Value-added tax (VAT)
The standard VAT rate is 19%.The standard VAT rate is applied to all supplies of goods and services (including imports) that neither qualify for an exemption (with or without credit) nor for a reduced VAT rate.
The reduced VAT rate of 9% is levied on supply of prosthesis and related accessories defined as per specific legislation, with the exception of dental prosthesis, which are tax exempt; supply of medicines for human and veterinarian use; supply of food, including non-alcoholic drinks, for human and animal consumption; domestic animals and livestock; seeds, plants and other ingredients used in food preparation; products used in order to complete or substitute food; supply of irrigation water used in agriculture; supply of fertilizers and pesticides used in agriculture; seeds and other agricultural products intended for sowing or planting; water supply and sewerage services.
The supply of school manuals, books, newspapers, and some magazines, as well as the supply of dwelling places as part of the social policy (including land on which they are built) are subject to the reduced VAT rate of 5%. Moreover, the 5% reduced VAT is applicable for:
- accommodation, restaurant, and catering services
- services consisting in giving access to amusement parks and recreational parks with activities classified under NACE 9321 and 9329, and to fairs,
- the right to use sports facilities with activities classified under NACE 9311 and 9313 for the purpose of practicing sport and physical education, other than those exempt from VAT.
- transport services for tourism or leisure purposes, such as: transport of passengers by vintage steam narrow-gauge trains or vehicles for tourism or leisure purposes; cableway transport of passengers - cable cars, gondola lifts, chair lifts, ski lifts - for tourism or leisure purposes; transport of passengers by animal-pulled vehicles, for tourism or leisure purposes; transport of passengers by boats used for tourism or leisure purposes.
- supply of high-quality food products, i.e. products sourced from mountain areas, organic and traditional products, certified by MARD. The conditions for applying the 5% reduced rate in the context of the specific regulatory requirements for authorisation should be assessed.
VAT exemption without credit applies to a range of activities, including the supply of services in relation to banking, finance, and insurance. However, some financial services are subject to the standard VAT rate of 19% (e.g. factoring, debt collection, managing and safekeeping certain equity papers). The VAT exemption without credit also applies to medical, welfare, educational related activities if performed by licensed entities.
There are also operations exempt with credit (i.e. deduction right for the related input VAT), such as the following:
- Supply of goods shipped or transported outside the European Union, and related services.
- Intra-Community supply of goods.
- International transport of passengers.
- Goods placed into free trade zones and free warehouses.
- Supply of goods to a bonded warehouse, a VAT warehouse, and related services.
- Supply of goods that are placed under suspensive customs regimes.
- Supply of services in connection with goods placed under suspensive customs regimes or goods placed into free trade zones.
- Supply of goods and services to diplomatic missions, international organisations, and North Atlantic Treaty Organization (NATO) forces.
VAT is not paid in customs for imports by taxable persons registered for VAT purposes which have a certificate for deferral of VAT payment and cumulatively meet the following conditions that they:
- have no outstanding budgetary obligations;
- have made, in the last six months prior to the month in which it requests the issuance of the certificate, imports from territories and third countries, with a cumulative value of at least RON 50 million, except for products subject to harmonized excise duties;
- have no debts to the customs authority;
- were registered for VAT purposes at least six months before submitting the application for the certificate;
- are not in a state of insolvency, in the reorganization or judicial liquidation procedure.
Companies established in Romania that are legally independent but are closely related in terms of financial, economic, and organizational purposes may choose to form a tax group, as long as they apply the same fiscal period. However, transactions between the members of the group fall within the scope of VAT.
Place of VAT taxation
The rules for establishing the place of VAT taxation for supply of goods and services are determined based on the same rules as those presented in the EU 2006/112/EC and EU 2008/8/EC Directives. Services provided by non-resident entities to Romanian companies with deemed place of supply in Romania are subject to Romanian VAT under the reverse-charge mechanism, provided that no VAT exemption is applicable.
Under the VAT reverse-charge mechanism, VAT is not actually paid, but only shown in the VAT return as both input and output tax, provided that both the beneficiary and the supplier are registered for VAT purposes.
As a rule, the reverse-charge mechanism applies either for intra-Community acquisitions of goods performed in Romania or for services performed by non-resident entities that are not established, nor have a fixed establishment, in Romania. Under the general rule, the place of supply of services is where the beneficiary is established or has a fixed establishment (e.g. consultancy, marketing services).
The reverse-charge mechanism is applicable for the supply of buildings, parts of buildings, and plots of land, and, until 30 June 2022, to the supply of mobile phones, PC tablets, laptops, gaming consoles, and devices with integrated circuits (provided that the value of such goods, excluding VAT, mentioned on an invoice is equal to/higher than RON 22,500).
Limited VAT deduction right
The VAT deduction right related to the acquisition of road vehicles used for the transport of passengers and vehicles that meet certain characteristics, as well as the acquisition of fuel and all related services used for the respective vehicles, is limited to 50%, except for some specific exceptions (e.g. vehicles used by sales agents, taxis, transport services).
The annual turnover threshold for VAT registration in Romania is the Romanian leu equivalent of EUR 88,500, computed based on the exchange rate from the date of EU accession (i.e. RON 300,000). Companies surpassing the VAT registration threshold will be liable to charge VAT for the advance payments received before registering for VAT purposes related to goods delivered/services performed after the registration date.
As a rule, the fiscal period is the calendar month. For taxable persons registered for VAT purposes whose previous year-end turnover (from taxable operations, VAT exempt, and outside the Romanian VAT scope operations with deduction right) did not exceed EUR 100,000, the fiscal period is the calendar quarter.
Taxable persons must keep complete and detailed records for calculation of VAT liabilities.
VAT returns should be submitted to the tax authorities by the 25th day of the month following the end of the fiscal period; the VAT payment is due by the same date. The VAT return can be submitted by electronic means.
Taxable persons not registered for VAT purposes in Romania and not required to register are liable to pay VAT and to submit a special VAT return in connection to services rendered by/provided to non-residents. These obligations must be fulfilled by the 25th day of the month following that when the services are supplied.
Taxable persons are required to file VAT statements related to acquisitions/supplies of goods/services performed on Romanian territory on a monthly/quarterly basis, based on invoices issued/received to/from taxable persons registered for VAT purposes in Romania. These obligations should be fulfilled within 30 days.
A taxable person registered for VAT purposes who does not exceed the threshold of RON 300,000 during the course of a calendar year may request de-registration from the VAT registered persons record between the first and tenth day of each month following the fiscal period used (month or quarter).
The cash accounting VAT scheme (CAVS)
The CAVS is optional for taxpayers with a turnover lower than RON 4,500,000 registered in the previous year and for newly founded companies. The right to deduct the input VAT for the acquisitions of goods/services from companies applying the CAVS is deferred until the date the payment is performed.
The VAT split-payment mechanism
The VAT split payment mechanism, the so-called “VAT Split”, was abolished as of 1 February 2020.
For persons who have applied the VAT Split mechanism and opened accounts at the State Treasury Units, the Treasury will transfer, within 10 days as of the Ordinance’s date of entry into force (i.e. 1 February 2020) and without any prior formalities, the amounts available in those persons’ VAT accounts to their current accounts.
Persons that have applied the VAT Split mechanism and do not have available a current account at the State Treasury will need to notify the State Treasury Unit of a current account opened with a credit institution.
Persons that have applied the VAT Split mechanism can no longer perform operations as of 1 February 2020, except, of course, for transfers from VAT accounts to current accounts.
VAT Quick fixes
The provisions of Directive 1910/2018, which establishes a common regulatory framework at the EU level for the simplification of call-off stock arrangements, allocation of transport for chain transactions and the conditions for applying the VAT exemption for intra-Community supplies (the so-called "quick fixes") were transposed in the national legislation and entered into force on 03.02.2020, as follows:
1. VAT exemption for Intra-Community supplies
The VAT exemption for intra-community supplies of goods, other than new transport means or excisable goods, is not applicable in case the supplier does not correctly report the transactions in the recapitulative statement (390).
The provisions regarding the conditions for the application of VAT exemption for the intra-community supplies are completed with the provisions of Regulation no. 1912/2018, which modifies EU Regulation no. 282/2011, introducing two relative presumptions regarding the documents necessary for proving the transport of the goods to another Member State.
According to the Regulation, if the transport of goods is performed by the supplier, in order to prove that such transport took place, the supplier should hold two relevant items of evidence issued by two entities independent of each other, as well as of the supplier and the client. If the transport is performed by the client, additionally to the above-mentioned documents, the latter has to provide the seller with a written statement confirming that the goods were transported by the client. That statement should contain: the issue date, the buyer’s name and address, the nature and quantity of the goods, the date and place of receipt of the goods and, in the case of means of transportation, the vehicle identification number and the identification details of the person who accepted the goods in the buyer’s name. The statement should be provided by the tenth day of the month following the delivery.
In the above, it is presumed that the goods are transported to another Member State if two of the following means of proof are held: documents relating to the dispatch or transport of the goods, such as a signed CMR document or note, a bill of lading, an air freight invoice or an invoice from the goods carrier, or one means of proof of those previously mentioned and one document from the following: (i) an insurance policy with regard to the dispatch or transport of the goods, or bank documents proving payment for the dispatch or transport of the goods; (ii) official documents issued by a public authority, such as a notary, confirming the arrival of the goods in the Member State of destination; (iii) a receipt issued by a warehouse keeper in the Member State of destination, confirming storage of the goods in that Member State.
2. Call-off stock arrangements
The quick fixes for call-off stock arrangements are introduced in the Fiscal Code with a set of application conditions slightly different from those previously stated in Ministry of Public Finance Order no. 4120/2015. Under the new conditions, a taxable person established in one Member State which transfers goods to another taxable person established in another Member State, within a call-off stock arrangement, does not perform a transfer and, therefore, does not have to register for VAT purposes in the territory where the goods are in stock if the following conditions are cumulatively met:
The goods are shipped by a taxable person to another Member State in order to be supplied in that Member State to another taxable person, based on a previous agreement;
- The taxable person is not established and does not have a permanent establishment in the Member State to which the goods are shipped;
- The taxable person to which the goods are shipped is registered for VAT purposes in the Member State to which the goods are shipped, with its identity and VAT code known to the taxable person shipping the goods;
- The taxable person shipping the goods records the transfer of goods in a special ledger provided by Regulation no. 1912/2018 and includes in the recapitulative statement both the identity and VAT code of the taxable person which purchased the goods.
The taxable person has to register for VAT purposes and declare an assimilated intra-community acquisition of goods in the following situations: if any of the above-mentioned conditions are not met, when goods stay in stock for more than 12 months, goods are destroyed or stolen, or the goods are sent to another Member State or exported.
3. Chain Transactions
Chain transactions are a set of successive supplies of goods performed by an operator to an intermediary operator, which supplies the goods to a final client, with the goods being transported from the initial operator directly to the final client, from one Member State territory to another.
The transport is allocated only for the delivery performed by the operator to the intermediary operator. By exception, the transport is allocated to the supply performed by the intermediary operator if it communicated to the supplier its VAT registration code from the Member State from which the goods are delivered.
Customs and international trade
Customs duties are those specified in the EU Common Customs Tariff and are expressed as a percentage applied to the customs value (i.e. ad valorem taxes), as a fixed amount applied to a specific quantity (i.e. specific taxes), or as a combination of the above.
Agricultural products (i.e. products from Chapters 1 to 24 of the EU Common Customs Tariff) are subject to specific taxation.
In certain cases (e.g. meat), the customs duty rate is established with regard to the cost, insurance, and freight (CIF) or the entry price of the products. In other cases, the customs duty rate is established by adding additional duties, such as agricultural components, to the ad valorem tax.
The customs value is determined and declared by importers in accordance with the provisions of the Union Customs Code and its Delegated, Implementing, and Transitional Regulations, which took over the rules set up by the World Trade Organization (WTO) Customs Valuation Agreement (i.e. the Agreement pertaining to the implementation of Article VII of the General Agreement on Trade and Tariffs [GATT]).
Authorised Economic Operator (AEO) status
Operators that obtain AEO status benefit from simplifications regarding customs inspection, obtaining certain customs authorisations, and performing customs formalities.
Moreover, through the AEO authorisation, the holder is recognised by the customs authorities as a reliable partner, giving comfort as regards observance of the safety and security standards, and can benefit from easier admittance to certain customs simplifications.
In addition, companies certified as an AEO may apply for a certificate granting the benefit to defer the payment of the VAT in customs upon import. Moreover, in case of imports followed by VAT-exempt intra-Community supplies, companies registered for VAT purposes in Romania having AEO status are not required to lodge a VAT guarantee.
Operators authorised as an AEO will be checked at least once every three years for assessing whether they comply with the certification criteria.
Binding Tariff Information (BTI) / Binding Origin Information (BOI)
Companies can obtain rulings (BTI) from the Romanian customs authorities on the tariff classification of imported goods that are binding for the customs authorities for a three-year period, whenever goods identical to those described in the BTI are imported.
A similar type of ruling can also be obtained regarding the origin of goods (BOI). They are also valid for a period of three years from the date of issue.
The BTI and BOI shall be binding for the holder of the decisions.
For some agricultural products, the European Union generally imposes specific measures (e.g. values or quantitative allowances) on imports from other third countries. It is mandatory to obtain an import licence before importing such products.
Moreover, import/export licences from relevant authorities are also required for commodities regarded as potentially hazardous to human health or to the environment (e.g. some chemical products, certain types of waste and scrap), for commodities the end-use of which is controlled (e.g. explosives), or for dual use products (i.e. both civil and military).
Harmonised excise products
The following products are subject to harmonised excise duties: alcohol and alcoholic beverages, manufactured tobacco, energy products (e.g. unleaded gasoline, diesel, gas, coal), and electricity.
Excise duties are due when excise products are released for consumption (e.g. imported into Romania, taken out of an excise duty suspension arrangement).
Ethyl alcohol and other alcoholic products are exempt from the payment of excise duties if they are denatured and used in the pharmaceuticals or cosmetics industry.
Some energy products subject to movement control are excepted from excise duty, provided that an end-user authorisation is obtained and the payment of excise duties is secured.
Manufactured tobacco is also exempt from excise duties when exclusively intended for scientific and quality testing.
In some cases, traders can claim a refund of the excise duties paid (e.g. excise duty paid for goods released for consumption in Romania, but intended for consumption in other EU member states; excise duties paid for goods released for consumption and then returned to the production tax warehouse for recycling, reconditioning, or destruction; excise duties paid for goods released for consumption in Romania and then exported).
For cigarettes, the excise duty due is equal to the sum of the specific excise duty and the ad valorem excise duty. The specific excise duty expressed in RON/1,000 cigarettes is annually determined based on the weighted average retail price, the legal percentage related to the ad valorem excise duty, and the total excise duty. The specific excise duty for cigarettes has been set at RON 418.76/1,000 cigarettes for the period 1 January 2021 to 31 March 2021, inclusively.
The excise duty rate for ethyl alcohol is RON 3,647.93/hectolitre of pure alcohol.
The excise duty level for fermented beverages, other than beer and wines, is set at RON 437.75 / hectolitre of product, while the excise duty level for apple and pear cider and mead and fermented beverages from berries is nil.
The excise duty level for fermented sparkling beverages, other than beer and wines, is set at RON 52.26/hectolitre of product, while the excise duty level for apple and pear cider and mead is nil.
The excise duty level for intermediary products is set at RON 437.75/hectolitre of product, and the level for beer is set at RON 3.64/hectolitre/1 Plato degree.
The current levels of excise duties are RON 2,149.09/1,000 litres for leaded gasoline, 1,827.13/1,000 litres for unleaded gasoline, and RON 1,674.55/1,000 litres for diesel, respectively.
Companies selling fuel in gas stations have to register with the customs authorities. The same obligation applies for companies performing wholesales of fuel, alcoholic drinks, or tobacco products.
Other excise products
Other excise products are:
- Heated tobacco products, which by heating generate an aerosol that can be inhaled without the combustion of tobacco mixture (falling under CN 2403 99 90).
- Liquids containing nicotine (falling under CN 3824 99 56) for inhaling using an electronic device (i.e. electronic cigarette).
Excise duties should be paid no later than the 25th day (inclusive) of the month following the one:
- in which they were sold on the national market for domestic products, or
- when the actual receipt takes place for products received from EU countries, except for the excisable goods imported, for which the excise duty is to be paid when the goods are released for free circulation.
Economic operators performing directly intra-Community acquisitions/imports of such goods are entitled to request a refund of the excise duties paid if the products are exported, supplied to another EU member state, or returned to the supplier. For the production/intra-Community acquisitions/imports of such products, prior authorisation is requested.
The building tax calculation method differentiates between buildings depending on their destination usage:
- Residential buildings: Tax rate between 0.08% and 0.2% (applicable to the taxable value as per the specific table provided by the law for individuals and the value resulted from the evaluation report for legal entities).
- Non-residential buildings: Tax rate between 0.2% and 1.3%. In the case of a building used for agricultural purposes, the applicable tax rate is 0.4%.
Local authorities have been granted the authority to increase local tax rates by 50%.
The increased tax rate for building tax due by legal entities is 5% (if no revaluation was performed during the last five years).
If a building was acquired during a fiscal year, the building tax for the entire year is due by the seller. The buyer is liable to pay the tax starting with the next year.
Building tax is paid annually, in two equal instalments, by 31 March and 30 September. For the payment of the entire annual tax by 31 March, a reduction of up to 10% is granted by the Local Council.
Owners of land are subject to 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 building tax, land tax is paid annually, in two equal instalments, by 31 March and 30 September. A 10% reduction is granted for full advance payment of this tax by 31 March.
There are no transfer taxes for companies for the transfer of property. The income derived from such a transfer will beincluded into the taxable profits of the company and will be subject to the flat tax rate.
For judicial claims, issue of licences and certificates, and documentary transactions that require authentication, stamp duty (in the form of notary fee) has to be paid.
Payroll taxes and social security contributions
Employers withhold, on a monthly basis, the mandatory employee’s social security contributions and the income tax (10%) from the employee’s gross salary and wire the amounts to the Romanian tax authorities.
The employer pays an insurance contribution for work of 2.25% and social insurance contribution of 4% for uncommon work conditions and 8% for special work conditions.
For the period 1 January 2019 to 31 December 2028, certain tax incentives have been introduced in the construction sector, under certain conditions.
For introducing on the national market packed goods/ packaging materials, substances which are hazardous for the environment, tires/industrial oils/shopping bags, electric and electronic equipment, batteries and accumulators, companies have the obligation to declare and pay (by the case) related contributions to the Environmental Fund.
Packaging and packaging waste management
In certain cases (e.g. for the contribution related to packaging materials introduced on the national market), the contribution to the Environmental Fund is enforced for companies that fail to achieve the annual packaging waste recovery/recycling targets (i.e. for FY19-FY2022, the global recovery target is 60% and the global target for recycling is 55%). Thus, the contribution to the Environmental Fund is currently of RON 2/kg of packaging materials introduced onto the market and is owed for the difference between the annual packaging waste recovery/recycling target stipulated by law and the packaging waste recovery/recycling target actually achieved by companies.
Sale of waste
The economic operators that generate from their activities different types of waste streams and sell these items to waste collectors/recyclers have the obligation to pay a 2% contribution to the Environmental Fund, amounting to 2% of the revenues obtained from the sale of all types of such waste.
Such contribution is withheld at source by the waste collectors/recyclers, which have the obligation to transfer the amounts to the Environmental Fund.
Companies must declare the number of shopping bags introduced on the national market and pay, on a quarterly basis, the related contribution (i.e. ecotax), amounting to 0.15 lei/piece, for all types of shopping bags, except those made with materials complying with SR EN 13432: 2002 requirements, e.g. biodegradable bags made of compostable materials. The ecotax is distinctly identified on the sales documents and its value is visibly displayed at the point of sale in order to inform end-users. The acquisition and sale of shopping bags with a thickness below 50 µ is banned as of 1 January 2019.
A tax amounting to RON 0.3/kg is levied (one time only) on industrial oils and lubricants introduced on the national market from outside Romania; the tax must be distinctly stipulated on the sale documents.
Companies conducting activities that result in the discharge of air emissions from fixed sources (e.g. nitrogen oxides, sulphur oxides, persistent organic pollutants, heavy metal emissions, such as lead, cadmium, mercury) have to pay the contributions to the Environmental Fund of between RON 0.02/kg and RON 20/kg.
Electric and electronic equipment
Companies which introduce on the national market electrical and electronic equipment (EEE) have the legal obligation to declare and pay (should the legal targets not be met) to the Environmental Fund a contribution (the amount of the contribution differs considering the type of equipment acquired), for the difference between the quantities of waste of electrical and electronic equipment (WEEE) corresponding to annual collection targets imposed by law and the quantities effectively collected.
Economic operators owning WEEE (waste of electrical and electronic equipment), including those from EEE imported for their own use, are required to hand over WEEE to the entities specialized in collecting WEEE in order to fulfil their WEEE collection/recovery targets.
Companies may fulfil the annual targets imposed by law either individually, or by concluding an agreement with an operator specialized in taking over the responsibility regarding WEEE.
Batteries and accumulators
Economical operators introducing on the national market batteries and accumulators must hold evidence of the quantities and types of products introduced on the national market and must fulfil the minimum collection rates for the used batteries and accumulators. According to the legislation in place, economical operators which introduce on the national market batteries and portable accumulators have the obligation to declare and pay a contribution of RON 4/kg of the mentioned products for the difference between the quantities of batteries and portable accumulators waste corresponding to annually collection targets imposed by law and the quantities effectively collected.
Specific tax for certain activities
Economic operators in the tourism, hotel, restaurants, bars, and catering sector will pay a specific tax, regardless of the size of the turnover and the level of profits. The tax will be calculated according to the area of the business, the place where other variables take place.
Thus, whether or not profitable, the restaurants, bars, or cafés will apply this tax system, which will negatively affect small businesses, especially.
The declaration and payment of the specific tax will be made half-yearly until the 25th day of the month following the semester for which the tax is due. Thus, the payment amount will be half of the annual tax.