Double Taxation in Romania

According to Romanian and international tax law, non-residents shall pay taxes for income from Romania. For such income one has to assess if it is also taxable in Romania.

What are taxable incomes in Romania?

Taxable incomes include for example the following:

• Dividends from a Romanian legal entity;
• Income of a Romanian permanent establishment;
• Income from the sale of shares and/or from the liquidation/closure of a Romanian legal entity;
• Income from management or consultancy services, which are paid by a resident or by a permanent Romanian establishment as expenses;
• Income from dependent and independent activities performed in Romania;
• Income from real estate or the sale of Romanian real estate;
• Income from services performed in Romania, excepting international transport and services related to this;
• Remuneration of non-resident directors, founders or members of the management board of a Romanian legal entity;
• Interests, commissions or royalties from a resident person or a permanent Romanian establishment.

Income may be subject to withholding taxes in Romania or have to be reported and paid by the non-resident person.

In order to avoid double taxation in case of tax claims in the country of residence and tax claims of the Romanian tax authority, the treaties for the avoidance of double taxation, hereinafter called DTT, shall be applied.

What is a DTT?

The purpose of DTTs is to determine among others the allocation of the tax right, the exchange of information between the authorities of the parties of the respective DTT, in order to avoid a double taxation of income earned by a tax payer in another DTT state than the DTT state of residence.

Romania has concluded almost 90 DTTs with other countries, which are available on the website of the Romanian tax authority ANAF.

When and how does the DTT apply?

The DTT does not apply automatically. The respective non-resident tax payer shall file a certificate of tax residence at the time / for the period during which he obtains the income. Such certificate is issued by the competent tax authority from the country of residence. In case such certificate was not filed, the Romanian income shall be taxable according to the Romanian Tax Code.

The tax payer has the right to benefit from the lowest applicable tax rate between the national legal provision and the DTT.

The provisions of the DTT regarding the allocation of taxation rights prevail. Hence in case the Romanian income is taxable under Romanian law, but not under the DTT, the DTT prevails.

Conclusion

Non-residents who receive income from Romania have to fulfill additional formalities in a timely fashion in order to avoid double taxation.

Please find more detailed information at:

https://stalfort.ro/wp-content/uploads/2021/05/20210408_AZ_Avoiding-double-taxation-some-tipps.pdf