Business Guide to Romania* - Bayern - Europa

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Chapter 9 Taxation of Individuals ■ A 16% flat tax rate applies on most individual income types ■ Romanians domiciled in Romania are subject to taxation on their worldwide income (except for salaries received from abroad for services performed abroad) ■ Romanians not domiciled in Romania and foreign individuals, regardless of their domicile, are subject to Romanian taxation only for income sourced in Romania (from 2007 foreign individuals may be taxed on their worldwide income if specific criteria are met) ■ Foreign individuals are required each month to calculate, declare and pay individual income taxes for income from personal services performed in Romania ■ Salary tax exemption for software engineers if certain conditions are fulfilled ■ Dividends are subject to a 10% withholding tax (15% for nonresidents) ■ Domestic interest income is subject to 1% until 31 May 2005, 10% until 31 December 2005, 16% after 1 January 2006 ■ Capital gains derived from shares and real estate transactions are taxed at different rates, depending on conditions 9.1 Individual Income Taxpayers Romania's individual income tax legislation defines taxpayers as: ■ resident natural persons; ■ non-resident natural persons conducting independent activities through a permanent establishment in Romania; 42 PricewaterhouseCoopers - Business Guide to Romania 2005 ■ non-resident natural persons conducting dependent activities in Romania; ■ non-resident natural persons deriving specific income. Criteria for qualifying as a resident are the following: ■ Domiciled in Romania, or ■ Centre of vital interests in Romania, or ■ More than 183 days in 12 consecutive months ending in the calendar year concerned*. * Residents (for second and third criteria above) for three consecutive years are taxable on worldwide income as of their fourth year of stay. 9.2 Taxable Income and Method of Taxation The following income is subject to Romanian income taxation: ■ Income subject to 16% flat tax rate a) Salary income b) Income from independent activities c) Income from transfer of usage rights d) Pensions income (over ROL 9,000,000~EUR 250) e) Income from agricultural activities f) Income from prizes (over ROL 6,000,000~EUR 167) g) Other income subject to 16% flat tax rate ■ Income subject to other tax rates h) Income from investments i) Income from real estate transactions j) Income from gaming.
Income Subject to 16% Flat Tax Rate a) Salary Income Salary is income in cash and/or in kind received by an individual based on an employment agreement. Income relating to salaries includes indemnities received by members of the General Meeting of Shareholders and of the Board of Directors and taxable benefits expressly stipulated by specific Romanian legislation, which include private use of company car and telephone. The following individuals are considered taxpayers: ■ Employees of Romanian companies, branches and representative offices of foreign companies; the employer is liable to calculate, withhold and transfer salary taxes, on a monthly basis; ■ Foreign individuals performing services in Romania based only on a foreign employment agreement; they are liable to submit a monthly tax declaration and pay monthly income tax based on salary sourced in Romania. b) Income from Independent Activities Income from independent activities includes: 1) income from freelance activities (authorisation needed); 2) income from intellectual property rights; 3) income from commercial mandate and commission agreement. b.1) Freelance Activities Income from freelance activities is assessed on the basis of entries in the single entry bookkeeping ledgers that providers of independent activities are obliged to keep. Net income is computed as gross income less deductible expenses. For freelancers (both Romanians and foreigners), the following are non deductible: fines, late payment penalties (other than contractual penalties), donations, sponsorship, and protocol expenses in excess of upper limits set by law, per diem and other expenses exceeding limits provided by current law. Alternatively, certain categories of freelancers are taxed on the basis of an income quota, as communicated yearly by the Romanian Ministry of Finance. Freelancers earning income from independent activities have the obligation to make equal quarterly provisional tax payments during the fiscal year. b.2) Intellectual Property Rights Chapter 9 - Taxation of Individuals The payers of royalties must compute, withhold, and pay a quota of 10% advance tax. The income is adjusted at the end of the year, when the provider may deduct expenses in a quota of 40% of the gross amount. b.3) Commercial Mandates and Commission Agreements A 10% withholding tax also applies for commercial mandates or commission agreements. The income is adjusted at the end of the year. c) Rental Income Gross annual income represents the income earned by the owner during the year as stipulated in the rental agreement registered with the Romanian tax authorities. Net income is determined by deducting a 25% expense quota from the gross income. Individuals earning income from these types of activities have the obligation to make quarterly provisional tax payments during the fiscal year. d) Income from Pensions Pensions are taxable only for the amount that exceeds ROL 9,000,000 (~EUR 250) per month. e) Income from Agricultural Activities The following activities are considered agricultural activities: ■ flowers and vegetables farming and selling, in greenhouses and/or in an irrigated system; ■ farming and selling of shrubs, decorative plants and mushrooms; ■ vineyard farming. f) Income from Prizes Tax on income from prizes in excess of ROL 6,000,000 (~EUR 167) is withheld at source g) Other Income Subject to 16% Flat Tax Rate The following types of taxable income are included in this category: ■ insurance premiums incurred by a payer that has no employment relationship with the beneficiary of the insurance; ■ gains received from insurance companies as a result of the insurance contract concluded between the PricewaterhouseCoopers - Business Guide to Romania 2005 43
Page 1 and 2: Business Guide to Romania* 2005 Edi
Page 3 and 4: Contents Chapter Page 1. Romania: a
Page 5 and 6: ■ Unions 30 6.2 Working Condition
Page 7 and 8: ■ VAT Compliance 48 10.2 Customs
Page 9 and 10: Chapter 1 Romania: a Profile ■ Ro
Page 11 and 12: upgrades made by Moody's and Fitch
Page 13 and 14: All visitors to Romania require pas
Page 15 and 16: nearly one-third of Romania's banki
Page 17 and 18: Mortgages are created under authent
Page 19 and 20: allowance of 20% of the value of th
Page 21 and 22: Chapter 4 Banking, Finance and Insu
Page 23 and 24: ■ Taking deposits; ■ Making loa
Page 25 and 26: tried to bring more transparency an
Page 27 and 28: Chapter 5 Corporate and Business La
Page 29 and 30: EUR 25,000 by 31 December 2005). Pa
Page 31 and 32: Chapter 6 Labour Relations and Soci
Page 33 and 34: employment contract with an occupat
Page 35 and 36: Chapter 7 Accounting and Audit Requ
Page 37 and 38: Chapter 8 Taxation of Corporations
Page 39 and 40: exempt from paying profit tax throu
Page 41 and 42: ■ Other salary and/or similar exp
Page 43: - revenues obtained from management
Page 47 and 48: ■ Income from sale of movable and
Page 49 and 50: similar function, cinema tickets, a
Page 51 and 52: guarantee import duties could be ob
Page 53 and 54: are transported between tax warehou
Page 55 and 56: also stipulates the elements that s
Page 57 and 58: elationships with key contacts, inc
Page 59: Appendices
Page 62 and 63: Appendix II Appendix II Major Banks
Page 64 and 65: Appendix III Restaurants Phone ■
Page 66 and 67: Appendix IV 481- 482 Internal Settl
Page 68 and 69: Appendix VI Appendix VI Accountants
Page 70 and 71: Appendix VII (b) Appendix VII (b) W
Page 72 and 73: Appendix IX Appendix IX Customs Dut
Page 74: Appendix XI Appendix XI Excise Tax

Business Guide to Romania* - Bayern - Europa

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