According to the Civil Code, lease is the contract whereby one party, called the lessor, undertakes to provide the other party, called the lessee, with the use of agricultural goods for a certain period of time, in return for a price, called rent.
Tax due on rental income:
It is important to note that the withholding and remittance by the lessee of the tax on the net rental income at the date of payment of the income is not an option of the individual which can be exercised through the provisions of the lease contract, but is an obligation of the lessee clearly regulated by the Tax Code.
According to Article 84 paragraph 4) of the Tax Code, in the case of income obtained from the lease of agricultural goods from personal property, the gross income is established on the basis of the legal relationship/contract concluded between the parties and represents the total amount of money received and/or the equivalent in lei of the income in kind received.
If the rent is expressed in kind, the evaluation in lei is made on the basis of the average prices of agricultural products, established by decisions of the county councils and, respectively, of the General Council of the Municipality of Bucharest, following the proposals of the specialized territorial directorates of the Ministry of Agriculture and Rural Development, decisions that must be issued before the beginning of the fiscal year. These decisions are transmitted, within the same deadline, to the regional general directorates of public finance, to be communicated to the subordinate tax units.
If the average prices of agricultural products, established in accordance with the provisions of the previous paragraph, have been changed during the tax year of income, the new prices for the evaluation in lei of the rental income expressed in kind, for the determination of the taxable base, shall be applied starting from the 1st of the month following their communication to the regional general directorates of public finance.
The net rental income is determined at each payment by deducting from the gross income the expenses determined by applying the 40% rate to the gross income.
Tax on rental income is calculated by withholding tax by the income payers at the time the income is paid, by applying the 10% rate on the net income, the tax being final.
Thus, the calculation, withholding and payment of tax on rental income is the responsibility of the lessee.
Tax on rental income is calculated, at each rental payment, by applying the rate of 10% to the net income. The tax thus calculated is withheld and paid to the state budget up to and including the 25th of the month following the month in which it was withheld.
Please note that the lessee is obliged to complete and submit, up to and including the 25th of the month following the month in which the income was paid, form 112 Declaration on the obligations to pay social security contributions, income tax and the nominal record of insured persons in order to declare the tax on rental income and, where applicable, the health insurance contribution (CASS) in section C, insured type 26 – FPs earning income from the rental of agricultural goods under the withholding tax regime.
Health insurance contribution (CASS):
According to Article 170, paragraph 1) of the Tax Code, individuals who earn the income referred to in Article 155 paragraph (1) letter b)-h), from one or more sources and/or categories of income, owe the health insurance contribution to a calculation basis established according to paragraph (1). (4), if they estimate for the current year income whose cumulative value is at least equal to 6 gross minimum wages per country, in force on the deadline for submission of the declaration provided for in Article 120.
“Article 155 – Categories of income subject to social health insurance contributions
1) The contributors to the social health insurance system, referred to in Article 153 para. (1) letter a)-d), shall pay, as the case may be, the social health insurance contribution for income from Romania and from outside Romania, in compliance with the European legislation applicable in the field of social security, as well as with the agreements on social security systems to which Romania is a party, for which there is an obligation to declare in Romania, made from the following categories of income:
a) income from wages and salaries and assimilated to wages and salaries, defined according to Article 76;
a 1) income from pensions, defined according to Article 99, for the part exceeding the monthly amount of 4,000 lei;
b) income from self-employed activities, defined according to Article 67;
c) income from intellectual property rights, defined according to Article 70;
d) income from association with a legal person, taxpayer according to Title II or Title III, for which the provisions of Article 125 are applicable;
e) income from the transfer of goods, as defined in Article 83;
f) income from agricultural, forestry and fish farming activities, as defined in Article 103;
g) income from investments, as defined in Article 91;
h) income from other sources, as defined in Article 114.”
The annual ceiling of at least 6, 12 or 24 gross national minimum wages, as the case may be, in force on the deadline for submission of the declaration referred to in Article 120, shall be reached by aggregating the income referred to in Article 155(1). (1) letter b)-h), as follows:
(…)
d) gross income, net income or income norm, as the case may be, for income from the transfer of the use of goods, established in accordance with Articles 84-87;
(1) (b) to (h):
a) the level of 6 gross minimum wages per country, in force on the deadline for submission of the declaration provided for in Article 120, in the case of income between 6 gross minimum wages per country inclusive and 12 gross minimum wages per country;
b) the level of 12 gross minimum wages per country, in force on the deadline for submission of the declaration provided for in Article 120, in the case of realised income between 12 gross minimum wages per country inclusive and 24 minimum wages
According to Article 84, in the case of income from the transfer of the use of property, other than income from rental and from the letting for tourist purposes of rooms situated in personally owned dwellings, gross income is taxable income.
The net rental income is determined at each payment by deducting from the gross income the expenses determined by applying the 40% rate to the gross income.
According to Article 174 (5) to (10) of the Tax Code:
In the situation where the income is made from a single payer (leaseholder), and the net level of this income, is at least equal to 12 gross minimum wages per country in the year 2022 (30,600 lei) and 6 gross minimum wages per country starting with the income of the year 2023 (18,000 lei), the income payer is obliged to calculate, withhold, pay and declare the social health insurance contribution (CASS).
If the income is earned from more than one income payer and the net income from at least one income payer is equal to or higher than the level of 12 gross minimum wages per country in 2022 (6 gross minimum wages per country starting with the income of 2023), the taxpayer designates, by the contract concluded between the parties, the tenant who has the obligation to calculate, withhold, pay and declare the CASS.
If the level of net rental income obtained from each income payer is below the level of 12 gross minimum wages per country in 2022 (6 gross minimum wages per country starting with the income of 2023), but the cumulated net income is at least equal to 12 gross minimum wages per country in 2022 (6 gross minimum wages per country starting with the income of 2023), the taxpayer (lessor) is obliged to submit a single declaration (form 212) for the declaration and payment of CASS.
The natural person does not have to estimate the basis for calculating the CASS, if he/she receives income exclusively from renting, even if this income would exceed the ceiling of 6 gross minimum wages per country starting with the income of 2023.
The individual must submit the single declaration on income tax and social contributions owed by individuals (form 212) to declare the CASS due, on the basis of which he/she will make the payment in his/her own name (self-assessment system) in the following year by 25 May, unless:
The level of net rental income obtained from each income payer is below the level of 6 gross minimum wages per country starting with the income of 2023, but the cumulative net income is at least equal to 6 gross minimum wages per country;
The total income obtained from more than one lease contract is higher than the threshold at which the CASS was withheld at source by the designated income payer, in which case the contribution withheld by the income payer is taken into account when determining the health insurance contribution
Legal basis:
– Tax Code (approved by Law no. 227/2015, published in the Official Gazette no. 688 of 10.09.2015), as amended and supplemented;
– Tax Procedure Code (approved by Law no. 207/2015, published in MO no. 547 of 23.07.2015), as amended and supplemented;
– Methodological Norms for the application of the Tax Code (approved by HG no. 1/2016).