submission of annual statements (regarding corporate income tax, microenterprise tax or specific tax) is postponed until June 25th of the next year. For companies subject to corporate income tax that opt for a different fiscal period than the calendar year, the deadline is until the 25th of the sixth month following the end of the modified fiscal year.

Micro-companies tax

Romanian legal entities that register a cumulative level of their taxable revenues (as listed by the tax legislation) lower than the RON equivalent of EUR1 million in the previous year are subject to a specific micro-companies taxation system. Micro-companies are liable to pay a tax on their turnover of 1 percent for companies having at least one employee on their payroll and 3 percent otherwise.

Entities that operate in the hospitality industry are obliged to apply a specific taxation regime that is based on business capacity and not on the level of the profits derived from their activity.

Casinos are obligated to apply the corporate income tax regime and pay a tax no lower than 5 percent of revenues related to gambling activities.

Tax holidays

Not applicable for this jurisdiction.

Tax rulings

Taxpayers can request an individual tax ruling that applies only to a future fiscal situation. Taxpayers engaged in transactions with related parties may also request the tax authorities to issue an Advance Pricing Agreement (APA).

Tax incentives

There are tax incentives for R&D activities and for profits reinvested in technological equipment, computers and software.

Taxpayers may register for a corporate income tax consolidation group. The entities that are part of such a group must meet the following requirements:

• They are Romanian legal entities or have their head office in Romania;
• They are affiliated via an individual or entity owning, directly or indirectly, at least 75 percent of shares/voting rights in each entity;
• The individual or entity generating the affiliation is either a Romanian resident or resides in a state with which Romania has concluded a double taxation avoidance treaty or an information exchange treaty.

Consolidation is also available also for VAT purposes. However, different requirements apply.

Participation exemptions apply where a minimum holding criteria of 10 percent for at least 1 year is met for:

• Dividends received from an EU company or a company situated in a 3rd country that has concluded a tax treaty with Romania

• Capital gains derived from the sale of the participation titles in a Romanian company or a company resident of a tax treaty jurisdiction and
• The liquidation of a Romanian company or a company resident of a tax treaty jurisdiction.

Dividends received from a Romanian legal entity are non-taxable with no minimum holding requirements.

Capital gain realized by a resident entity is included in its taxable profits and taxed at the same rate as ordinary income.

Capital gain derived by a foreign entity from Romania is also taxed at the standard corporate income tax rate.

Capital gain tax may be eliminated under the participation exemption regime or under the provisions of tax treaties.

Distributions of current profits and retained earnings paid by a corporation to its shareholders represent dividends. A distribution in excess of current profits and retained earnings may qualify as a return of capital (if carried out as a share capital reduction), non-taxable up to the contributions of each shareholder to the share capital of the distributing company. A distribution of new participation titles or an increase of their nominal value, as a result of an incorporation of reserves, benefits or share premiums, are non-taxable for corporate income tax purposes.

Fiscal losses can be carried forward for 5 consecutive years and offset against 70 percent of future profits. Losses can also be transferred within reorganization processes, such as mergers, spin-offs, etc.

Qualifying mergers and spinoffs, as well as the transfer of business lines made in exchange for shares, may be tax-free to a participating corporation and its shareholders, provided that such operations are not tax-driven. Similar tax neutrality rules apply to cross-border reorganizations involving EU companies.

CFC

Under the controlled foreign corporation (CFC) rules, a Romanian tax resident shall include in its taxable basis the non-distributed revenues of an entity or a permanent establishment that qualifies as a CFC, proportionally to the taxpayers' participation in said CFC.

Exit taxation rules

Under the exit taxation rules, corporate tax resident involved in transfers of assets to or from the head office or a permanent establishment for which Romania loses the taxation right is liable to pay standard corporate income tax on the difference between the market value and the fiscal value of those assets.

General Anti - Abuse Rules (GAARs)

Under the GAAR, non-genuine arrangements or series of arrangements, meaning those that do not have valid commercial reasons that reflect economic reality, carried out for the main purpose of obtaining a tax advantage, will be disallowed by the tax authorities when computing the fiscal result of a taxpayer.

Subject to limitations and the availability of supporting documentation, foreign tax credits are available for foreign taxes paid.

Gains derived by a foreign entity from transfer of a real estate located in Romania or from the disposition of any rights related to such real estate are subject to the standard corporate income tax rate. Tax treaties can reduce or eliminate these taxes.

Arm's-length principles generally are applied under Romanian law to transactions between related entities. The Romanian rules are similar in many respects to the OECD guidelines, with certain differences. Specific transfer pricing documentation should be prepared by Romanian corporate tax residents for transactions with related parties with annual values exceeding certain thresholds.

Dividends, royalties, interest, rents, etc.

A 10 percent withholding tax applies to dividends and a 16 percent withholding tax applies to royalties, interest, commission and other taxable income paid by a Romanian tax resident to a foreign person, subject to reduction or elimination by an applicable tax treaty.

An increased 50-percent tax rate applies for payments made under certain conditions and when income is paid in respect of transactions that qualify as artificial.

Dividends, interest and royalties could be exempt from withholding tax if paid to a resident of another EU member state provided the minimum holding criteria and specific conditions referring to the legal and fiscal status of the payer and the beneficiary of the income are equally met and sustained through relevant documentation provided at local level.

Service fees

Withholding tax of 16 percent may apply to fees for management and consultancy services, regardless of where such services are rendered, and for other services if performed in Romania.

There is no capital duty. Transfer taxes and notary fees may be imposed upon sale of a real estate property.

Employers must withhold income tax, social security contributions (pension contributions) and health fund contributions from the gross salary received by each employee. Salary tax incentives are applicable for the R&D sector.

Employers also must pay a labor insurance contribution on top of the gross salary costs and an additional pension fund contribution for employees working in hard and special conditions, which are deductible for Romanian corporate income tax purposes at the level of the employer.

An annual property tax is levied by the local tax authorities for constructions, land and vehicles held in patrimony. Other local taxes are applicable in some cases.

Rules for deductibility of borrowing costs

In certain situations, excess borrowing costs, which are higher than the RON equivalent of EUR1 million, are deductible within a limit of 30 percent of the computation basis. The threshold for excess borrowing costs in relation to related parties is limited to the RON equivalent of EUR500,000.

The excess borrowing costs which fail the 2 deductibility tests are not deductible in the tax period when they are incurred, but will be carried forward to the following tax periods without a time limit.

MAP timeline

The provisions of EU Directive 2017/1852 on tax dispute resolution mechanisms within the European Union are present in the Romanian legislation. This provides the steps, and maximum deadline for each step, for the resolution of any tax disputes involving a Romanian tax resident entity and an EU tax resident entity.

DAC6 requirements

The DAC6 provisions (ie, reporting of cross-border arrangements) have been implemented in the Romanian legislation. The wording is in line with EU Directive 2018/822 of 25 May 2018 and introduces reporting obligations for local taxpayers and intermediaries (eg, advisors) that were involved in implementation of cross-border transactions that meet certain hallmarks listed by the legislation. Tax consultants and lawyers are covered by the professional privilege and can only report if the taxpayer releases them from such privilege. In the absence of such a waiver granted by the taxpayer, the reporting responsibility lie with the taxpayer.

VAT

Value-added tax shall be charged by Romanian companies for goods supplied or services provided.

Foreign entities are also liable to register for VAT purposes in Romania and charge Romanian VAT on supplies of goods and provision of services whose place of supply is in Romania. The standard VAT rate is 19 percent, while reduced VAT rates of 9 percent or 5 percent are applicable for supply of certain goods.

Companies registered for VAT purposes are allowed to deduct the input VAT incurred upon acquisition of goods and services used in respect of taxable transaction. The difference between the output VAT charged on goods supplied or services provided and the input VAT incurred upon acquisitions of goods or services should be paid to the state budget, if positive, or could be requested for refund from the state budget, where negative.