In the current economic context in which free movement is a fact in the EU, it is very important who collects the taxes of companies and people who move frequently from one country to another or who choose, for their business, a certain country in the Union. At present, Romania can still be considered a tax haven for companies that would choose to operate here. Even if the number of taxes increases from one month to the next, their amount still allows non-residents to increase the percentage of profit withheld by paying a lower tax than in their home country. For example, if a Frenchman imports used cars from Germany and sells them in France, he can do the same through a Romanian company, paying lower taxes.
Gradually, however, due to the imposition of an increasingly aggressive taxation in Romania, business people will move south of the Danube, in Bulgaria, where taxes are much lower: and VAT and profit tax rate and other tax facilities .
Let’s see who the Non-Resident is and for what activities he pays taxes in Romania.
Notion of non-resident
According to the Romanian Fiscal Code, Non-Resident means any foreign legal person and / or non-resident natural person. A foreign legal entity is a legal entity that was established in accordance with the laws of a country other than Romania or that takes place in the exercise of effective management beyond the borders of our country – that is, any foreign company that comes to Romania.
Non-resident natural person is defined as any natural person who is not resident and who does not meet any of the following conditions:
- domicile in Romania;
- vital interests center located in Romania;
- present in Romania for a period or more exceeding a total of 183 days in an interval of 12 consecutive months and ending in the calendar year concerned;
- Romanian citizen working abroad as a civil servant or envoy of Romania in a foreign state.
As a supplement to the status of non-resident individual, it is specified that the following types of persons fall into this category:
- foreign citizens with diplomatic or consular status in Romania;
- foreign citizens who are employees of an international and intergovernmental body registered in Romania;
- foreign citizens who are employees / officials of a foreign state in Romania together with their family members.
Income obtained by the non-resident will be subject to taxation: Non-resident income tax.
Income categories that are subject to taxation
Income that, according to Romanian law, is subject to taxation:
- Dividends from a Romanian individual;
- Interest;
- Revenues from liquidation or dissolution without liquidation;
- Gambling income;
- Income from prizes;
- Income from pensions;
- Income from independent professions;
- Revenues from services provided in Romania;
- Income from remuneration;
- Revenues from the provision of management and consulting services;
- Income from sports and entertainment activities;
- Commissions;
- Royalties;
- Interest;
- Other incomes.
Dividends from the Romanian legal entity
Dividends of a Romanian legal entity are made in Romania, in any of the following situations: if they are received on the territory of our country or if they are received abroad.
The dividend is defined as a distribution in cash or in kind, made by a legal entity to a participant in the legal entity, as a result of holding shares in that legal entity; exception:
- a) a distribution of additional participation titles that does not change the percentage of possession of the participation titles of any participant of the legal person;
- b) a distribution in cash or in kind made in connection with the redemption of shares in the legal entity, other than the redemption which is part of a redemption project and which does not change the percentage of possession of the shares of any holder in the legal entity ;
- c) a distribution in money or nature, made in connection with the liquidation of a legal entity;
- d) a distribution in money or nature, made at the reduction of the share capital actually constituted by the participants.
The dividend is also defined by law and the action of receiving by the partner / shareholder the equivalent of goods or services delivered to the legal entity, if the amount that the legal entity gives exceeds the market price for similar goods or services – the difference is the dividend taken calculation.
Dividend is also the amount paid by a legal entity for the goods or services offered in favor of a shareholder or associate of the legal entity, this being used in his personal interest.
Interest
Interest is given by the amount to be paid or received in exchange for the use of money, in connection with a deposit or in accordance with a financial leasing contract, sale with payment in installments or any other transaction (sale) with deferred payment.
Royalties
The royalty is the financial or in-kind payment due for:
- 1) copyright for literary, artistic, scientific works, films, tapes for radio or television broadcasts, making video recordings;
- 2) any patent, invention, innovation, license, trademark, franchise, project, design, model, plan, sketch, secret formula or manufacturing process or software;
- 3) transmissions, including those to the public, direct or indirect, by cable, satellite, fiber optics or similar technologies;
- 4) industrial, commercial or scientific equipment, any movable property, means of transport or container;
- 5) any know-how;
- 6) the name or image of any natural person or other similar rights relating to a natural person.
- 7) the right to record or transmit, whatever the chosen option, some shows, shows, sports events or other similar activities.
Commissions
The commission is the amount of money or payment in kind made to a general commission agent for the intermediation activities carried out in a commercial operation. We can say that both the commissions from residents and those from non-residents with permanent headquarters in Romania (provided that the royalty represents an expense of the permanent headquarters) are taxed.
Income from sports and entertainment activities.
They are considered incomes obtained in Romania, regardless of whether they are collected on the territory of our country or abroad. As a result, the tax is due in Romania.
Revenues from the provision of management and consulting services
They are considered to be obtained from Romania regardless of the place of collection: in the country or abroad.
Income from remuneration
Here we refer to the remunerations received by non-residents as administrators, members of the boards of directors or founders of a Romanian legal entity whose remuneration can be established, according to Romanian legislation, by a constitutive act of the Romanian legal entity or by A.G.A. The Romanian law of commercial companies says that a natural person and / or a legal person can be an associate / shareholder or administrator of a commercial company. The fiscal regulation contains in the category of income that is taxed, those remunerations received by the founders. These are the ones who sign the constitutive act, as well as other persons with a determining role in setting up a company. If a non-resident acquires, after the establishment of a company, the quality of shareholder or associate in that Romanian company, he is no longer obliged to pay income tax from the remuneration he receives in this capacity, this fact not representing in any way an omission of the Romanian legacy. , as long as the law of the commercial companies does not allow the associates / shareholders to gain remuneration in the form of goods or money from the company. This facility is addressed only to the founders of a company (cf. Article 8, letter M, art. 38 of L31 / 1990), persons who can receive advantages from the company, ie precisely these remunerations.
Revenues from services provided in Romania
This includes the revenues from any type of services provided in Romania, whatever their nature, except for the revenues obtained from international transport and the provision of services assimilated to this transport.
Income from independent professions
This category includes income from independent professions realized in Romania – doctor, dentist, architect, lawyer, engineer, auditor, or similar professions, if these incomes are earned in other conditions than through a permanent establishment or for periods not exceeding 183 consecutive days ending during the target calendar year, situations in which we discuss residents’ incomes.
Pension income
Revenues from pensions from the state budget or social insurance, which exceed 900 lei, are subject to taxation.
Income from prizes
Revenues from prizes, obtained at competitions organized in Romania, of any type, are subject to taxation. Exceptions are the prizes won by non-residents at artistic, cultural and sports events that are financed with public money, but also the prizes offered to non-resident pupils in public-funded competitions.
Gambling income
Gambling practiced in Romania generates taxable income. The basis for calculating taxes is each gambling.
Tax rate
- The share is 16% on the income of non-residents;
- 25% for gambling income;
- 50% if the income is paid in a state with which Romania has not concluded a legal instrument based on which to exchange information. These provisions apply only in the situation where the revenues are paid as a result of transactions qualified as artificial according to art. 11 para. (1).
Pay attention to artificial operations
Starting with 2013, the Tax Office may classify certain operations as artificial and meant to provide the user with some fiscal facilities. Under these conditions, it may require the removal of those operations from accounting or the withholding of a tax of 50% (instead of 16%). This means that you must not only have the basic documentation regarding the performance of the activities but to demonstrate that those activities were done in order to obtain profit.