income tax

INDIVIDUALS

Renting properties is subject to 10% income tax. However, a flat deduction of 40% from the gross revenue is applicable; therefore, the final income tax is 6% (the rule is suitable for up to 5 rented properties).

The tax is due to be reported (online) and paid on May 25th of the following year. Foreign individuals need a tax registration in Romania.

The tax regime in the residence country should be considered

The sale of properties in Romania is subject to a 3% revenue tax. A fixed deduction of RON 450,000 is applicable. The tax is paid to the Notary when the sale agreement is signed.

Romanian residents are due to pay a health insurance contribution if the yearly taxable income is at least the equivalent of 12 national minimum wages (RON 27,600).

If anticipated, the health insurance contribution is RON 2,760 RON/year.

COMPANIES

Small companies (yearly revenues less than EUR 1 million) are subject to a revenue tax (1% or 3% if the company has/does not have employees).

The company’s profits may be distributed to individual shareholders after a 5% dividend tax (withheld).

The tax regime in the residence country should be considered

Larger companies (yearly revenues at least EUR 1 million) are subject to 16% profit tax.

Complete accounting reports are required for any company. A CPA or internal accounting department must prepare the financial statements. An audit is not mandatory except for larger companies.

PROPERTY TAX
residential properties

INDIVIDUALS

The tax is 0.08%-0.2% per year from the building’s taxable value, depending on the Municipality decision. The taxable value is calculated according to the tax code and cannot exceed RON 2,600/sqm in 2021.

Foreign individuals need a representative to register the property with the Municipality.

COMPANIES

The Property tax for the company’s residential properties is 0.08%-0.2% per year from the building’s taxable value, depending on the Municipality decision.

The difference compared to individual owned properties is the taxable base. The taxable base is the purchase value or the value resulting from a certified evaluation in companies’ case. Such evaluations are due every five years.

VAT

1. PURCHASE

The regular VAT quota is 19%. However, a 5% VAT applies to houses sold to individuals, in certain circumstances: useful area max 120 sqm and value up RON 450,000. The deal will be increased to EUR 140,000 starting with 2022.

The reversed charge is applicable for transactions between VAT entities.

 

2. RENT

Rent of buildings (long term) is VAT exempted unless the owner chooses otherwise. Should the owner deducted VAT upon purchase, renting without VAT will generate VAT liabilities consisting of deducted VAT adjustments? The adjustment period is 20 years.

 

3. SALE

The sale of the building that is now new is VAT exempted unless the owner chooses otherwise. Should the owner deducted VAT upon purchase, renting without VAT will generate VAT liabilities consisting of deducted VAT adjustments? The adjustment period is 20 years.

 

Summary

OWNER VAT PURCHASE VAT RENT VAT SALE TAX RENT TAX SALE PROPERTY TAX BASIS
INDIVIDUAL 19%/5% 0 0 6% 3% (ron 450 K exempted) Max RON 2,600/sqm
VAT Company (micro) Reversed charge 19% 19% 3% on revenue + 5% on dividends 3% on revenue + 5% on dividends Purchase price or evaluation
Non VAT Company (micro) 19% 0 0 3% on revenue + 5% on dividends 3% on revenue + 5% on dividends Purchase price or evaluation

The purpose of this page is to disclose the tax rules applicable to investments in Romanian properties (more specifically apartments), helping investors to choose the most tax-efficient model for their investment.

This is a list of the general rules. For a thorough, personalized diagnostic, please contact us:

Eduard Pavel – Certified tax advisor
+40 727 333 345, [email protected]