How to register a company in Romania?

In order to register a company in Romania, you need to choose the type of company form you want to incorporate, to prepare the necessary documents and to submit the application to the Romanian Trade Registry. Most common forms of companies in Romania are the Limited Liability Company (LLC), Joint Stock Company (SA) and sole trader (PFA).

How long does it take to open a company in Romania?

The company formation in Romania process will take 2 working days, since the date the incorporation application is submitted to the Romanian Trade Registry.

What is the main advantage to open a company in Romania?

One of the lowest taxation in EU: 1% turnover tax for the companies whose turnover does not exceed EUR 60,000 and have at least one employee or 3% turnover tax if the companies has a revenue exceeding EUR 60,000 or the companies is engaged in some specific activities.

Can I start a company in Romania as a foreigner?

Foreign citizens and legal persons can quickly and easily incorporate their own company in Romania, without any restrictions. There is no need for a Romanian shareholder and director

Romanian Tax Residence | Become Tax Resident in Romania

Curious about tax residence in Romania? This detailed guide breaks down everything you need to know about Romania tax residency, including fiscal registration, obtaining a tax residence certificate, and understanding income tax residential status. Explore the benefits of tax residency in Romania, discover taxes in Romania for expats, and learn how Romania taxation works for individuals and expats alike. Get Romanian tax residence explained and start optimizing your taxes today!

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Romania, located in Eastern Europe, offers an unique tax regime that appeals to many expatriates and foreign investors. Its balanced taxation system, combined with its growing economy and affordable cost of living, makes it an attractive destination for individuals seeking tax optimization and financial stability. In this article, we will explore the intricacies of tax residence in Romania, the process of obtaining Romanian tax residency, and the benefits it brings for expatriates and other individuals.

What is Tax Residence in Romania?

Tax residence in Romania refers to the status of an individual or entity being subject to Romanian taxation laws based on residence criteria. This is crucial because a person's income tax residential status determines where they are liable to pay taxes.

Romanian tax laws classify individuals as either:

Tax residents, who are subject to taxation on their worldwide income, or
Non-residents, who are taxed only on income sourced within Romania.

Understanding your tax residency is essential for compliance and for optimizing your tax obligations, especially for expatriates and foreign investors.

Criteria for Becoming a Tax Resident in Romania

To qualify as a tax resident in Romania, you must meet certain criteria outlined by Romanian tax law. The following factors are considered when determining Romanian tax residence for individuals:

Duration of Stay: If you spend more than 183 days in Romania within a calendar year, you are considered a tax resident.
Permanent Home: Owning or having access to a permanent home in Romania establishes a strong connection and indicates residency.
Center of Vital Interests: If Romania is where your economic, professional, or personal life is predominantly based, you are likely to be deemed a Romanian tax resident.
Employment or Business Activities: Individuals employed or running businesses in Romania may also fall under Romanian tax residency laws.

Steps to Obtain Tax Residency in Romania

1. Fiscal Registration in Romania. The process begins with fiscal registration in Romania, where you obtain a personal tax identification number. This step involves:

Submitting a fiscal registration form to the Romanian tax authorities (ANAF).
Providing documents such as a valid passport, visa, proof of residence, and employment contracts if applicable.

2. Apply for a Tax Residence Certificate Romania. Once registered, you may apply for a tax residence certificate in Romania. This document officially confirms your tax residency status. It is particularly useful for individuals seeking to avoid double taxation under international treaties.

3. Meet Compliance Requirements. You will need to declare your worldwide income to Romanian tax authorities, file annual tax returns, and pay applicable taxes to maintain compliance.

Required documents for obtaining the Romanian tax residence registration certificate

If you're looking to secure the Romanian tax residence registration certificate, make sure to gather these essential documents: a photocopy of your passport, a copy of your ID card or permanent residency document, and evidence of your residence in Romania, like a property title or lease agreement. You will also need a document from your home country that verifies your tax deregistration, which must be translated into Romanian by a certified translator. Don’t forget to include the Certificate of Fiscal Residency from your home country’s State Authority, also requiring a certified Romanian translation.

Taxes in Romania for Expats

Romania offers a straightforward tax system with competitive rates, especially for expatriates. Here’s what expats need to know:

Income Tax: Romania applies a flat income tax rate of 10% on personal income. This applies to both salary and other types of income, making it one of the lowest rates in the European Union.

Social Contributions: In addition to income tax, there are mandatory social contributions: Health Insurance Contribution (CASS): 10% and Pension Contribution (CAS): 25%.

Tax Benefits for Expats: Double Taxation Treaties: Romania has agreements with numerous countries to avoid double taxation, allowing expats to optimize their global tax liabilities and Exemptions for Foreign Income: Certain types of income earned abroad may be exempt from Romanian taxes under specific conditions.

Benefits of Romanian Tax Residency

1. Low Tax Rates: Romania’s 10% flat income tax is among the most competitive in Europe. Combined with relatively low living costs, this makes it attractive for expats and digital nomads.

2. Access to EU Benefits: As a Romanian tax resident, you gain access to various EU tax benefits and financial opportunities.

3. Favorable Business Environment: Romania supports entrepreneurship with incentives for small businesses and startups, making it ideal for business owners seeking a new base of operations.

4. Strategic Location: Romania’s position as a gateway to both Eastern and Western Europe offers logistical and financial advantages for professionals and investors.

Key Considerations for Expats on the Tax Residency in Romania

Double Taxation: Understanding international tax treaties is crucial to avoid being taxed twice on the same income.

Tax Obligations for Expats: Even as a non-resident, you may owe taxes on Romanian-sourced income. Consulting a tax advisor is recommended for clarity on your expat taxation obligations.

Romanian Tax Residence Explained for Individuals

For individuals considering Romania as a permanent or temporary base, the country offers a transparent and favorable tax system. The low personal income tax, robust international treaties, and a welcoming fiscal environment make Romania a viable choice for expatriates, digital nomads, and international investors.

Comparison on the Tax Residence in Romania Benefits with Other EU Countries

When compared to neighboring countries, Romania's taxation policies for expats are particularly appealing:

Flat Tax Rates: Unlike progressive tax systems in other EU states, Romania’s flat rate ensures predictability.
Lower Social Contributions: Although mandatory, the rates are competitive and capped, making it easier to plan financially.

Frequently Asked Questions (FAQs) on Romanian Tax Residency

1. What is the Connection Between Earnings and Tax Residency in Romania?

Your Romanian tax residency determines where you are legally required to report and pay taxes on your earnings in Romania. For instance, if you work in Romania but maintain tax residency in the US, you must report all income earned in Romania to US tax authorities and pay taxes in accordance with US laws and any applicable international tax treaties.

This makes establishing your tax residence Romania or elsewhere crucial, as it significantly impacts how and where your income is taxed—whether in your home country or the country where you live and work as a foreigner. Understanding your income tax residential status ensures compliance and helps you navigate taxation more effectively.

2. What happens when You Become a Romanian Tax Resident?

Once you achieve tax residency in Romania, you are obligated to declare and potentially pay taxes on all your worldwide income in Romania. This means:

Income from Abroad: Any income earned in other countries will first be taxed in those jurisdictions, according to local tax laws. Subsequently, this income must be reported to Romanian tax authorities and taxed in Romania, in line with applicable double taxation treaties. These treaties often prevent paying taxes twice on the same income by providing tax credits or exemptions.
It is advantageous if you plan to apply for Romanian citizenship. Declaring your worldwide income in Romania demonstrates financial stability and provides clear proof of your means of living, which is a key requirement for citizenship applications.
Romania tax residency: Establishing Facilitates Citizenship Applications
By becoming a tax resident in Romania, you align with Romania taxation regulations, simplify financial documentation for residency or citizenship purposes, and benefit from tax treaty protections for income earned abroad.

3. How can you change your fiscal residency?

If you spend more than 183 days per year in another country, you may qualify to establish your tax residency there. For instance, spending this time in Romania can make you eligible for tax residence Romania, provided you follow the necessary procedures.

Changing your fiscal residency in Romania can be a bureaucratic process, often taking up to six months to finalize. However, relocating to a country with lower taxes, like Romania, can result in significant financial benefits, making the effort worthwhile.

It's crucial to inform the relevant fiscal authorities if you meet the 183-day rule. Failure to do so may result in the authorities automatically declaring you a tax resident in Romania or another country. This can have major implications for your taxes, including the possibility of double taxation. You might need to request refunds for taxes already paid in your home country and settle additional taxes, interest, and penalties in the country where you've exceeded the 183-day threshold. Taking proactive steps ensures smoother compliance with Romania tax residency regulations.

4. Do expats in Romania need to establish tax residency?

Yes, as an expat in Romania, you are required to establish your tax residency if you meet certain criteria. Under the 2015 Romanian Tax Code, any foreign citizen who resides in Romania for at least 183 days within a 12-month period must declare their presence to Romanian tax authorities (ANAF) to determine their fiscal residency in Romania.

This process involves notifying the tax authorities about your situation by submitting the necessary documentation. Based on your file, ANAF will assess whether you qualify as a tax resident in Romania. Failure to comply with this requirement may result in penalties and taxation complications. Establishing your Romania tax residency ensures that you meet your tax obligations and align with Romania taxation laws for expats.

5. What happens if you do not obtain Romanian Tax Residency?

If you do not establish your tax residency in Romania, you will remain classified as a foreign tax resident. This means the Romanian tax authorities will only tax the income you earn from sources within Romania. Any income earned outside Romania will not be subject to Romania taxation.

However, failing to notify the authorities about your presence in Romania (if you meet the criteria, such as staying over 183 days) could lead to complications. Authorities may automatically classify you as a tax resident in Romania, resulting in potential back taxes, penalties, and interest. To avoid such issues, it’s essential to comply with fiscal registration in Romania and clarify your tax obligations.

6. What Are Double Taxation Treaties?

Double taxation treaties are agreements between countries designed to prevent individuals and businesses from paying taxes on the same income in both jurisdictions. For example, if you earn a salary in Romania but have tax residency in the US, such a treaty ensures you don’t pay taxes on the same wage twice, provided Romania and the US have an agreement in place.

These treaties clearly outline how each type of tax is handled between the two countries. They specify where taxes should be paid, the applicable rates, and whether taxes paid in one country can be credited against taxes owed in the country of tax residency.

One of the key benefits of these treaties is that income from wages is often taxed in only one country. However, it's essential to carefully analyze and apply the treaty to your specific situation. Each treaty may differ in its provisions, and the taxation rules can vary depending on the type of income you earn. Understanding these agreements is crucial for optimizing your tax residency Romania and ensuring compliance with Romania taxation laws.

7. How do you determine if you need to establish Tax Residency in Romania?

Romanian law requires individuals to submit a set of documents, including a questionnaire, to the Romanian tax authority (ANAF) if they meet any of the following conditions for establishing tax residency in Romania:

Legal Domicile in Romania: If you have a registered permanent address or residence in Romania, you are obligated to declare your situation to the tax authorities.
Spending 183 Days in Romania:If you spend more than 183 days within a 12-month period inside or outside Romanian borders, you must report your status. This applies to expats and foreign nationals staying in the country for extended periods.
Vital Living Interests Transferred to Romania: If your primary economic, professional, or personal interests (e.g., family, employment, business) are centered in Romania, you may need to establish Romania tax residency. This also applies in reverse for Romanian citizens transferring their vital interests abroad.

Meeting any of these criteria makes it mandatory to notify ANAF and follow the process to determine your income tax residential status. Establishing fiscal registration in Romania ensures compliance with Romania taxation laws and prevents potential penalties.

Final Thoughts on the Romanian Tax Residency and the Advantages of Becoming Tax Resident in Romania

Becoming a tax resident in Romania comes with numerous advantages for expats and foreign investors. The process, while bureaucratic, is straightforward with the right guidance. From the initial steps of fiscal registration in Romania to obtaining a tax residence certificate Romania, understanding the requirements and benefits ensures compliance and maximizes financial efficiency.

For personalized advice, consulting with a tax professional familiar with tax residency in Romania is highly recommended. Whether you are relocating for work, starting a business, or seeking a lower tax burden, Romania offers a conducive environment for growth and financial optimization.

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Romanian Tax Residence: Comprehensive Guide to Become Tax Resident in Romania