Romania: Business Environment

Accounting Rules

Tax Year: The fiscal year begins on 1 January and ends on 31 December, although taxpayers can opt for a fiscal year corresponding to a financial accounting year. Romanian subsidiaries of foreign companies, which have a modified financial accounting year, can modify the date set for the completion of their financial statements only if the parent company adjusts its reporting date or is subject to reorganization procedures.
Accounting Standards: Romanian accounting standards follow the Fourth and Seventh EC directives and the IFRS.
Several laws are governing accounting principles and standards in Romania:
- The Ministry of Economy and Finance: Order No. 907/2005; Order No. 1752/2005; Order No. 1121/2006; Order No. 2001/2006, Order No. 3055/2009, Orders No .1286/2012 and No. 881/2012 on the Application of the IFRS
- National Ethics Code for the accounting profession
- Regulation No. 1606/2002 by the European Parliament Assembly of 19 June 2002 on the Application of International Accounting Standards
- The National Bank of Romania : Order 27/2010 on the Application of the IFRS
All domestic companies whose securities trade in a regulated market are required to use IFRS standards as adopted by the EU in their consolidated financial statements.
In case of listings by foreign companies, IFRS Standards are required in the consolidated financial statements, but if the standards of the foreign company's home jurisdiction are deemed by the EU to be equivalent to IFRS Standards, the company may use its home standards.
IFRS Standards as adopted by the EU are required for all credit institutions (National Bank of Romania Order no. 27/2010) and all insurance companies (CSA Bulletin no. 202/2012), including those whose securities do not trade in public markets.
Accounting Regulation Bodies: The Body of Expert and Licensed Accountants of Romania
Accounting Reports: Bookkeeping records are divided into credit and debt, the latter being broken up into long-term and short-term debts.

The results give emphasis to the overall production and classifies expenses by type.

SMEs have to prepare a simplified balance sheet, income statement and notes explaining the details of the financial report.
Companies which have exceeded the criteria included in law no. 1752/2005 over two consecutive years or more must prepare a comprehensive annual financial report (balance chart, income statement, account statements, changes in shareholders, explanatory notes to accompany the financial report).
Publication Requirements: Romanian businesses are asked, as well as foreign companies with corporate names registered in Romania, to organise and conduct their own accounts including the preparation of annual and periodic financial reports. The Romanian Ministry of Public Finance law No. 1752/2005 stipulates that all companies prepare simplified financial statements (simplified balance sheet, income statement and notes explaining the details of the financial report) and that only companies which have exceeded the following criteria over two consecutive years or more must prepare a comprehensive annual financial report (balance chart, income statement, account statements, changes in shareholders, explanatory notes to accompany the financial report):
- Total balance: EUR 3,650,000
- Net annual sales figures: EUR 7,300,000
- Average number of employees during the accounting year: 50
The parent company is exempt from consolidating financial reports if, on the date of the financial statement, the entities that must be consolidated do not exceed two of the three following criteria:
- Total balance: EUR 17,250,000
- Sales figures: EUR 35,040,000
- Average number of employees during the accounting year: 250
Professional Accountancy Bodies: CECCAR , The Body of Expert and Licensed Accountants of Romania
CAFR , Chamber of Financial Auditors of Romania
Certification and Auditing: Audits must be conducted by financial auditors, who are legal persons or entities authorised by the Romanian Chamber of Financial Auditors. They must be conducted under the Standards of Auditing adopted by the Romanian Chamber of Financial Auditors, which are similar to international auditing standards. A few cases of exemption from audit requirements are subject to the audit carried out by financial censors:
- the annual financial reports prepared by businesses under the OMF law 1752/2005
- the annual financial reports prepared by insurance and reinsurance brokers who on the balance sheets do not exceed the limit of two of the criteria mentioned in the OMF law 1752/2005 (total balance: EUR 3,650,000; net annual sales figures: EUR 7,300,000; average number of employees during the accounting year: 50).

You can contact an external auditor: KPMG, Deloitte, Ernst & Young and PricewaterhouseCoopers.
Accounting News

Tax Rates

Consumption Taxes

Nature of the Tax: Value Added Tax (VAT) - Taxa pe valoarea adaugata (in Romanian)
Tax Rate: 19%
Reduced Tax Rate: 9% on prostheses of any type and accessories (except dental prostheses); orthopedic products; medicines for human and veterinary use; food (excluding alcohol) having certain classification codes; fertilizers, seeds and other agricultural products intended for the sowing or planting, as well as for supplies of services, such as those specifically used in the agricultural sector; supply of water for agriculture irrigation; irrigation and drinking water supplies.
5% for books, newspapers, magazines and school manuals (except those intended exclusively for publicity); hotel accommodation and similar accommodation, including the rental of land for camping; restaurant and catering services (excluding alcohol, except for draught beer); access to museums, castles, cinemas, zoological and botanical gardens, amusement and recreational parks and sporting events; the right to use sport facilities; the passenger transport by trains or historical vehicles with steam powered on narrow lines for touristic or entertaining purposes; the passenger transport using transport installations on cable; the passenger transport using vehicles with animal traction, used for touristic or entertaining purposes; the passenger transport by boats for touristic or entertainment purposes; delivery of high-quality food, respectively, mountain products, eco, traditional, authorized by the Ministry of Agriculture and Rural Development; supply of social housing.
Intra-community supplies of goods and export of goods, as well as transport services and international transport of passengers are zero-rated.
Exemptions include specific banking and financial operations; insurance and reinsurance; medical services; education; specific hiring, concession leasing or letting of immovable property; sale of "old" buildings; re-imports of Romanian goods repaired abroad; imports of natural gas through specific distribution systems and electricity; etc.
Other Consumption Taxes: Several products are subject to harmonised excise duties, including: alcohol and alcoholic beverages, manufactured tobacco products, energy products (e.g. unleaded gasoline, diesel, gas, coal), and electricity.
Several environmental taxes apply (packaging and packaging waste management; plastic bags; sale of wast; industrial oil; air emission; electric and electronic equipment; batteries and accumulators; etc.).

Corporate Taxes

Company Tax

16%

Tax Rate For Foreign Companies

Resident companies are taxed on their worldwide income, while non-resident companies are taxed on all income derived from Romanian taxpayers, regardless of whether the services are rendered in Romania or abroad.
Foreign businesses that have a permanent establishment are subject to the same income taxes as a Romanian company. An entity is deemed to be tax resident in Romania if it was set up under Romanian law or has its place of effective management in the country.

Representative offices of foreign businesses are subject to a fixed tax of RON 18,000 for each fiscal year.

Capital Gains Taxation

Capital gains derived by resident and non-resident entities from the sale of shares and real property are included in overall profits and taxed at the ordinary corporate tax rate of 16% (certain capital gains may be exempt). Capital gains from the sale/transfer of shares, as well as income arising from the evaluation or revaluation of shares held in a Romanian or foreign legal entity located in a country that has concluded a tax treaty with Romania, are exempt from tax if the recipient holds at least 10% of the share capital of the entity whose shares are sold/transferred or evaluated/revaluated for an uninterrupted period of at least one year.

Main Allowable Deductions and Tax Credits

Expenses incurred for business purposes are generally deductible. The Romanian Fiscal Code lists the following deductible expenses:

expenses incurred for environmental protection and resource conservation
R&D expenses that are not recognised as intangible assets for accounting purposes
expenses related to benefits granted to employees as equity instruments settled with cash (if the benefits are subject to personal income tax)
losses incurred when writing off client receivables (under certain conditions)
travel and accommodation expenses related to business; including transportation of personnel to and from the workplace
expenses incurred from professional training and development of employees
business travel and accommodation expenses
marketing and advertising expenses
fines, interest, penalties, and other increased payments due under commercial contracts.

Other expenses can be deducted only up to certain specific limits:

certain provisions and reserves
interest expenses and other borrowing costs
protocol expenses (up to 2% of the accounting profit)
lunch vouchers and holiday vouchers
social expenses (capped at 5% of salary expenses)
taxes and fees paid to non-government organisations or professional associations related to the taxpayer’s activity (maximum EUR 4,000/year)
certain vehicle expenses
certain provisions and reserves (with limits).

Start-up expenses may be capitalised and depreciated over a maximum period of five years, but cannot be depreciated for tax purposes.
Certain R&D expenses give rise to an extra 50% deduction. Furthermore, machinery and equipment used in R&D activities is subject to accelerated depreciation.
Companies can carry forward fiscal losses declared in the annual profit tax returns for a period of a maximum of seven years (no inflation adjustment is allowed). Carryback of losses is not permitted.

Other Corporate Taxes

Other taxes on corporations include:

a building tax, which differentiates between residential buildings (tax rate between 0.08% and 0.2%, applicable to the value resulted from the evaluation report for legal entities) and non-residential buildings (between 0.2% and 1.3%; 0.4% if the building is used for agricultural purposes). Legal entities pay an increased rate of 5% (if no revaluation was performed during the last five years)
a land tax, established at a fixed amount per square metre, depending on the rank of the area where the land is located and the area or category of land use, in accordance with the classification made by the local council. Similar to the building tax, the land tax is paid annually in two equal instalments, by 31 March and 30 September, with a 10% reduction granted for full advance payment before the 31 March
stamp duties apply for judicial claims, issue of licenses and certificates, and documentary transactions that require authentication
social security contributions: employers are liable to pay 2.25% for insurance contribution and 4% for social insurance contribution for uncommon work conditions (8% for special work conditions).

For certain activities (e.g. dangerous hazardous substances, activities that generate polluting emissions, etc.), companies have the obligation to declare and to pay (as the case may be) related contributions and taxes to the Environmental Fund. Several environmental taxes apply (packaging and packaging waste management; plastic bags; sale of wast; industrial oil; air emission; electric and electronic equipment; batteries and accumulators; etc.).
Entities in the tourism, hotel, restaurants, bars, and catering sector pay a specific tax, regardless of the size of the turnover and the level of profits. The tax is calculated according to the area of the business, the location and other criteria.

Other Domestic Resources

National Agency for Fiscal Administration

Consult the Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Country Comparison For Corporate Taxation

	Romania	Eastern Europe & Central Asia	United States	Germany
Number of Payments of Taxes per Year	14.0	13.9	10.6	9.0
Time Taken For Administrative Formalities (Hours)	163.0	226.2	175.0	218.0
Total Share of Taxes (% of Profit)	20.0	36.5	36.6	48.8

Source: Doing Business - Latest available data.

Individual Taxes

Tax Rate

Individual income tax

Flat rate of 10%

Allowable Deductions and Tax Credits

Allowable deductions for the primary workplace include:

individual mandatory social contributions due according to the provisions of the law and in line with the provisions of the EU legislation or any social security agreement to which Romania is a party
personal deductions calculated in accordance with the relevant legislation
trade union membership fees
contributions to voluntary pension funds classified as such by the Financial Surveillance Authority, made to authorised entities established in member states of the EU or EEA, up to the RON equivalent of EUR 400 per annum per employee
voluntary health insurance premiums and subscriptions to private healthcare facilities, according to the relevant legislation, borne by employees, up to the RON equivalent of EUR 400 per year

For the salary income obtained in other cases, taxable income is computed as the difference between the gross salary income and the individual mandatory social contributions.

Individual taxpayers may direct up to 3.5% of their annual income tax to charitable purposes.

Special Expatriate Tax Regime

Romanian citizens domiciled in Romania are taxed on their worldwide income, while Romanian citizens not domiciled in Romania and foreign individuals are only taxed on their Romania-source income.

An individual is resident in Romania if he/she fulfils at least one of the following conditions: is domiciled in Romania; is present in Romania for a period or periods that exceed 183 days in any 12 consecutive months interval ending in the calendar year concerned; is a Romanian citizen working abroad as a civil servant or as an employee of the Romanian state; or has the centre of vital interests in the country.

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed: National Fiscal Administration Agency
Withholding Taxes: Dividends: 0% (individuals; paid by Romanian companies to companies resident in one of the EU member states, if the conditions of the Parent-Subsidiary Directive are respected)/5% (paid to a company not resident in the EU/EEA), Interest: 0% (resident companies; individuals)/16% (non-resident company), Royalties: 0% (resident companies; individuals)/16% (non-resident company)
These rates could be reduced under double taxation agreements.

Sources of Fiscal Information

Tax Authorities: Overview of Romania's tax measures in response to Covid-19
Romanian Ministry of Public Finances
National Agency for Fiscal Administration
Other Domestic Resources: Invest Romania
Paying Taxes in Romania

Intellectual Property

National Organisations: The State Office for Inventions and Trademarks (OSIM) is the government agency that is responsible for the registration and protection of patents, trademarks and industrial designs. The Romanian Office for Copyright (ORDA) is the government agency that is responsible for the registration and protection of copyrights.
Regional Organisations: For the protection of patents: the European Patent Office
To control trademarks, designs and models: the Office for Harmonisation in the Internal Market
International Membership: Member of the WIPO (World Intellectual Property Organization)
Signatory to the Paris Convention For the Protection of Intellectual Property
Membership to the TRIPS agreement - Trade-Related Aspects of Intellectual Property Rights (TRIPS)

National Regulation and International Agreements

Type of property and law	Validity	International Agreements Signed
Patent Patent Law No. 64/1991	validity period of 20 years	Patent Cooperation Treaty (PCT)
Trademark Law No. 84/1998 on trademarks and geographical indications	Validity period of 10 years	Trademark Law Treaty Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks
Design Law on Design No. 49/1992 (Design Law)	5 years renewable
Copyright Law No. 8 of March 14, 1996 on Copyright and Neighboring Rights (amended in 2006)	50 years	Berne convention For the Protection of Literary and Artistic Works Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms Rome ConventionFor the Protection of Performers, Producers of Phonograms and Broadcasting Organizations WIPO Copyright Treaty WIPO Performances and Phonograms Treaty
Industrial Models Law on Design No. 49/1992 (Design Law)

Legal Framework

Independence of Justice: The judiciary is not completely independent in Romania. It is heavily influenced by the executive branch institutions of power.
Equal Treatment of Nationals and Foreigners: Foreign nationals cannot expect an impartial trial by the judicial system.
The Language of Justice: The judicial language used in the country is Romanian.
Recourse to an Interpreter: It is possible to be assisted by an interpreter.
Sources of the Law and Legal Similarities: The main source of law in the country is the Constitution of 1991 (revised 2003). The judicial system is based on the French Civil Code (Code Napoleon). Because Romania belongs to the European Union, national law conforms to the requirements of Community legislation.
Checking National Laws Online: Drept Online (links to Romanian laws)
Lexadin (links to Romanian laws)

Standards

National Standards Organisations: ASRO, Standards Association of Romania
Integration in the International Standards Network: The Romanian Institute for Standardisation (Asociaţia de Standardizare din România - ASRO) is the organisation that is responsible for issuing certificates of standardisation.
Its goal is to harmonise Romanian standards with the standards of the European Union. ASRO represents Romania in the international standardization process by co-ordinating the national input, by organising the assurance of standards information as well as of a wide range of services, both for the distribution of standards and accredited certification activities. It also issues various publications and performs training courses.
ASRO is a full member of European Committee for Standardisation (CEN), of European Committee for Electrotechnical Standardisation (CENELEC), International Organisation for Standardisation (ISO) and the International Electrotechnical Commission (IEC); and an observer member of the European Telecommunications Standards Institute (ETSI).
Classification of Standards: Romania upholds national standards (SR), European standards (CE) and international standards (ISO).
Online Consultation of Standards: Consult the ASRO on-line catalogue.
Certification Organisations: RENAR Romanian Accreditation Association

Business Practices

General Information: U.S. Department of Trade, Guide to Doing Business in Romania
Commisceo Global, Guide on doing business in Romania
Passport to trade, Business guide in Romania
Opening Hours and Days: Offices are open on Monday through Friday from 9 a.m. to 6 p.m.
Banks are open on Monday through Friday from 9 a.m. to 1 p.m.
Stores are open on Monday through Friday from 9 a.m. to 6 p.m.
During the summer, some businesses will reduce staff, opening hours and/or are closed during the month of August.

Public Holidays

New Year's Day	1 January
Saint Sylvester's Day	2 January
Orthodox Easter	the last Monday in April
May Day	1 May
Assumption	15 August
Christmas	25 December

Holiday Compensation: No

Periods When Companies Usually Close

New Year's Day and the following workday	1 and 2 January
Orthodox Easter	April/May - 3 days (Sunday and Easter Monday are vacation days; Tuesday is a part of the religious celebration, but it is not a national holiday)
Labor Day	1 May
National Day	1 December
Christmas	25 and 26 December

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