An Overview of the Tax System
Romania's tax system is structured to accommodate various business needs. Here's a quick glance at the key taxes that might be relevant for entrepreneurs and businesses:
Tax Type | Rate | Note |
---|---|---|
Corporate Tax | 16% on profit or 1% on revenue | 16% on profit for standard companies; 1% on revenue for micro-enterprises with revenue under €500,000 |
Dividend Tax | 8% | Applicable to dividends distributed to shareholders |
VAT | 19% (standard rate) | Reduced rates (5% or 9%) for certain goods/services; exemptions for specific activities |
Property Tax | Varies | Based on property value, location, and usage; specific rates for residential and commercial properties |
Register your Romanian Company
Start a business on the right foot, by registering your business with Incorpo.ro
We help you access the banks you need and offer a money-back guarantee if anything goes wrong!
Chapter 1: Introduction to Romania's Tax Landscape
1.1 The Romanian Tax Environment
Corporate Taxation:
- Standard Profit Tax: Companies in Romania are subject to a 16% tax on profit, a rate that aligns with many European nations.
- Micro-Enterprise Tax: For businesses classified as micro-enterprises with revenue under €500,000, a special 1% tax on revenue applies. This rate aims to support and encourage small business growth.
Value-Added Tax (VAT):
- Standard Rate: The standard VAT rate in Romania is 19%.
- Reduced Rates: Certain goods and services, such as food products or cultural events, benefit from reduced VAT rates of 5% or 9%, following specific guidelines.
Property Tax Considerations:
- Variable Rates: Property taxes in Romania vary from 0.08% to 1.5%, depending on factors like property value, location, and usage. Residential properties typically have lower tax rates compared to commercial properties.
1.2 Regulatory Compliance and Strategic Insights
Legal Framework:
- Compliance RequirementsRomania's legal framework stipulates specific compliance obligations, including periodic filings and compliance with accounting norms.
- R&D Incentives: Businesses engaged in research and development activities can benefit from a 50% additional deduction of eligible R&D expenses, encouraging innovation.
Economic Strategy:
- Supporting Various Business Stages: The differentiated tax rates, such as the 1% revenue tax for micro-enterprises, are part of Romania's strategy to support businesses at different growth stages.
Chapter 2: Key Aspects of the Romanian Tax System
2.1 Corporate Taxation in Detail
Standard Profit Tax:
- Rate: 16% tax on profit for standard companies.
- Applicability: This rate applies to both resident and non-resident companies on their worldwide income, provided they meet specific criteria.
- Filing Requirements: Corporate tax returns are generally due annually, by March 31 of the following year.
Micro-Enterprise Tax:
- Rate: 1% tax on revenue for micro-enterprises with revenue under €500,000.
- Eligibility: Companies with at least one employee and revenue below the threshold are eligible.
- Benefits: This simplified tax regime is designed to reduce administrative burdens and encourage the growth of small businesses.
``` 2.2 Dividend Tax Insights
Dividend Tax Rate:
- Rate: 8% on dividends paid to shareholders.
- Applicability: This rate applies to both individual and corporate recipients.
- Reduction Opportunities: Double taxation treaties may lead to reduced rates for non-residents.
2.3 Understanding Value-Added Tax (VAT)
Standard VAT Rate:
- Rate: 19% is the standard VAT rate in Romania.
- Goods and ServicesThis rate is applicable to the majority of goods and services traded within the country.
Reduced VAT Rates:
- 5% Rate: Applies to specific goods like books, newspapers, and certain medical equipment.
- 9% Rate: Applies to hotel accommodation, restaurant services, and certain medical and pharmaceutical products.
Exemptions:
- Examples: Certain activities, such as education and healthcare services, are exempt from VAT in Romania.
2.4 Property Tax Considerations
Property Tax Rates:
- Residential Property: Rates range from 0.08% to 0.2% based on the property's value.
- Commercial Property: Rates range from 0.2% to 1.5%, varying by location and usage.
- Regulamenti lokali: Autoritățile locale pot implementa reglementări specifice care afectează impozitul pe proprietate.
Chapter 3: Romania vs. The World - A Tax Comparison
3.1 Graphs and various other measures of Romanian business registration tax advantages.
3.2 Comparative Analysis with the UK, Delaware, and Bulgaria
Corporate Taxation:
- Romania16% tax on profits or 1% tax on revenue for micro-enterprises with revenue below €500,000.
- UK: 19% on profit, with plans to increase to 25% for profits over £250,000 by 2023.
- Delaware (USA): No state corporate income tax on goods and services provided by Delaware corporations operating outside of Delaware.
- Bulgaria: 10% on profit, one of the lowest in the European Union.
Dividend Taxation:
- Romania: 8% on dividends.
- UK: Ranges from 7.5% to 38.1% based on income level.
- Delaware (USA): Subject to federal tax rates, ranging from 0% to 20%.
- Bulgaria: 5% on dividends.
Value-Added Tax (VAT):
- Romania: 19% standard rate, with reduced rates of 5% and 9% for specific goods/services.
- UK: 20% standard rate, with reduced rates for certain categories.
- Delaware (USA): No state-level sales tax.
- Bulgaria: 20% standard rate, with reduced rates for specific categories.
Effective Tax Rate Comparison:
- Yearly Revenue Thresholds:
- Romania vs. UK: Romania becomes more advantageous when yearly revenue exceeds €8,286.
- Romania vs. Delaware: Advantageous in Romania for yearly revenue exceeding €10,986. Businesses intending to target the NYSE are advised to incorporate in Delaware when their yearly revenue surpasses $1,000,000.
- Romania vs. Bulgaria: Advantageous in Romania for yearly revenue below €500,000 with higher profit margins, with companies making over €500.000 EUR being recommended to register in Bulgaria for a lower tax footprint or consider other jurisdictions that are more fit for growth (eg: Delaware).
3.3 Insights into Bureaucracy and Other Factors
- Romania: Nivel moderat de birocrație; politici favorabile pentru întreprinderile mici și mijlocii.
- UK: Relatively efficient bureaucracy; established legal and business framework.
- Delaware (USA): Known for business-friendly regulations and efficient legal system.
- Bulgaria: Lower effective tax rate for high revenue companies but higher bureaucracy and administrative costs.