A RT I C L E

APRIL 2005

Taxation in Romania

!@#
Corporate taxes at a glance
(a) See section related to prots tax.
Particulars Rates Notes
(b) The withholding taxes referred in the table are levied on
Corporate Income Tax Rate (%) 16 (a) income earned in Romania by Romanian legal entities (referred
to below as residents) and non-resident legal entities (referred
Capital Gains Tax Rate (%) 16 (a) to below as non-residents), income which is not attributable
Branch Tax Rate (%) 16 (a) to a permanent establishment of the non-resident recipient in
Romania. This section does not cover withholding taxes applied
Withholding Tax (%) (b) on income earned by individuals.
Dividends 10/15 (c) (c) The 10% rate applies to residents and the 15% applies to
non-residents.
Interest 10/15 (d) (d) The 10% rate applies to non-residents for interest income
Royalties 15 related to term deposit, deposit certicates and other saving
instruments provided by banks and other authorised credit
Trade commissions 15 institutions in Romania. The 15% rate applies to non-residents
for any other interest income except the following: interest
Services 15 (e) income related to non-term deposits in current accounts
Commissions 15 opened with credit institutions in Romania; interest related to
debt instruments issued and/or guaranteed by the Romanian
Entertainment and sport activities 15 government, local councils, the National Bank of Romania,
or by nancial institutions acting as agent for the Romanian
International air, water, railway, 15 government; and interest related to debt instruments issued by
road transport a Romanian legal entity which is not afliated to the interest
recipient.
Branch Remittance Tax 0 (e) Withholding tax generally applies to services rendered in
Net Operating Losses (Years) Romania. However, income from management and consultancy
services is taxable regardless whether the services are rendered
Carryback 0 in Romania or abroad, if such income is obtained from a resident
or if it is a cost of a permanent establishment in Romania.
Carryforward 5 (f)
(f) See section related to determination of taxable income.

Taxes on corporate income and gains

The Fiscal Code entered into force on 1 January 2004. The Fiscal Code for the rst
time unies key tax legislation and provides a basis for stable framework of tax
legislation, by requiring amendments to necessarily follow the juridical route.

Fiscal year
In Romania the scal year is the calendar year.
 Article
April 2005
Corporate income tax
Resident entities are subject to tax on
worldwide income. An entity is resident
in Romania if incorporated in Romania
or if its effective management and
control are in Romania.
Associations or consortia between
Romanian legal entities, which do not
give rise to 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 are also subject
to prots tax in Romania (see section
related to capital gains tax).
Non-resident companies are taxed in
Romania at the standard rate of 16%
on earnings derived exclusively from
their Romanian operations (through
branches, other permanent establishment
or consortia). 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 ofce; a branch; an agency; a factory;
a mine; a place of extraction for gas or
oil; a building site that exists for a period
exceeding six months.
2 Ta x a t i o n i n Romania
Rates of corporate income tax
The standard rate of income tax for
Romanian companies is 16%. Prots
tax payable by companies earning their
revenues from night bars, nightclubs,
discos, casinos and sports betting
(including revenues obtained based on
an association agreement) is computed
at the standard 16% rate, so long as the
tax amount is not less than 5% of the
total realised revenues. In case the prots
tax payable is below the threshold,
the taxpayer is liable to pay corporate
income tax computed as 5% of the
revenues realised from such activities.
Representative ofces are taxed on a
yearly basis, at a lump sum of ROL
equivalent of EUR 4,000, payable in two
equal instalments.
Capital gains tax
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%.
In such a case, any scal loss resulting
from the sale/assignment of immovable
property located in Romania or shares
held in a Romanian legal entity can be
carried forward and recovered from
taxable prots resulting from operations
of the same nature for ve subsequent
years.
Dividends
Dividends paid out by a Romanian
legal entity to another domestic entity
are subject to a 10% withholding tax,
while dividends paid out by a Romanian
company to a non-resident are subject
to a 15% withholding tax, or, if a double
tax treaty is applicable, to 10% or to a
more favourable rate available under the
respective treaty. Dividends paid out by
a Romanian entity to individual resident
shareholders are subject to a 10%
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 companys
shareholders or associates. Also, the
amounts distributed to open investment
funds should follow the same treatment
and be taxed at 10%.
The dividend tax must be withheld and
paid to the state budget until the 25th of
the month that follows the one in which
the dividend was paid.
A participation exemption is granted to
the recipient of dividends, Romanian
legal entity, provided a participation
of at least 25% in the share capital of
the paying Romanian entity existed
for a time period exceeding two years.
However, such an exemption would only
be available after Romanias accession to
the European Union.
Equally, after Romanias accession,
dividends received from EU resident
entities would constitute non-taxable
income at the level of the Romanian
recipient, if such Romanian beneciary
of dividends participated in the share
capital of the EU entity with at least 25%
for a period of at least 2 years.
Foreign tax relief
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 with respect to foreign taxes
paid, up to the level of the Romanian tax
on that income.
Determination of taxable income
Starting point for determining taxable
income
Taxable income equals revenues from all
sources, including the delivery of goods
and the supply of services, less expenses,
less non-taxable revenues, less other
deductible elements plus non-deductible
expenses.
The following items are expressly
considered as non-taxable:
Dividends paid out by a Romanian
entity to another Romanian entity.
Dividends received from a non-
resident are taxable (see also the
Foreign tax relief and Dividends
sections).
Gains in the value of shares held in
other entities, caused by increase
of capital in those entities through
incorporation of reserves, premiums,
profits, etc.
Revenues from the reversal of
expenses and provisions previously
considered as non-deductible.
Non-taxable income, expressly
provided as such by legal norms.
Deductions
As a general rule, expenses related to
earning taxable revenues including those
regulated by legal norms in force are
considered deductible.
The Fiscal Code also provides for certain
types of expenses which are specically
deductible, such as:
expenses incurred with insurance
premiums for labour protection,
prevention of labour accidents and
professional diseases;
advertising and publicity expenses
incurred for the promotion of the
business, products and/or services,
if properly documented, as well as
expenses for other goods and services
incurred with a view to stimulate
sales;
transport and accommodation
expenses of management as well as
of other authorised persons, based on
contractual clauses, provided that the
taxpayer realises profit in the current
and/or in the previous years;
subscription fees, dues and other
mandatory contributions, as provided
by legal norms in force;
contributions to the fund for the
negotiation of the collective labour
contract;
expenses associated with the
professional training of employees;
marketing expenses, market research
and promotion expenses in existing
or new markets, participations in fairs
and exhibitions, business missions,
publication expenses for materials,
regardless of taxpayers position
reflected by the companys financials
(condition previously provided by the
law);
research and development expenses,
in case they do not qualify as
intangible assets from an accounting
perspective;
expenses incurred for the
improvement of management,
of information systems, for the
implementation, maintenance and
improvement of quality management
systems, for the acquisition of
certificates attesting the quality
standards;
expenses incurred for the protection
of the environment and the
preservation of resources;
expenses related to losses incurred by
companies when writing off doubtful
or contested uncollected receivables
in case of bankruptcy (based on a
final court decision), as well as in
other cases, such as death of the
debtor (when the receivable cannot be
collected from the heirs), dissolution
3
 Article
April 2005
of SRLs with sole shareholders or
liquidation in case no successor
exists and when the debtor has major
financial difficulties affecting its
entire patrimony;
registration fees, dues and
contributions owed to commercial
chambers, unions and owners
associations.
Key items which are partially
deductibile, include, inter alia:
provision expenses and contribution
to the reserve funds exceeding the
limits described in the Provisions and
reserves section;
protocol and entertainment expenses
(i.e. gifts to clients, business lunches)
up to 2% of the adjusted accounting
profit before tax;
employee-related expenses
(i.e. birth, death, incurable disease
support, expenses aimed at the proper
functioning of certain units/activities
of taxpayers, e.g. kindergartens,
health units, canteens, sports clubs,
sponsorship for schools, as well
as Christmas gifts for employees
children, part of employees transport
costs, treatment in health resorts)
currently up to 2% of the total salary
cost;
expenses with meal vouchers, in
accordance to the law;
perishable goods within the limits
provided by norms approved by the
government;
interest expenses and foreign
exchange differences within the
limits set described in the Thin
capitalisation rules section;
expenses incurred on behalf of
employees, which are in relation
to optional occupational pension
schemes, within the limits set in the
law (i.e. EUR 200);
health insurance premiums within the
limits set in the law (i.e. EUR 200);
expenses for the maintenance or
repair of cars used by the management
and administrative personnel, limited
to one car per person.
4 Ta x a t i o n i n Romania
Key expenses, which are expressly non-
deductible, include, inter alia:
Romanian and foreign profits tax
(however, a tax credit is allowed for
taxes paid in other countries please
refer to the Foreign tax relief section);
sponsorship expenses (however, a
tax credit is allowed for sponsorship
expenses, if certain conditions are
met please refer to the Sponsorship
section);
late payment interest, penalties and
fines paid to Romanian or foreign
authorities;
losses from reduction in the value
of inventory and assets which have
not been insured, including the
corresponding VAT;
VAT related to goods granted to
employees as benefits in kind, if they
were not taxed at employees level;
any expenses performed in favour
of shareholders or associates other
than those generated by payments
for goods and services at the market
value;
insurance premiums that are not
related to the taxpayers assets or
its business scope, except for rented
and leased assets or assets used as a
collateral for a business-related loan;
insurance premiums and other
employment-related expenses which
are not taxable at the level of the
employee;
expenses related to non-taxable
income;
service expenses, including
management and consultancy
expenses, which cannot be
substantiated by written contracts and
documents proving the rendering of
the services;
losses in the value of shares held
in other entities, except for losses
determined by selling such shares;
contributions paid in excess of the
legal limits or which are not regulated
by legal norms.
Sponsorship
Taxpayers incurring sponsorship
expenses performed in accordance with
the relevant legislation, are entitled to a
tax credit (i.e. deduction from the prots
tax payable of an amount equal to the
sponsorship expense incurred) if the
following conditions are cumulatively
fullled:
the sponsorship expenses do not
exceed 0.3% of the turnover; and
the sponsorship expenses do not
exceed 20% of the profits tax liability.
Provisions and reserves
Under Romanian regulations, the
following provisions and reserves are
deductible for prots tax purposes:
Bad debt provisions within the limit
of 25% of the outstanding value of
receivables under certain conditions.
This limit will be increased to 30%
from 1 January 2006. Starting
1 January 2007 the bad debt provision
is entirely deductible if certain
conditions are met.
Provisions for quality performance
guarantees granted to clients.
Specific provisions and reserves
created by banks and other credit
institutions, mortgage credit
companies and finance service
companies, as provided by the
governing laws of those entities.
Provisions set by guarantee funds as
provided by the norms of the National
Bank of Romania.
Technical reserves set by insurance
and re-insurance companies, as
provided by the relevant regulatory
laws.
Risk provisions for financial market
operations, as provided by the
regulations of the National Securities
Commission.
Thin capitalisation rules
Generally, interest expenses incurred by
companies (other than credit institutions)
are subject to the following limitations:
Debt-equity ratio: interest expenses
are fully deductible if the debt-
equity ratio is lower than 3. In
case such ratio is higher than the
aforementioned limits, interest
expenses are non-deductible for tax
purposes and can be carried forward
until they are fully deductible.
Interest rate (for loans granted
by companies other than credit
institutions): interest rate is deductible
based on the following limits:
- the reference interest rate of the
National Bank of Romania relating
to the last month of the quarter, for
loans denominated in ROL;
- the annual interest rate of 7%,
respectively 1.75% per quarter for
loans in foreign currencies.
Separately, the difference between
foreign exchange losses and foreign
exchange revenues relating to long-term
loans (>1 year) is treated as an interest
expense and is subject to the debt-equity
ratio limitation (see above).
The interest expenses, as well as the
foreign exchange differences related to
loans obtained from Romanian banks
(including subsidiaries of foreign
banks), leasing companies (for leasing
operations) and other legal entities
allowed to grant credits according to
the law are no longer subject to the thin
capitalisation rules starting 1 January
2005.
Deductibility of interest expenses
incurred by credit institutions is not
limited based on the above-mentioned
rules.
Tax depreciation
Three alternative methods are available
for the computation of tax depreciation,
namely:
the straight-line depreciation;
the reducing balance depreciation;
and
the accelerated depreciation.
These methods must be followed
consistently.
Buildings can be depreciated only based
on the straight-line method. Land is not a
depreciable asset.
From a tax perspective, the law
prescribes the concept of useful lives.
These useful lives are provided by
Government Decision, as follows:
Asset Years
Buildings and constructions 2 to 60
(e.g. roads and fences)
Machinery and equipment 2 to 60
Furniture, ttings and protection systems 2 to 24
Vehicles 3 to 24
Patents, licenses, know-how,
manufacturers brands, trademarks and
service marks, as well as other similar
industrial and commercial property
rights, are depreciated over the period
provided for their utilisation. Goodwill is
not considered as a depreciable asset for
tax purposes.
The revaluation of xed assets after
1 January 2004 is not to be taken into
account for scal purposes.
Special depreciation allowance
Taxpayers investing in depreciable xed
assets and/or patents, meant for activities
they are authorised for and who did
not choose the accelerated depreciation
regime, may deduct initial depreciation
expenses representing 20% of the
assets entry value, until 30 April 2005.
The remaining depreciation would be
allocated for tax purposes to the years
of useful life of the asset, based on the
straight-line method. Such tax allowance
is also applicable to xed assets, subject
5

to a nancial lease, only if the contract
provides for a transfer of ownership at
the end of the lease. The beneciary of
the allowance shall maintain the assets in
its balance sheet for a period of at least
half of the useful life of the asset.
Reorganisation, liquidation, other
transfers
Capital contributions in exchange of
shares are not considered as taxable
transfers. The tax value of the assets
received as contribution is equal to the
tax value of these assets when held
by the contributor. At the same time,
the tax value of shares received by the
contributor equals the tax value of the
contributed assets.
Asset distribution to shareholders, either
as dividend or following liquidation, is
taxable, except in case of:
merger, whereby the shareholders of
merging entities receive shares in the
resulting entity;
split-up, whereby shareholders
receive proportional stakes in the
resulting entities;
acquisition of the business of
a Romanian entity by another
Romanian entity in exchange of
shares;
acquisition by a Romanian entity
of at least 50% of shares in another
Romanian entity, in exchange of its
own shares, and, as the case may be,
for a cash payment not exceeding
10% of the nominal value of the
newly issued shares.
In the above-mentioned cases the
following rules apply:
transfers of assets/liabilities and
exchange of shares held in one
Romanian entity with the shares
in another Romanian entity are not
taxable;
in a split-up, distribution of shares is
not treated as dividend payment;
tax value of assets/liabilities for the
receiver equals the tax value of the
same items for the transferor;
6 Ta x a t i o n i n Romania
Article
April 2005
fiscal depreciation for assets continues Relief for losses
in the same manner as before the Tax losses may be carried forward
transfer; over ve years and are not updated for
transfer of provisions/reserves is not ination purposes. Loss carry-forward
taxable if the receiver takes them is not available for entities that cease to
over and maintains the same value as exist as a result of split-up or merger.
before the transfer; The carry-back of losses is not permitted.
in a share exchange (as above), the
tax value of shares received equals the Fiscal consolidation
tax value of the shares transferred; The legislation regarding consolidation
of companies is at an early stage
in a split-up the tax value of shares
of development and so far only the
held before the distribution is
consolidation for accounting purposes
allocated between these shares and
is regulated. Special norms for
distributed shares proportionally with
consolidation of nancial statements
their market value immediately after
for credit institutions are available since
the split-up.
2002 for company groups headed by a
bank and starting since 2003 for those
If a Romanian entity holds more than
25% of the shares in another Romanian held by a credit cooperative house.
entity, which is transferring its assets
and liabilities to the shareholder, the Currently, there are no provisions in the
legislation regarding consolidation for
cancellation of the shares is not a taxable
transfer. tax purposes.
Tax return filings
Transfer pricing
According to Romanian legislation, Taxpayers are required to le a prots
tax return and pay prots tax quarterly
transactions between related parties must
be performed in accordance with the (except for banks which full such
obligations monthly) by the 25th of the
arms-length principle (i.e. transactions
rst month of the following quarter. The
should be performed at the same levels
denitive annual tax return should be
of price as if concluded among non-
led along with the nancial statements.
related parties). Fiscal regulations
stipulate that, in case of transactions
between related parties, the value Legal entities ceasing to exist need to le
accepted by the scal administration will a nal tax return and pay the prot tax
be the market value of the transaction. within 10 days prior to registering such
The methods for the assessment of event with the Trade Registry.
market value include in particular: the
Comparable Uncontrolled Price Method,
the Cost Plus Method, the Resale
Price Method and any other method
recognised by the transfer pricing
guidelines issued by the Organisation
for Economic Cooperation and
Development.
Withholding tax
Withholding tax is applicable on a
number of payments made by Romanian
tax residents to non-resident recipients.
Types of payments which trigger
withholding tax are presented in the table
below.
Whitholding
Type of payment
Tax Rate (%)
Royalties 15
Interest (except for current
account bank deposits, external
debt/credit instruments/titles issued
and/or guaranteed by Romanian
5 / 15*
government, or issued by a non-
related Romanian legal party and
traded on a recognised securities
market, which are deemed as exempt)
Commissions 15
Dividends 15**
Various Services 15
Gambling income 20
* 10% rate applies to non-residents for interest
income related to term deposit, deposit certicates
and other saving instruments provided by banks
and other authorised credit institutions in
Romania. The 15% rate applies to non-residents
for any other interest income except the following,
which are specically exempt: interest income
related to non-term deposits in current accounts
opened with credit institutions in Romania;
interest related to debt instruments issued and/or
guaranteed by the Romanian government, local
councils, the National Bank of Romania, or by
nancial institutions acting as agent for the
Romanian government; and interest related to
marketable debt instruments/securities issued by a
Romanian legal entity which is not afliated to the
interest recipient.
** Also see the participation exemption to be
available after Romania joins the European Union.
After Romania joins the European
Union, a participation exemption will
be available for dividends paid out to
companies incorporated in the European
Community countries, provided that
the beneciary of dividends holds
a minimum participation of 25% in
the Romanian company paying the
dividends, for a continuous period of
2 years, ending at the date of the
dividend payment.
The interest derived by international
nancing bodies with which Romania
concluded nancing agreements are not
subject to withholding tax if the interest
rate charged in respect of loans granted
are less then 3%. The qualifying entities
are as follows: the European Bank for
Reconstruction and Development, the
International Bank for Reconstruction
and Development, the International
Finance Corporation and the Association
for International Development, the
International Monetary Fund, the
European Investment Bank.
The withholding tax must be paid to the
state budget until the 25th of the month
following the one in which payment was
made.
Companies are liable to le an annual
return until 28th (29th) February of the
year following the relevant tax year.
Romania has concluded about
80 agreements for the avoidance of
double taxation since the 1970s, which
may reduce the applicable withholding
rate.
In order to apply the more benecial
provisions of the treaty, the income
beneciary has to provide a certicate of
tax residence issued by the foreign tax
authority. Also, the domestic law bans
application of double tax treaties in case
of net-of-tax arrangements.
Historically, the interpretation of treaty
provisions by Romanian authorities has
led to withholding tax being applied on a
wide range of services contrary to OECD
principles. In view of this practice,
a foreign service provider may be
advised to review the resident country
tax credit mechanisms to ensure
availability of credit for the taxes
withheld in Romania.
Value Added Tax (VAT)
Regime
The Romanian VAT system is modelled
on the basis of the 6th EU Directive,
although less complex and open to
alternative interpretations.
Taxable persons
General
Any person supplying taxable goods or
services in the course of business, on
a regular basis, is considered a taxable
person. The term business refers to all
the activities of producers, traders and
suppliers of services, which are carried
out independently. The activities of
employees are outside of VAT scope.
VAT representative
Foreign entrepreneurs without an
establishment in Romania, but making
taxable supplies in Romania are required
to appoint a VAT representative, who
will be responsible for fullling the
administrative obligations and payment
of the tax due on behalf of the foreign
entrepreneur. In case foreign suppliers
of services fail to comply with such
obligation, beneciaries are liable to
account for/pay the related VAT.
Taxable operations
Transactions subject to VAT refer to
the supply of goods in Romania and
provision of services, as well as to the
importation of goods. To be taxable a
supply must be made for consideration.
Supply of goods
Supply of goods refers to the actual
transfer of the ownership of the goods
from one person to another against
payment, directly or through an
intermediary.
As a general rule, supply of goods has
the place of supply where the goods are
located at the moment when the delivery
takes place, with certain exceptions for
goods to be transported, installed, or for
goods to be delivered on board of ships,
aircraft, trains, etc.
7

Supply of services
As a rule, the supply of services is
taxable in Romania if the place of
supply is deemed to be in Romania.
The general rule is that the place of
supply is considered place where the
supplier has his place of business, his
scal establishment or his usual place
of residence. However, there are several
exceptions, similar to those listed in the
6th EU Directive (e.g. services related
to immovable property place where
immovable property is located; renting
and leasing of movable goods and
intangible services place where the
recipient of the services is located).
The term services applies to all
transactions, which are not treated as
supplies of goods.
Importation of goods
The introduction of the goods from
abroad to the territory of Romania is
considered as importation of goods
and it is considered within the scope of
VAT with certain exceptions (i.e. supply
of goods under customs suspensive
regime).
Reverse-charge VAT
For certain services provided by a
foreign supplier for which place of
supply is deemed to be in Romania
(e.g. leasing and renting of tangible
assets, marketing, e-services, banking,
non-competition assurance and other
specied services), the law imposes
the application of the so called VAT
reverse-charge mechanism by the
Romanian beneciary.
Under the reverse-charge mechanism,
the beneciaries (provided they are
registered for VAT purposes) have to
simultaneously recognise the related
VAT both as input and output VAT in the
return of the respective month, based on
a self-invoicing system.
8 Ta x a t i o n i n Romania
Article
April 2005
Simplified recording of VAT
For certain deliveries of goods
(e.g. waste and scrap materials, land,
buildings, wooden products etc.),
a simplied VAT recording mechanism,
similar to the reverse-charge mechanism
is applicable.
Under this mechanism, both the seller
and the purchaser have to simultaneously
recognise the related VAT both as an
input and output VAT in the return of the
respective month, with no out/in-ow of
cash.
Taxable base
VAT is assessed on the total amount
received or to be received by the
supplier, as consideration for the supply
of goods or services, including taxes,
commissions, packaging, transport
and insurance expenses. The discount
provided to the client is not included in
the taxable base.
Tax rates
The following rates presently apply in
Romania:
19% standard rate, which is applicable
to supplies of goods and services not
subject to the reduced rate; and
9% reduced rate, which is applicable
to the suppliers of certain goods/
services specifically enumerated
in the Fiscal Code, such as sale of
medicines, hotel accommodation
services, books, tickets to museums,
etc.
Exempt operations
Supplies within the scope of VAT are
classied as taxable operations and
exempt operations.
Exempt operations are divided as
follows:
exempt supplies with credit for
input tax (exemption for exports and
other similar supplies, international
transportation, as well as specific
exemptions related to international
traffic of goods, certain transactions
within the free trade zones);
exempt supplies without credit for
input tax (e.g. medical care services,
educational services, financial and
banking services, leasing and renting
of immovable property with certain
exceptions, etc.);
import operations exempt from
payment of VAT (exemption for
imports).
Import of goods received as donations
for humanitarian, social, religious,
cultural, artistic, sports, scientic
purposes are VAT exempt.
Also, the Fiscal Code provides for
specic rules regarding to goods
beneting from special customs
regimes. The following transactions are
VAT exempt with credit for input tax,
provided they do not lead to a nal use/
consumption of goods within Romania:
supply of goods placed under a
bonded warehouse customs regime;
goods imported in free trade zones for
storage purposes only;
goods introduced in free trade zones
from abroad and sold within the free
trade zones.
Persons with an annual turnover in
excess of ROL 2 billion are required to
register for VAT purposes. Persons not
meeting the above-mentioned turnover
criterion have an option to register for
VAT purposes.
Credit for input VAT
General rule
As a general rule, the performance
of taxable supplies allows offsetting
output VAT against input VAT. Exempt
supplies do not allow the recovery of
input VAT, except in the event of VAT
exempt supplies with credit, for which
input VAT can be recovered. Companies
performing a combination of taxable and
exempt supplies generally have the right
to recover the input VAT on a pro-rata
basis. The unrecovered input VAT would
generally represent a cost.
Refund of VAT
If the input VAT exceeds the output VAT,
the recoverable balance VAT (dened as
negative VAT balance) can be:
carried forward to the next period; or
compensated/refunded by the tax
authorities, based on the option
expressed by the taxpayer in the VAT
return; the option can be exercised
only for negative VAT balance
exceeding ROL 50 million.
The VAT refund/compensation request
should normally be solved within
a 45-day term, during which tax
authorities are entitled to require
additional information from the
taxpayer. Hence, the term can be
extended with the equal of the number
of days elapsed between the date of
the additional information request and
the date of the information receipt by
the tax authorities. In case the refund/
compensation request is not solved at the
expiration of such term, the taxpayer is
entitled to receive late payment interest
from the state budget.
Payment and filing requirements
Taxpayers must le VAT returns with
the tax authorities and pay VAT on a
monthly basis, specifying the taxable
amount and the tax due. The tax return
must be led and the respective VAT
paid by the 25th of the following month.
In case of taxpayers whose annual
turnover is less than EUR 100,000 the
VAT returns should be led with the tax
authorities on a quarterly basis.
Customs duty
Foreign trade has been liberalised
in 1990 and generally follows the
guidelines set by the European Union.
As a result of this liberalisation and
an on-going process of harmonisation
of the Romanian customs rules with
the EU system, imports and exports of
commodities are not generally subject
to special authorisation requirements.
Exceptions apply to quantity restrictions
or control requirements imposed through
the different agreements entered into
by Romania. Performance of import-
export operations on a clearing, barter
and international cooperation basis is
no longer required to be licensed by the
authorities.
Radioactive and explosive materials,
chemical products, residues, weapons,
nuclear equipment and related materials
are subject to particular legislation
requirements. Specic laws prohibit the
import of narcotics.
Customs duties
The customs duties are expressed as a
percentage of the cost-insurance-freight
(CIF) value of the goods. Other taxes,
duties and levies may be required to
be paid upon importation in addition
to customs duties, such as import VAT,
excise tax, customs commission or
clearance fees.
Preferential rates apply to a wide range
of products imported in Romania based
on certain free trade arrangements. There
are certain internationally accepted
aspects that are essential for determining
the applicable customs duty rates,
including the corresponding international
tariff headings, value declared in
customs and the country of origin of the
goods.
Romania has adopted the Brussels
Harmonised System for the
nomenclature of goods and follows
the valuation rules of the World Trade
Organisation for the assessment and
declaration of the value in customs.
The law provides for two denitive
procedures import for free circulation
and export. A denitive import triggers
the payment of import duties (unless a
specic relief is available); the export of
goods is exempt from duties.
The Romanian Customs Code provides
for several customs suspensive regimes,
which may be granted for denite
periods of time:
inward processing;
outward processing;
bonded warehouse;
temporary admission;
transformation under customs control;
and
customs transit.
The suspensive regimes do not require
payment of the customs duties, although
a bank guarantee equal to the amount of
such duties may be required.
Besides the general customs clearance
system, Romania has adopted simplied
customs clearance procedures similar to
those applied in the EU.
Temporary duty relief
Certain customs regimes may defer,
suspend or allow for the refund of
the customs duties and other import-
related taxes, under specic conditions
specically stipulated in the domestic
customs regulations. Such temporary
duty relief may include the bonded
warehousing regime, inward and
outward processing relief or temporary
admission regimes.
9
 Article
April 2005
Individuals customs regime
Romanian customs regulations provide
for a specic customs duty treatment
for the personal belongings introduced
by individuals establishing domicile or
residence in Romania, goods introduced
into Romania upon marriage, inherited
goods and household goods used for
furnishing a secondary residence in
Romania, as well as goods shipped
by individuals via parcels and postal
services.
A specic import duty exemption applies
for the goods contained in the personal
luggage of travellers, brought into
Romania without having commercial
purposes. This duty exemption can be
granted up to a total value of EUR 175
per traveller, for goods other than:
tobacco products: 200 cigars or
100 cigarettes (cigars having the
maximum weight of 3 grams per
piece) or 50 cigars or 250 grams
smoking tobacco or their proportional
mixture;
alcohol and alcoholic beverages:
- distilled and spirit beverages whose
alcoholic concentration exceeds
22% of the volume; not processed
ethylic alcohol of 80% or more:
1 liter;
- distilled and spirit beverages
and appetizers based on wine or
alcohol, sake or similar beverages
whose alcoholic concentration does
not exceed 22% of the volume;
sparkling wines, brandy: 2 liters
or proportional mixture of such
products;
- light wines: 2 liters;
perfumes: 50 ml and eau de toilette
250 ml;
medicines: the quantity required to
meet the needs of the travellers.
The duty exemption mentioned above
for tobacco and alcoholic beverages does
not apply for the travellers whose age is
under 18 years.
10 Ta x a t i o n i n Romania
Excise duty
Excise duty is a consumption tax payable
on certain categories of goods including
alcoholic beverages, gasoline, tobacco
products, cars as well as perfumes
and certain other items. The tax (also
regulated by the Fiscal Code) is payable
on import and sales of locally produced
items in the domestic market and is
set as xed EUR amounts per unit
(specic excises) or as a percentage of
a specied taxable base.
Currently, the excise duties in respect
of the main categories of goods is
established in EUR as presented in the
table below.
Category of products Excise duty rates
Alcoholic products up to EUR 465.35 per hl
EUR 9.10/1,000 cigarettes
Cigarettes + 30% of the declared
maximum retail price
Coffee EUR 680 - EUR 4,000 / ton
Car fuel EUR 259 - EUR 480 / ton
Vehicles 0 - 32 %
Fur, jewels, crystal,
5 - 55 %
perfumes
Taxpayers are liable to submit monthly
tax returns and pay the excise duties by
the 25th of the following month. In case
of imported goods, the related excise
duty (if applicable) should be paid at
the moment of registering the import
declaration in customs.
A special supervision and control system
is provided for the production and
distribution of alcoholic beverages and
certain mineral oils.
The fiscal warehouse regime
The scal warehouse regime allows
the production, transformation and/
or storage of products subject to
harmonised excise duties (i.e. beer,
wines, other fermented beverages,
intermediary products, ethylic alcohol,
tobacco products and mineral oils)
without the payment of the related excise
duties. Generally, the scal warehouse
regime cannot be used for retail sale of
such products.
Local taxes
Starting 1 January 2004, local taxes in
Romania are regulated by the Fiscal
Code. Local taxes represent a distinct
category of taxes set by the local
administration, which are payable by
both individuals as well as entities in
Romania.
The local taxes include:
Building tax
Building tax is payable by owners of
buildings located in Romania, regardless
of their residence. The tax rate ranges
between 0.1% and 0.4% for individuals
and between 0.5% and 1% for legal
entities. For buildings not revalued 3
years prior to the concerned year, the
tax may vary between 5% and 10%
applied on the book value of the building
resulted until its rst revaluation.
The tax is applied on the value of the
building (minimum established values
are provided) for individuals and on
the book value of the building, for legal
entities. The tax must be paid quarterly,
the latest by the 15th of the last month of
the quarter.
Land tax
Land tax is payable by owners of
land. Generally, the tax is established
as a xed amount per square meter,
depending on the location of the land
within certain determined zones, towns
and villages and also depending on the
use of the land. The tax must be paid
quarterly, the latest by the 15th of the last
month of the quarter.
Vehicle tax
Vehicle tax is payable by owners of
land/water vehicles, which should be
registered in Romania. The tax depends
on the engine capacity, and is computed
as a xed amount per 500 cubic
centimetres. The tax must be paid
quarterly, by the 15th of the last month of
each quarter.
Tax for construction authorisations
The taxes are established depending
on the construction value, land or
installations, usually as a percentage/
xed amount on the value/area.
Publicity and advertising tax
Advertising tax is payable by the 10th of
each month by the suppliers of publicity
and advertising services rendered in
Romania, except for publicity and
advertising services performed through
audio-video and printed mass media.
The tax rate is established by local
councils and ranges between 1% and
3%. It is applied on the value of the
publicity and advertising services. Users
of outdoor advertising means have to
pay an outdoor media advertising tax
computed as a xed quota per square
meter, depending on the surface used for
advertising. Such tax should be paid in
four equal instalments by 15 March, 15
June, 15 September and 15 November.
Resort tax
The tax is due by individuals over
18 years for their stay in resorts and
is included in the hotel tariffs. The tax
rate is established by local councils and
ranges between 0.5% and 5%.
Show tax
Show tax is payable by individuals and
entities performing show-biz activities
at a quota from 2% to 5% of revenues,
or a xed fee depending on the surface
of premises (from ROL 1,200/sqm/day
to ROL 2,400/sqm/day). The show tax is
payable monthly in arrears by the 15th of
the month following the one in which the
show took place.
Other local taxes
The local councils may impose a daily
fee of up to ROL 119,000 for the
temporary use of public places and
for admissions to museums, memorial
houses, or historical, architectural or
archaeological monuments and also
for the ownership or use of equipment
that is held for the purpose of obtaining
income. An annual fee of ROL 321,000
may be established by the local councils
for a number of slow-moving vehicles,
specically provided, which are
normally used in construction activities
(e.g. bulldozers, cranes, tractors, etc.).
Stamp duty
Stamp duty is payable on most judicial
claims, issuance of certicates and
licences, and documentary transactions
which require notarial registration.
Currently there are three types of stamp
duties:
notarial stamp duty;
judicial stamp duty; and
extra-judicial stamp duty.
Notarial stamp duty is charged for the
authentication of documents and other
services rendered by Notaries Public.
The duty is applied either as a regressive
tax or as a xed percentage tax, or even
as a xed amount, depending of the type
of notarial service rendered.
Judicial stamp duty is levied on claims
and requests led with Courts and the
Ministry of Justice and it is established
depending on the value of the claim.
Quantiable claims are taxed under
the regressive tax mechanism. Non-
quantiable claims are taxed at xed
amount levels.
Extra-judicial stamp duty is charged for
the issuance of various certications
such as ID cards, car registrations, etc.
11

Individual taxation
As a rule, Romanian citizens domiciled
in Romania are taxed in Romania on
their worldwide income. Also, foreigners
and Romanian individuals without
a Romanian domicile, who become
Romanian tax residents, may be subject
to taxation in Romania on worldwide
income, as detailed in the Taxpayers
section below.
Residence
An individual is considered as Romanian
tax resident if fulls at least one of the
following conditions:
a) the individual has the domicile in
Romania;
b) the centre of vital interest of the
individual is located in Romania;
c) the individual is present in Romania
for a period or periods exceeding in
total 183 days during any period of
12 consecutive months ending in the
respective calendar year; or
d) the individual is a Romanian citizen
working abroad as clerk or employee
of the Romanian state in a foreign
state.
Taxpayers
Taxpayers of individual income tax can
be:
Residents, Romanian individuals
domiciled in Romania for incomes
obtained from any source, both from
Romania and abroad, and residents
other than Romanian individuals
domiciled in Romania only for
Romanian source income.
A fiscal credit may be granted for tax
paid abroad if certain conditions are
met.
Non-residents, who either:
- carry out independent activities
through a permanent establishment
in Romania, for the net income
attributable to the permanent
establishment; or
- carry out dependent activities in
Romania, for the net income from
such dependent activities; or
- earn other types of income.
12
Article
April 2005
If a non-resident individual complies
with one of the conditions mentioned in
Residence section above at points b) or
c) for a period of three consecutive years,
starting with the fourth year becomes
subject to taxation on worldwide income.
Until the end of the three-year period,
the respective individual is subject
to Romanian income tax only for the
Romanian-sourced income.
Individuals tax residents in countries
that have concluded double tax treaties
with Romania may benet from tax
exemption under the terms of the
respective treaties. Individuals, tax
residents in countries that have not
entered into a double tax treaty with
Romania, are subject to Romanian
taxation starting with their rst day of
presence in Romania.
Categories of income subject to
taxation
Employment Income
Taxable compensation includes salaries,
income in cash or in kind, wage
premiums, rewards, temporary disability
payments, paid holidays, and any
other income received by an individual
based on an employment agreement.
Taxable compensation also includes
salaries received by daily or temporary
workers, fees and compensation paid
to directors and managers of private
commercial companies, to members
of the Board of Directors and General
Shareholders Meeting, to members of the
Administration Council and to members
of the audit commission.
A at tax rate of 16% has replaced the
progressive tax rates. For the main
employment position, the monthly tax is
determined by deducting from the gross
income:
the mandatory social security
contributions;
the personal deductions allowed
(if any);
the monthly trade union contribution;
the contribution to the voluntary
occupational pension scheme
(up to EUR 200 per year).
Ta x a t i o n i n Romania
Employment income is not subject to
globalisation.
Income from independent activities
Income from independent activities
includes:
A. income earned from freelance
activities;
B. income from intellectual property
rights;
C. income from other independent
activities.
A. Income earned from freelance
activities
The net taxable income is computed as
gross income less specic deductible
expenses. The law specically provides
deductible expenses within a certain
limit. Authorised individuals are obliged
to keep single entry books.
Alternatively, income earned by certain
categories of freelancers is subject to
income tax based on income quota(s),
yearly established by the Romanian
Ministry of Finance.
The freelancers are required to perform
anticipated payments on a quarterly
basis, by the 15th of the last month of
each quarter. The anticipated tax is of
16% of the net taxable income.
B. Income earned from intellectual
property rights
The net income from intellectual
property rights results by deducting from
the gross income the following:
deductible expenses representing 40%
of gross income;
compulsory social security
contributions.
The payers of intellectual property rights
have the obligation to compute, withhold
and pay a 10% advance income tax,
by the 25th of the month following the
income payment.
C. Income from other independent
activities
Income from the following sources is
also taxed with 10% advance income
tax:
income from sale of goods on
consignment;
income from agent, commission or
commercial mandate agreements;
income from civil conventions
concluded based on the Civil Code;
income from accounting, technical,
judicial and extra-judicial expertise.
Payers of such income are liable to
compute, withhold and pay the advance
income tax by the 25th of the month
following the income payment.
Income from all types of independent
activities is subject to an annual
regularisation, which is performed by
applying a 16% tax rate to the annual
income less carried forward scal losses
(if any).
Rental income
As a rule, gross rental income consists
of amounts in cash or in kind stipulated
in the rental agreements and related to
a scal year (regardless of the moment
of effective cashing), as well as certain
expenses borne by the tenant and which,
based on the law, are the landlords
liability.
The taxable amount is determined by
deducting a 25% expense quota from
the gross income. Tax on rental income
is determined by levying 16% on the
taxable amount.
As an exception, taxpayers may opt
for the determination of the net rental
income based on single entry accounting.
Rental income is also subject to an
annual regularization process, further
to which the annual tax is computed by
the relevant scal authority by applying
a 16% tax rate to the annual taxable
income.
Investment income
Investment income includes:
A. dividend income;
B. interest income;
C. gains from the transfer of securities;
D. income from futures/forward
transactions with foreign currencies
and other similar operations;
E. income from liquidation/dissolution
without liquidation of a legal entity.
A. Dividend income
Dividends are dened as any grant
of benets in cash and/or in kind to
shareholders or associates from the
annual prot. For taxation purposes,
amounts received from holding
participation titles in closed investment
funds are treated in the same manner as
dividends.
The tax rate applicable to dividends
distributed to resident individuals is 10%
and it is calculated, withheld and paid by
the payer of dividends. The tax should
be paid until 25th of the month following
the month when the dividends were
paid; in case of dividends distributed
but not paid until the end of the year, the
tax is payable by December 31st of that
C. Gains from the transfer of securities
year. The dividend tax is nal (i.e. the
income is not subject to globalisation in
Romania). The withholding tax for non-
purchase price of different types of
resident individuals is either 15% or, if a
double tax treaty is applicable, 10% or a
more favourable rate available under the
respective treaty (please see the section
related to withholding taxes).
B. Interest income
The taxable income from interest is any
income in the form of interest other than:
interest from current account deposits
and deposits with mutual assistance
institutions;
interest relating to debt instruments,
as well as municipal bonds, bonds
issued by the National Agency for
Housing, and other entities that issue
bonds with respect to the construction
of dwellings;
interest for deposits constituted in
accordance with the provisions of
Law 541/2002 regarding real estate
collective savings and credits.
The tax rate applicable to interest
income is 1% until 1 May 2005 and 10%
afterwards and it is calculated, withheld
and paid by the payer of interest on a
monthly basis, until 25th of the following
month. The interest tax represents a
nal tax. The withholding tax applied to
interest income earned by non-resident
individuals varies between 10% and
15%, depending on the source of interest
income (please see the section related to
withholding taxes).
The capital gain represents the positive
balance between sale price and the
securities, reduced by intermediaries
commissions, as the case may be. In case
of transfer of shares in a limited liability
company, the capital gain represents
the balance between the sale price and
the nominal value/purchase price of
such shares. In case of redemption of
investment titles held in open-ended
investment funds, the capital gain is
the positive difference between the
redemption price and the purchase/
subscription price.
13
 Article
April 2005

Capital gains from sale of shares are
subject to 1% tax if held for a period
over 1 year and 10% otherwise. The
capital gains tax is nal (i.e. it is not
subject to globalisation). Also, income
from the sale of shares acquired based
on a stock option plan is subject to the
same tax treatment.
Generally, intermediaries are liable to
compute, withhold and pay the capital
gains tax at the completion of the
transaction. The payment should be
made by the 25th of the month following
the withholding date. However, in case
of a sale of shares in limited liability
companies or closed-end companies, the
liability to compute and withhold the tax
belongs to the acquirer of income if the
latter is a Romanian individual domiciled
in Romania. In this case, the deadline
for the payment of the capital gains tax
is the date when the documents are led
for the registration of the ownership
right with the Trade Registry or in the
shareholders register. The ownership
registration cannot be completed
without the proof of the capital gains tax
payment to the state budget.
Income obtained from liquidation and/
or dissolution without liquidation of a
legal entity is taxable at a rate of 10%
applicable on the difference between the
contribution to the share capital of the
beneciary, natural person, and cash/
in-kind distributions.
The obligation regarding the
computation, withholding and payment
of the due tax applicable to revenues
obtained by shareholders, natural
persons, from liquidation and/or
dissolution without liquidation of a
legal entity, stays with the legal entity.
The payment of the due tax should be
performed until the ling of the related
necessary documentation to the Trade
Registry.
D. Income from futures/forward
transactions with foreign currencies
and other similar operations
Gains from contractual sale-purchase
transactions of foreign currencies with
subsequent term settlement, as well as
from any other similar operations, are
taxable at the rate of 1%.
The tax is computed and withheld by the
intermediary of such transaction
(e.g. a bank), upon nalisation of
the operation. Subsequently, the tax
is payable by the 25th of the month
following the date when the tax was
withheld. The tax is nal
(i.e. the gain is not subject to
globalisation).
Income from pensions
Taxable income from pensions
comprises any amounts received in form
of pension from funds created from
mandatory social contributions made to a
social insurance system. Taxable income
from pension also includes any amount
from optional occupational pensions
schemes and those nanced by the state
budget. All other types of pensions are
deemed as non-taxable income. The
monthly pension income up to
ROL 9 million is not taxable.
The tax is to be determined by levying
16% on the taxable amount. The tax is
nal.
The tax computed as such is to be
withheld on the date of actual payment
of the pension and remitted to the
state budget by the 25th of the month
following the month in which the
pension income is paid.
Income from agricultural activities
Taxable income from agricultural
activities is to be established based on
income quotas issued by the Ministry
of Agriculture. Alternatively, taxpayers
earning income from agriculture
activities may opt to determine
the income based on single entry
bookkeeping The tax is computed by
levying 16% on the taxable income.
Income from prizes
The tax on prizes is 16% and is levied
on the balance between gross realised
income and the tax free amount
(i.e. currently, ROL 8 million).
The tax is payable by the 25th of the
following month and the liability to
compute, withhold and pay the tax rests
with the payer of the income.
The tax is nal.
Income from gambling
The tax is nal and is determined by
applying 20% on the gross income.
Income from other sources
Income from other sources include,
inter alia:
insurance premiums borne by a
freelancer or any other entity on
behalf of an individual who is not an
employee of the respective freelancer/
entity; such income is taxable in the
hands of the recipient at 16%, through
withholding, the tax being final;
income received by pensioners or
former employees arising out of the
employment contracts concluded
with their former employers or based
on some special laws, in the form of
price differences for certain goods,
services or other rights; such income
is taxable in the hands of the recipient
at 16%, through withholding, and
the obligation for the calculation and
withholding rests with the payer of
such income.
Tax on income from other sources
is payable by the 25th of the month
following the month of withholding.

14 Ta x a t i o n i n Romania
Deductions
Personal deductions
Romanian individuals domiciled in
Romania as well as foreigners meeting
the residence criteria for 3 consecutive
years are entitled to personal deductions,
which vary depending on the monthly
gross income and the number of
dependents, as follows:
for monthly gross income up to
ROL 10 million, the monthly
deductions vary between
ROL 2.5 million for non-dependents
and ROL 6.5 million for at least
4 dependents;
for a gross monthly income ranging
between ROL 10 million and
ROL 30 million, the degressive
deductions have been established
through an order issued by the
Ministry of Finance;
for a gross monthly income higher
than ROL 30 million, the taxpayers
right to deductions is withdrawn.
Filing and payment requirements
Taxpayers who earn income subject to
globalisation have to le a global income
tax return as well as special declarations
with the tax authorities by May 15th
of year following the year in which
income is earned. The tax authorities
compute the global income tax on the
basis of the information provided in the
global income return. The taxpayers are
subsequently informed about the tax
payable/reimbursable and the deadline
for its payment.
Taxpayers earning only salary income
throughout the entire scal year satisfy
their tax liabilities through employer
withholdings. Employers withhold the
salary income tax on a monthly basis.
Expatriates employed abroad but
performing an activity in Romania
should le monthly tax returns and pay
monthly tax in Romania by the 25th of
the following month.
3 For the year 2005, the national average salary is of ROL 9,211,000
Social security Contribution to the Health Fund by
Under a Romanian employment foreign individuals
arrangement, both employers and According to the current regulations
employees are required to contribute to regarding the health fund, foreign
the social security system. individuals having established their
residence in Romania could become
Social security contributions at the liable to contribute to the health fund an
individual level amount of 6.5% calculated at the level of
Social security contribution9.5% the Romanian taxable income.
applied to the gross salary, capped
at the level of five times the national However, foreign individuals who are
average salary (for the respective temporarily present in Romania may
year3) opt to contribute to the Romanian
health fund an amount equal to 13.5%
Health fund contribution6.5%
calculated on the value of two national
applied on the monthly gross income
minimum gross salaries.
subject to income tax; and
Unemployment fund contribution1% Citizens of European Union countries, as
applied on monthly base salary. well as individuals resident in countries
which have concluded with Romania
Social Security contributions at the totalisation agreements, benet from the
employer level coverage of medical expenses incurred
on the Romanian territory, according
Social security contributionbetween
22% and 32% (depending on working to the provisions of the respective
conditions) of the total salary fund, agreements.
which is capped at the level of five
times the national average salary,
multiplied by the average number of
employees;
Health fund7% of total salary fund;
Unemployment fund3% of total
salary fund;
National insurance fund for work
accidents and professional diseases
the contribution is ranging between
0.5% and 4% of the total salary fund,
depending on the risk category; and
Labour Chamber commission0.25%
or 0.75% of total salary fund,
depending on whether the company
or the Labour Chamber keeps the
workbooks.
15
ERNST & YOUNG 75 Dr. N. Staicovici Street
Forum 2000 Building, 4th Floor
Str. Dr. N. Staicovici nr. 75
Sector 5, RO-050557 Bucharest
Romania

Phone: (21) 402 4000

Fax: (21) 410 7052
Email: office@ro.ey.com
2005 Ernst & Young
All Rights Reserved.
Ernst & Young is
a registered trademark.

Fiscal sanctions
Failure to submit tax returns, as well as failure to pay the taxes in due time, entails
penalties as follows:

Failure to file tax returns

Non-ling of tax returns by the respective deadline may attract the following nes:
ROL 500,000 to ROL 15 million for individuals and ROL 100,000 to
ROL 1 million for the income tax return of individuals; and
ROL 5 million to ROL 100 million for legal entities.

Taxpayers remain liable for the payment of the nes for late ling of returns
regardless of the payment of the tax due.

Interest and penalties on delays in payment of tax due

Failure to pay the taxes at the prescribed dates is penalised with late payment interest,
which is currently of 0.06% per day of delay. An additional penalty of 0.5% per
month or fraction of month is also payable in respect of the liabilities not paid in due
time.

Separately, failure to pay taxes withheld at source (taxes on salary-type income,

dividend income and non-residents income) within 30 days after the deadline is
considered criminal offence and can be punished with imprisonment from 6 to 24
months or ne between ROL 100 million to ROL 500 million.

www.ey.com www.ey.com/romania

Ernst & Young Romania

VENKATESH SRINIVASAN, Partner
Head of TAX Department
Venkatesh.Srinivasan@ro.ey.com

In the preparation of this article, every effort has been made to offer current, correct and clearly expressed
information. However, the information in the text is intended to afford general guidelines only.