The Romanian tax system for companies is a fiscal friendly one, which is mostly attractive for small and medium entrepreneurs interested to set up a company in Romania.
For very specific details of the Romanian tax system, like Corporate Income Tax (CIT) or Dividend Tax please visit the specific section of our site, where we have detailed about its. Our aim here is to provide a short overview for any potential investor over the Romanian tax system.
Definition of taxpayers under the Romanian tax system
- Romanian legal persons, taxpayers subject to the microenterprises tax or specific tax, tax-transparent entities with legal personality and certain institutions specifically defined in the Fiscal Code (Law no. 227/2015, as subsequently amended and supplemented).
- Foreign legal persons operating through a permanent establishment/several permanent establishments in Romania.
- Foreign legal persons that have their actual place of management in Romania.
- Foreign legal persons that obtain income from the transfer of ownership or any other rights related to immovable property located in Romania.
- Legal persons established according to European legislation that have their registered office in Romania.
Fiscal year under the Romanian tax system
In general, the fiscal year is the calendar year. Taxpayers that have opted for an accounting period other than the calendar year, in accordance with the accounting regulations, may opt for the fiscal year to correspond to the accounting period.
Tax returns and payments under the Romanian tax system
Quarterly (for quarters I-III) – until the 25th of the first month following the quarter.
- in general, until the 25th of the third month of the following fiscal year (25 March of the following year, if the fiscal year corresponds to the calendar year).
- until the 25th of the second month of the following fiscal year (25 February of the following year, if the fiscal year corresponds to the calendar year) in the case of non-for-profit organisations that receive taxable income and taxpayers that receive the majority of their income from growing cereals, industrial plants and potatoes, and from fruit-growing and viticulture.
Tax loses according to the Romanian tax system
Tax losses may be carried forward for a period of 7 years. There is no carry back of losses. Changes in ownership do not affect loss carryovers. Tax losses registered by taxpayers that cease to exist because of reorganisations can be recovered by beneficiary taxpayers. Taxpayers that have paid taxes on the income of microenterprises and that have previously incurred tax losses shall apply the rules for recovering tax losses from the date they resumed the application of the corporate income tax. This loss shall be recovered within the 7 years after the registration of the tax loss.
What is the Romanian tax system considering deductible expenses
As a rule, expenses incurred in order to carry out the economic activity are deductible. Certain types of expenses are specifically provided as limited or non-deductible when calculating the fiscal result.
Limited deductible expenses are the following:
- Social expense – 5% of the expenses with salaries
- Entertainment expenses – 2% of gross accounting profit + entertainment expenses
- Vehicle operation expenses – 50% for vehicles that are 100% not used for business purposes (with certain exceptions)
Romanian tax system rates
- 1% – 3% FOR MICROENTITIES (tax on income);
- 16% STANDARD TAX RATE;
- 5% FOR INCOME FROM DIVIDENDS;
- 1% FOR INCOME FROM GAMBLING, WITH CERTAIN EXCEPTIONS;
- 50% – INCREASED TAX RATE for tax heavens.