|
Corporate Taxes
The Fiscal Code came into effect on 1 January 2007. The code integrates key tax legislation and provides the basis for a stable framework of tax legislation, by requiring amendments to necessarily follow a specific juridical route.
In Romania, the fiscal year is the calendar year.
Resident entities are subject to tax on worldwide income. An entity is resident in Romania if it is incorporated in Romania or if its effective management and control are in Romania.
‘Associations’ or ‘consortia’ between Romanian legal entities, which do not qualify as a legal person, are taxable in Romania separately at the level of each partner.
For such associations between a Romanian legal entity and individuals or foreign entities, the tax must be computed and paid by the Romanian legal entity on behalf of the individuals or its foreign partners.
Non-resident companies are subject to tax on their Romanian-sourced income only. Sale of shares held in Romanian companies by non-resident companies and sale of real estate located in Romania are also subject to profits tax in Romania (see section related to capital gains tax).
A foreign company is considered to have a permanent establishment in Romania, without a legal presence here, if it has any of the following types of presence in Romania: an office, a branch, an agency, a factory, a mine, land for oil and gas extraction, a building site that exists for a period exceeding six months.
The standard profits tax rate is 16%. Profits tax payable by companies earning revenues from bars, nightclubs, discos, casinos and sports betting (including revenues obtained based on an association agreement) is computed at the standard 16% rate, provided the tax amount is not less than 5% of the total declared revenue. In case the profits tax payable is below this threshold, the taxpayer is liable to pay corporate income tax computed at 5% of the declared revenue from such activities.
If certain conditions are met, companies may opt for the micro-company regime, under which a 2% (2.5% in 2008 and 3% in 2009) income tax rate is applied to revenues derived by the Company.
The conditions to qualify for the micro company regime are the following:
- annual turnover up to EUR 100,000;
- the company should have between 1 and 9 employees; and
- the company should derive more than 50% of its income from activities other than consultancy and management.
Representative offices are taxed on a yearly basis at a lump sum of the RON equivalent of EUR 4,000, payable in two equal installments.
No separate capital gains tax is payable by resident entities. Capital gains from sale of immovable property located in Romania or from sale/transfer of shares held in a Romanian legal entity are taxed at the standard corporate tax rate of 16%.
Dividends
Under the EU Parent – Subsidiary Directive, dividends paid by resident legal entities to its shareholders (i.e. resident legal entities and EU resident legal entities) are exempt from withholding tax in Romania provided that the shareholders own minimum 15% (10% starting 1 January 2009) of the share capital of the Romanian legal entity for an uninterrupted period of two years ended at the date of dividends payment.
Unless the above conditions are met, a 10% tax rate applies to dividends paid by resident entities to other resident entities, while a 16% tax rate applies to dividends paid to EU resident legal entities (or, if a double tax treaty is applicable, the tax rate available under the respective treaty, if favorable).
If the shareholding period condition is fulfilled at a later stage, the dividends beneficiary would be entitled to benefit from the exemption at that moment and ask for a reimbursement of the withholding tax paid.
Dividends paid by Romanian legal entities to non-resident legal entities (non-EU entities) are subject to a 16% withholding tax or, if a double tax treaty is applicable, to the tax rate available under the respective treaty, if favorable.
Dividends paid by a Romanian entity to individual shareholders are subject to a 16% withholding tax rate.
Payments made by a Romanian legal entity to any of its shareholders for goods or services provided by the latter, in excess of the market value of the transaction, are assimilated to dividends from a tax point of view.
The same tax treatment will apply to payments made for supply of goods/services to be used for personal purposes by the company’s shareholders or associates.
The dividend tax must be withheld and paid to the state budget by the 25th of the month following the payment of dividend.
In case of dividends declared to Romanian residents (legal entities or individuals) which were not effectively paid by the end of the year, the dividend tax must be paid by 31 December of the respective year.
Foreign income of Romanian entities is included in the taxable income. This includes passive income as well as capital gains. However, a credit is allowed for foreign taxes paid, up to the level of the Romanian tax on that income.
Dividends received from EU resident entities constitute nontaxable income at the level of the Romanian recipient, if the Romanian beneficiary of dividends holds at least 15% (10% starting 1 January 2009) of the shares of the EU entity for an uninterrupted period of minimum 2 years.
|
