Romania

Tax measures 

Pillar 2 Directive

Directive (EU) 2022/2523 (‘Pillar 2 Directive‘) was transposed in the Romanian legislation through Law no. 431/2023, which introduced into the Romanian legislation a complex system of rules for an effective minimum taxation of 15% for multinational enterprise (MNE) groups and large-scale domestic groups with annual consolidated revenues of at least 750 million euros (EUR) in at least two of the four previous financial years. It was published in the Official Gazette no. 8 dated 5 January 2024 and is applicable to financial years starting as of 31 December 2023. 

Entry into effect of the Multilateral Instrument (MLI)

In accordance with the reservation made by Romania based on art. 35 (7) of the MLI, Romania submitted to the Organisation for Economic Co-operation and Development (OECD) secretariat on 6 March 2023 the notification regarding the fulfilment of the necessary internal procedures in order to produce effects by the MLI for the implementation within the double tax treaties (DTTs) of the base erosion and profit shifting (BEPS) measures currently with 51 out of 89 treaty partners. 

Therefore, the MLI will start to produce effects for transactions that will take place on or after 1 January 2024 for the withholding tax (WHT) provisions and beginning with fiscal periods beginning on or after 1 January 2024 for the other tax provisions of the treaties.

DAC7

OUG 16/2022 introduced rules that transposed the provisions of the seventh update to Council Directive 2011/16/EU on administrative cooperation in the field of taxation into law (DAC7). 

DAC7 extends the European Union (EU) tax transparency rules to digital ’platforms‘ and introduces an obligation on ’reporting platform operators‘ to collect, verify, and report specific information with respect to ’reportable sellers‘ that have undertaken ’relevant activities‘ through their platforms. 

DAC7 also introduces new automatic exchange of information between the EU tax authorities regarding the taxable events and income generated through these platforms. 

Furthermore, DAC7 includes a legal framework to enable joint audits. In a joint audit, two or more countries join to form a single audit team to conduct a taxpayer examination. Joint audits should result in quicker issue resolution, more streamlined fact finding, and more effective compliance.

Public country-by-country (CbC) reporting

Order 2048/2022 requires qualifying Romanian-based MNEs and MNEs with subsidiaries or branches in Romania, irrespective of whether these are EU or non-EU headquartered groups, to publicly disclose certain information on a country-by-country basis. The threshold of the annual consolidated revenue is 3.7 billion Romanian leu (RON) in each of the last two consecutive financial years.

The public CbC report is effective starting 1 January 2023 and applies to financial years beginning on or after 1 January 2023 (which is earlier than the 22 June 2024 deadline set by the EU Directive). Following these amendments, Romania became the first EU member state to officially introduce public CbC reporting obligations, with a deadline for the CbC preparation and public disclosure significantly earlier than that set by the EU Directive.

Changes of the Romanian Fiscal Code

Government Emergency Ordinance (GEO) no. 115/2023 

The Government of Romania has adopted Emergency Ordinance no. 115/2023 (GEO no. 115/2023), which introduces new measures for fiscal consolidation and combating tax evasion. We present below the most important amendments to the Fiscal Code brought by GEO no. 115/2023:

Value-added tax (VAT)

The reduced VAT rate of 9% will become applicable to milk powder for newborns, infants, and young children.

The right to deduct the VAT related to the purchase, rental, or leasing of buildings/living spaces, regardless of their destination, located in residential areas or in housing blocks, as well as the VAT related to the expenses related to these buildings/spaces, has been limited to 50% for the living area if they are not used exclusively for economic activity purposes. This limitation becomes applicable starting with the first day of the month following the date in which Romania receives the decision to derogate from the provisions of Directive 2006/112/EC in this regard.

The facility of deferring the payment of VAT in customs will be removed for taxable persons registered for VAT purposes who hold an authorised economic operator (AEO) certificate. The possibility of deferring import VAT in the case of submitting a customs declaration through the use of centralised customs clearance has been introduced. In order to obtain the certificate of deferment for the payment of VAT in customs, the applicants will be required to make available to the customs authority a statement on their own responsibility according to which they state that they do not have any outstanding budgetary obligations.

RO e-Factura

Changes regarding the deadline for sending e-invoices through the RO e-Factura system, as well as the applicable sanctions for the taxable persons established in Romania, were implemented, as follows:

• Between 15 December 2023 and 30 June 2024, for situations where both the supplier and the beneficiary are registered in the RO e-Factura national system, the issued invoices must be sent within five calendar days as of the date of issue / issue deadline according to the Fiscal Code. As of 1 July 2024, for non-compliance with the five-calendar-day transmission deadline, fines will be applied, depending on the type of taxpayer.
• During 1 April 2024 to 30 June 2024, the suppliers who are required to issue electronic invoices and to send them through the national RO e-Factura system will face sanctions for not respecting the deadline of five working days from the date of issue / the deadline for issuing invoices according to the Fiscal Code, with the level of fines to be applied depending on the type of taxpayer.

As of 1 July 2024, the fine for sending the B2B invoices by other methods than through the RO e-Factura system will be 15% of the invoice value (taxable base and VAT), both at the level of the supplier and the beneficiary. The fine applies to taxable persons established in Romania, who are both suppliers or beneficiaries.

It has also been clarified that the following invoices will not be sent through the RO e-Factura national system: simplified invoices, invoices issued for operations to entities not established and not registered for VAT purposes in Romania, and for the provision of services for which the issuance of the invoice is not subject to invoicing rules in Romania.

RO e-Transport

RO e-Transport obligations have been initially implemented as of 1 July 2022 and are mandatory for certain categories classified by the authorities as high fiscal risk goods (e.g. fruits and vegetables, alcoholic/non-alcoholic beverages) that are transported on Romanian territory.

Moreover, as of 15 December 2023, RO e-Transport obligations were extended also to international road transport.

Thus, the identification of transports and the generation of the unique UIT codes in the RO e-Transport system is mandatory both for road transports on the national territory of goods with high fiscal risk and for international road transports of goods.

The obligation to report in the RO e-Transport system the data related to the international transport of goods and to obtain the UIT codes is with the following users:

• The recipient listed in the import customs declaration or the sender listed in the export customs declaration for goods that are the subject of the import or export operations, as the cases may be.
• The beneficiary in Romania in cases of intra-Community purchases of goods.
• The supplier in Romania for the intra-Community supplies of goods.
• The depositary in cases of goods that are subject to transit intra-Community transactions, both for goods unloaded on Romanian territory for storage purposes or for the arrangement of a new shipment from one or more consignments of goods, as well as for goods loaded after storage or after the arrangement of a new transport on the national territory for one or more batches of goods.

The road transport operator is required to equip the transport vehicle with telecommunication terminal devices. The driver of the means of transport is required to switch on the positioning device before starting a transport on the national territory and to keep it in operation until it arrives at the declared place of delivery on the national territory or after leaving the national territory.

Sanctions for non-compliance with the high fiscal risk goods apply as of 1 January 2023, while the sanctions for the new measures introduced with respect to international road transport will apply as of 1 July 2024.

Law no. 296/2023

Minimum turnover tax (IMCA)

Law no. 296/2023 introduced the IMCA.

Taxpayers (other than credit institutions and oil and gas companies) that registered a turnover of over EUR 50 million in the previous year and for which the corporate income tax (CIT) is lower than the IMCA will be required to pay CIT at the level of the IMCA. In the case of a tax group, the IMCA is calculated by the responsible legal entity by summing all the group members’ turnovers.

As an exception, companies that have activities in the oil and gas sectors and that registered in the previous year a turnover of more than EUR 50 million will owe, in addition to the CIT, a specific turnover tax.

Credit institutions (i.e. Romanian legal entities and Romanian branches of credit institutions – foreign legal entities) are liable for a newly-introduced turnover tax in addition to the CIT.

Economic operators that exclusively conduct activities of distribution/supply/transport of electricity and natural gas that are regulated/licensed by the National Energy Regulatory Authority are exempt from the application of the IMCA.

VAT

The same Law no. 296/2023 introduced a series of amendments and completions to the provisions of the Fiscal Code with respect to the VAT. 

Thus, as of 1 January 2024, the following amendments became effective:

• The VAT rate increases from 9% to 19% for: 

• Supplies of non-alcoholic beer.
• Foods with added sugar (over 10g per 100g product), with the exception of sweet bread and biscuits.

• The VAT rate increases from 5% to 9% for:

• The supplies of high-quality food products (e.g. food produced in mountainside areas, eco and traditional products).
• The supplies of housing as part of the social policy (useful surface of a maximum of 120sqm, exclusive of household annexes, the value of which, including the land on which they are built, does not exceed the amount of RON 600,000 excluding VAT). The reduced rate applies only to homes that, at the time of supply, can be inhabited as such.
• Supply and installation of photovoltaic panels, solar thermal panels, heat pumps, and other high-efficiency, low-emission heating systems, including installation kits, as well as all necessary components purchased separately for central or local public housing / buildings, except for commercial companies.
• The supply and installation of components for repairment and/or expansion of systems as a component part of construction supplies or as extra options when delivering a construction.
• Access to fun fairs, amusement parks, recreational parks for which economic activities fall under the following NACE codes: 9321 and 9329, and fairs, exhibitions, cinemas, and cultural events, other than the tax-exempt ones.
• Access to sports events.
• The VAT rate increases from 5% to 19% for: 
• The right to use the sports facilities which activities are classified under NACE codes no. 9311 and 9313, other than the exempt ones.
• The transport of people by train or historical steam-powered vehicles on narrow gauge lines for tourist or leisure purposes.
• The transport of people using cable transport facilities (e.g. cable cab, gondola lift, chair lift, ski lift) for tourist or leisure purposes.
• The transport of people by animal-drawn vehicles, used for tourist or leisure purposes.
• The transport of people with boats, used for tourist or leisure purposes.

The VAT exemption with deduction right becomes obsolete for the following operations carried out towards public hospitals:

1. Construction, rehabilitation, and modernisation services for hospital units in the public health system.
2. Supplies of medical equipment, apparatus, devices, and the like.
3. Adaptation, repair, rental, and leasing of such goods mentioned at point ii) above. 

The related VAT exemption is maintained only when these operations are conducted for non-profit entities registered in the National Agency for Fiscal Administration’s (NAFA’s) (i.e. Romanian tax authority) Public Registry and intended for hospital units owned and operated by the non-profit entity or those in the state public network.

Transitional measures were established for housing supplies for which contracts were concluded by 31 December 2023 and which will be supplied between 1 January and 31 December 2024 in order to apply the reduced VAT rate of 5%.

Mandatory e-invoicing

The obligations of issuers sending invoices through the national system for electronic invoicing, RO e-Factura, have been extended. As of 1 January 2024, economic operators (i.e. taxable persons established in Romania, regardless of whether they are registered for VAT purposes or not, and taxable persons not established in Romania but registered for VAT purposes) have the obligation to send invoices that are issued for the supply of goods and taxable services in Romania, under a B2B relationship, in the RO e-Factura system, regardless of whether or not the receivers are registered in the RO e-Factura Register.

Also, invoices related to taxable operations carried out in Romania towards public institutions (B2G) must be sent through the RO e-Factura system.

In the light of the above, it is mandatory to send the invoices to the beneficiaries, in accordance with the provisions of the Fiscal Code, except in cases where both the supplier and the beneficiary are registered in the RO e-Factura Register.

Invoices must be sent through the RO e-Factura system within five working days as of the date of issuance or the deadline provided in the Fiscal Code for issuing the invoice.

For non-compliance to this provision, contraventional fines could be applied depending on the type of taxpayer that the issuer is classified, as follows:

• From RON 5,000 to RON 10,000 for large taxpayers.
• From RON 2,500 RON to RON 5,000 for medium taxpayers.
• From RON 1,000 RON to RON 2,500 for other legal entities and individuals.

During the period 1 January 2024 to 31 March 2024, no sanctions will be applied for non-compliance with the obligations to send invoices through the RO e-Factura system.

As of 1 July 2024, only invoices sent through the RO e-Factura system will be considered invoices for the supply of goods and the provision of taxable services in Romania conducted in B2B relationships (carried out between taxable persons established in Romania). The use of electronic invoices is subject to acceptance by the beneficiary, with the exception of B2B invoices, which must be sent through the RO e-Factura system. 

The receipt and recording in the bookkeeping of invoices other than the ones sent through the RO e-Factura system for B2B transactions is sanctioned with a fine equal to the amount of the VAT inrelated to the invoice in cause.

RO e-Sigiliu  

A new national system, RO e-Sigiliu, was introduced based on the use of electronic devices and an IT application that allows the relevant authorities (such as the National Fiscal Administration Agency and the Romanian Customs Authority) to determine the potential points of diversion for the road transport of goods regardless of whether they are in transit or have as their final destination an economic operator on the national territory. 

GO no. 16/2022 for amending and completing the Fiscal Code

• Tax exemption for reinvested profit is to be extended to cover investments in assets used in refurbishment, production, and processing activities. Changes come into force on 1 January 2023.
• Tax on dividends was increased from 5% to 8% on dividends distributed between/paid to Romanian legal entities and for those distributed between/paid to privately managed pension funds and optional pension funds. The 8% rate applies to dividends distributed starting 1 January 2023.
• Micro-company tax becomes optional, and the tax rate on micro-company revenues remains only 1% (the 3% rate is thus repealed). If a micro-company achieves revenues of more than 500,000 euros (EUR) or its revenues from consulting and management (except tax consultancy) are 20% or more of the total revenues during a tax year, it owes CIT as of the quarter in which they exceeded those limits. Micro-company tax changes enter into force on 1 January 2023. 
• The WHT rate for dividends obtained by a non-resident has increased from 5% to 8% on dividends distributed after 1 January 2023.
• Local taxes and fees changes enter into force on 1 January 2025. For buildings that include residential and non-residential spaces, the taxes and fees are determined by measuring which of those spaces is larger and applying the tax applicable to that type of space to the value of the entire building. Tax of at least 0.1% (for residential buildings) or at least 0.5% (for non-residential buildings) applies to the value of the building. The previous regulation provided for 0.08% to 0.2% for residential buildings and 0.2% to 1.3% for non-residential buildings, applied to the taxable value of the building.
• The following VAT changes enter into force on 1 January 2023:
  • The applicable VAT rate in the hotels, restaurants, and catering (HORECA) sector is to be increased from 5% to 9%. Thus, accommodation in the hotel sector or sectors with similar functions, including the rental of land set up for camping, and restaurant and catering services, will be subject to the 9% rate.
  • The application of the reduced VAT rate of 9% is regulated for both chemical and non-chemical fertilisers and pesticides used in the agricultural sector. For deliveries of chemical fertilisers and pesticides, the reduced VAT rate of 9% applies until 31 December 2031 inclusive.
  • The standard VAT rate of 19% will be applied to the supply of alcoholic and non-alcoholic beverages containing added sugar or other sweeteners or flavourings falling under CN codes 2202 10 00 and 2202 99.
  • For firewood deliveries, a reduced VAT rate of 5% applies until 31 December 2029 inclusive.

Law no. 88/2023 for changing and amending the Fiscal Code has provided new exemptions for VAT in the medical field.

The provisions entered into force within 60 days as of the date of publication of the law in the Official Gazette.

According to Law no. 88/2023, the following activities are exempt from VAT with the right of deduction:

• Construction, rehabilitation, and modernisation services for hospital units in the state public network, as well as construction, rehabilitation, and modernisation services for hospital units provided to non-profit entities if they are intended for hospital units owned and operated by the non-profit entity or those in the state public network.
• Supplies of medical equipment, apparatus, devices, articles, accessories and protective equipment, materials and consumables for medical purposes normally intended for use in the healthcare field or by disabled persons, essential goods for assisting with and overcoming disabilities, as well as the adaptation, repair, rental, and leasing of such goods, to hospital units in the state public network and to non-profit entities if they are intended for hospital units owned and operated by the non-profit entity or those in the state public network.

The VAT exemption for the above supplies of goods and services applies as follows:

• Directly, by invoicing without VAT by goods/service providers if the beneficiary is a hospital unit in the state public network or a central or local public institution/authority that finances that network, according to the law.
• By refunding the VAT related to the purchases of goods or services made by non-profit entities, according to a procedure established by order of the Minister of Public Finance.

The following supplies of goods to which the reduced VAT rate of 9% was previously applied will also be exempt from VAT with the right of deduction:

• The delivery of prostheses and their accessories, apart from dental prostheses exempt from tax according to art. 292 para. (1) lit. b) from the Fiscal Code.
• Delivery of orthopaedic products.

The order of the Minister of Finance and the methodological rules regarding the application of exemptions will be issued within 60 days as of the publication of Law no. 88/2023 in the Official Gazette.

Law no. 216/2023: Reduced VAT rates in the wood industry and the energy industry

Law no. 216/2023 regarding the reduced rate of 5% VAT for supplies of wood in various forms and for heat pumps introduced a series of changes regarding the application of reduced VAT rates in the wood industry and the energy industry.

Reduced VAT rates in the wood industry

Law no. 216/2023 extended the application of the reduced VAT rate of 5% for the supply of sawdust, waste, and agglomerated wood scraps in the form of wood pellets, wood briquettes, or similar forms, classified under CN codes 4401 31 00 and 4401 32 00, and for the supply for use as heating fuel of sawdust, waste, and non-agglomerated wood scraps, classified under CN codes 4401 41 00 and 4401 49 00. 

The reduced rate will be applied to supplies performed towards individuals, legal persons, and other entities, regardless of the legal form of organisation, based on a statement of own responsibility made available to the supplier, certifying their quality as end users.

Reduced VAT rates in the energy industry

It has been clarified that the reduced VAT rate of 5% for the supply and installation of photovoltaic panels intended for homes and buildings of the central or local public administration and the buildings of the entities under their control (except for commercial companies) applies to all components required to be purchased separately for this purpose. The reduced rate of VAT also applies to heat pumps.

A new provision has been introduced that extends the applicability of the reduced 5% VAT rate to cover:

• the supply and/or installation of components to repair and/or expand these systems, and
• the supply of systems as a component part of construction supplies, as well as for the supply and installation of systems as extra options in such supplies, to the recipients mentioned above.

To benefit from the above reduced VAT rates, legal entity buyers are required to sign a statement of own responsibility, as per annex no. 1 to Law no. 216/2023.

Corporate taxation

Government Ordinance (GO) no. 153/2020 provides that, during its application period (2021 - 2025), the deadline for submitting returns and paying CIT applicable for taxpayers applying the OMF 1802/2014 for the respective tax year is 25 June of the following year, or the twenty-fifth day of the sixth month following the end of the amended tax year. The same date applies to (i) the deadline for submitting the declaration for the fourth quarter and the payment of the tax for that quarter in the case of microenterprises and (ii) the deadline for submitting the declaration for the second half and the payment of activity-specific taxes.

Starting from 14 May 2020, expenses resulting from assignments of government securities, bonds, and other debt instruments that give the holder a contractual right to receive cash are deductible when calculating the CIT result.

On 31 January 2020, the Ordinance for implementing mandatory disclosure rules pursuant to Council Directive (EU) 2018/822 (DAC6) was published in the Official Gazette. The Romanian version of the law is closely aligned with the DAC6 Directive’s scope, hallmarks, and reporting requirements.

The provisions of ATAD II have been implemented in Romanian tax legislation. The Ordinance implementing ATAD II (published in the Official Gazette on 31 January 2020) is in line with ATAD II provisions. 

Starting from January 2022, if the 0.75% turnover limit minus the sponsorship amounts carried forward from previous periods has not been used in full, the taxpayers can redirect that unused value for sponsorships, patronage, and private scholarships within six months as of the date of submission of the annual CIT.

Starting with Q3 of 2018, companies may opt for quarterly distribution of profits to shareholders. Reconciliation of such amounts is performed subsequent to the approval of the annual financial statements. Those who opt for the quarterly distribution of dividends are required to prepare interim financial statements. Any differences resulting from the reconciliation are payable within 60 days of the date of approval of the annual financial statements. Failure to meet that deadline results in penalty interest being due.

Value-added tax (VAT)

The period of application of the reverse-charge mechanism in connection with certain transactions under VAT law, such as the supply of grain delivery, green certificates transfer, or mobile phone provision, has been extended to 31 December 2026.

Romania transposed the EU provisions regarding the VAT treatment applicable to transactions with vouchers into the national legislation as of 17 April 2019.

A reduced rate VAT of 5% is applicable to the supplies of thermal energy to the following categories of users: population public and private hospitals, public and private schools, NGOs, churches, and social services providers (either public or private).

The supplies of firewood, such as tree trunks, logs, brushwood, branches, as well as sawdust, wood waste, and agglomerated wood scraps in the form of wood pellets, wood briquettes, or similar forms, performed to individuals, to companies, schools, hospitals, medical offices, and social assistance units are subject to the reduced 5% VAT rate based on a declaration on own responsibility of the beneficiary. 

The supplies of school books, books, newspapers, and magazines in hardcopies or/and electronic version, with the exception of those that have as a whole or predominantly a video or audio content and those exclusively designed for marketing purposes, are subject to the reduced 5% VAT rate.

As of 1 January 2021, the Fiscal Code is amended as follows:

• The possibility to exercise the right to deduct VAT is granted to the beneficiary if the supplier issues correction invoices on one's own initiative or after a tax inspection, even if the limitation period for the right to establish tax obligations has expired. Thus, the right of deduction can be exercised within a maximum of one year from the date of receipt of the correction invoice, under the sanction of forfeiture of the right.
• The national legislation on the adjustment of the VAT base has been amended to align it with the fundamental principles of the VAT Directive and recent European case law. According to the current legal and fiscal framework, it is not possible to adjust the tax base in the case of uncollected receivables from individual debtors. Thus, the amendment provides that if the total or partial value of the goods delivered or services provided was not collected from the beneficiaries-individuals within 12 months from the payment deadline set by the parties, or, failing that, from the invoice date of issue, the taxable VAT base may be adjusted.
• The adjustment is allowed only if it is proved that commercial measures have been taken for the recovery of claims up to RON 1,000 and that legal proceedings have been undertaken for the recovery of claims higher than RON 1,000.

The turnover threshold for the application of the cash accounting VAT scheme has been increased from RON 2,250,000 to RON 4,500,000.

VAT is not paid in customs for imports by taxable persons registered for VAT purposes in Romania that:

• are authorised for entry into the declarant records simplified customs procedure
• declares the goods by using the centralised clearance simplified customs procedure, or  
• have a certificate for deferral of VAT payment and cumulatively meet the following conditions:

• • 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 harmonised 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 reorganisation or judicial liquidation procedure.