In Romania there are 2 alternative corporate taxes.

Turnover (income or revenue) tax

Currently, there are 2 applicable turnover taxes: 1% and 3% tax on turnover.

Turnover taxation is labeled as a special taxation. Companies that would like to trigger this taxation must fulfil these requirements:

• The 1% tax on turnover is for companies with a yearly turnover up to EUR 60.000. Certain business activities (e.g.: IT and computer related, hotels, restaurants, medical assistance etc.) are not eligible for 1% tax, but the 3% can be triggered.
• The 3% tax on turnover is for companies having a yearly turnover of more than EUR 60.000, but limited to EUR 500.000.
• The company must have at least 1 employee or the director must conclude a management agreement with the company for the monthly minimal gross salary - EUR 740. Hence, the monthly payroll taxes to be paid is around EUR 320.
• The income related to consultancy and management activities must NOT exceed 20% of the total turnover.
• The yearly financial statements must be duly and timely submitted by the 31st of March for the previous financial year. For this, the services of an accountant are required.

A shareholder (natural person) can own only one company having the turnover taxation.

If the above conditions (i.-v.) are not met, the company becomes a profit taxpayer (16% tax on profit) and it cannot switch back to the turnover taxation.

Profit tax

The corporate tax is 16% on profit (profit meaning turnover minus business expenses).

There is no condition to trigger profit taxation.

Any company that is not eligible for the 1% or 3% turnover tax will be subject to the 16% profit tax.

VAT

In Romania, the VAT is 19%.

A lower VAT rate is applicable only in some cases.

Before reaching a yearly turnover of approx. EUR 60,000, a company can become a VAT payer only by explicit request.

After reaching a turnover of approx. EUR 60,000 in a given year, a company automatically becomes a VAT payer and the accountant will file a certain application to obtain the related certificate.

Dividend tax

If the company generates profits, the shareholder has the choice (not the requirement) to withdraw the profits as dividends.

Before the dividends are withdrawn, the company must pay on behalf of the shareholder, the dividend tax of 8%.

Health insurance tax, only when withdrawing the dividends and only for shareholders residing in Romania

If the shareholder residing in Romania receives dividends, they are required pay a health insurance tax:

• Fixed EUR 400 per year, if the yearly dividends are between EUR 4,000 and EUR 8,000 (approx.);
• Fixed EUR 800 per year, if the yearly dividends are between EUR 8,000 and EUR 16,000 (approx.);
• Fixed EUR 1,600 per year, if the yearly dividends are above EUR 16,000 (approx.).

The above health insurance tax is not paid if the shareholder does not reside in Romania.

Such tax is calculated per shareholder.

Other taxes

There are some special taxes applicable to companies with a high yearly turnover which act in different business sectors (e.g. oil & gas, financial sector etc.)

Important note: To duly organize the business activity and to fulfil all the tax & accounting duties, the company needs to retain the services of a Romanian chartered accountant.

For more information, please contact us at: office@counselors.legal.