The fiscal year is the calendar year or the period during which the entity existed if it was set up or ceased to exist during that calendar year.
Taxpayers with a financial year different from the calendar year have the option to align the tax year to the financial year. The first amended tax year will start on 1 January and will end on the last day of the amended tax year.
The period in which a taxpayer has to communicate to the territorial tax bodies the intention of changing the fiscal year period is within 15 days as of the beginning of the new fiscal year.
Taxpayers (except for non-profit organisations and taxpayers deriving most of their income from agriculture) should submit the quarterly CIT returns by the 25th day of the first month following the first, second, and third quarters. The annual CIT return is due by 25 March of the following year for which the CIT is due (if the fiscal years equals the calendar year); for the cases where the fiscal year is different than the calendar year, the annual CIT return is due by 25th day of the third month after the end of the company’s fiscal year.
For the period 2021 - 2025, the deadline for submitting the annual CIT returns and for paying the related CIT applicable for taxpayers subject to OMF 1802/2014 is 25 June of the following year, or the 25th day of the sixth month following the end of the amended fiscal year.
Non-profit organisations and taxpayers that obtain income mainly from agricultural activities have to declare and pay annual CIT by 25 February of the year following the reporting period.
Taxpayers (except those specifically mentioned by law) may opt to declare and pay the annual CIT by performing quarterly advance payments (see Payment of tax below). The decision to implement this option has to be communicated by the 31 January of the fiscal year in which the taxpayer intends to apply the option and it has to be maintained for at least two consecutive years.
Starting with 1 March 2022, taxpayers have the obligation to enrol in the virtual private space (SPV) in order to submit to the tax authorities requests, documents, tax returns, or any other notifications. If the taxpayers do not fulfil their obligation to electronically communicate these documents and they are submitted to the tax authorities in letter format, they will not be taken into account.
The electronic signature of the tax returns can only be made using a qualified certificate issued by a legally accredited certification services provider.
Taxpayers required to withhold tax, except for salary payers, are required to submit a return to the tax authorities regarding the tax withheld for each beneficiary of income. This return should be submitted for the previous year by 31 January of the current fiscal year and refers to the tax withheld and paid by Romanian residents on income obtained from Romania by non-resident beneficiaries.
If taxpayers have failed to submit their tax returns, the tax authorities will assess, by way of default, all the tax obligations found in the taxpayer’s fiscal liability records for each fiscal period in which tax returns were not submitted.
Payment of tax
Taxpayers (except for banks, non-profit organisations, taxpayers deriving most of their income from agriculture) must pay the quarterly CIT by the 25th day of the first month following the first, second, and third quarters. The final CIT payment is generally due by the 25th day of the third month after the end of the company’s fiscal year. Banks and branches of foreign banks in Romania are required to apply the system of advance quarterly CIT payments. Other taxpayers, with some exceptions mentioned by law, may use this system as an alternative reporting and payment procedure.
The advanced quarterly payments are calculated as a quarter of the previous year’s CIT increased by the consumer price index (CPI) inflation rate, with the payments due by the 25th day of the month following the end of the quarter. The CPI inflation rate is published by Order of the Ministry of Finance by 15 April of the year for which the advance payments are made. For 2023, the CPI inflation rate is 109.6%. If taxpayers incur fiscal losses in the first year of the application of the option, the advance CIT payments are calculated by applying the CIT rate to the accounting profit for the period in which tax payments are made in advance.
Non-profit organisations and taxpayers that obtain income mainly from crop production have to pay annual CIT by 25 February of the following year for which the tax is due.
Newly established banks and branches of foreign banks in Romania (i.e. without a previous year history) or those that incurred fiscal losses in the previous year make quarterly advance payments at the level of the amount resulted from applying the CIT rate on the accounting profit for the period for which the advance payment is made.
For the last quarter of the fiscal year, the deadline for the obligation to declare and make advance payment will be the 25th day of the last month of that fiscal year.
The late-payment interest rate is 0.02% for each day of delay. Subsequent late-payment penalties also apply.
The penalty is set at 0.01% per day of delay. This penalty does not apply to main tax obligations not declared or incorrectly declared by the taxpayer and is additionally established by a tax inspection authority decision.
In such a case, instead of penalties, a non-declaring penalty is applicable, at 0.08% per day, starting from the day following the due date until the date of payment. This penalty applies to the main tax obligations declared incorrectly or not declared by the taxpayer and is established by a tax inspection authority decision and is diminished to 0.02% per day if the fiscal liabilities are paid in due time.
Capital gains derived by non-resident legal entities from the transfer of real estate located in Romania or the sale of shares in a Romanian legal entity are taxable in Romania at the 16% CIT rate (except if participation exemption or the DTT applies).
Even if no capital gain tax is due in Romania (or if a loss is generated), there are compliance obligations to fulfil (i.e. the non-resident should register for CIT purposes in Romania, file CIT returns, and then de-register).
Non-residents may appoint a tax agent/representative to fulfil this requirement.
For capital gains tax reporting and payment, the Romanian legislation requires the following tax returns to be submitted:
- Quarterly returns, starting the 25th day of the month following the quarter in which the non-resident first earned capital gains taxable in Romania.
- An annual CIT return.
The quarterly returns and annual return must be submitted during the entire period in which the non-resident is registered with the Romanian tax authorities, even if, throughout that period, it no longer carries out transactions generating taxable revenue in Romania.
Tax audit process
Tax inspections can be carried out in respect of all legal persons, irrespective of their organisational structure, that are bound to determine, withhold, and pay taxes, duties, contributions, and other amounts owed to the general consolidated budget.
The tax authorities may not inspect the same taxes for a period previously checked unless additional data is obtained of which the tax inspectors were unaware when carrying out the first inspection or computation errors were performed.
Prior to the tax inspection commencing, the tax authorities must notify the taxpayer in writing, by sending a tax inspection notice, except in the cases explicitly laid down in the Fiscal Procedure Code.
Tax inspections are generally carried out at the taxpayer’s business premises and may not exceed a six-month period in the case of large taxpayers or three months for other taxpayers. For taxpayers that have secondary offices, the tax inspections may not exceed six months. The tax authorities may suspend the tax inspection if they deem it necessary for the clarification of the taxpayer’s tax status.
Starting with 14 May 2020, companies with their seat of their economic activity in Romania are subject to a tax risk analysis conducted by the central fiscal authority after their registration for VAT purposes.
Before finalisation of the tax inspection, the tax authorities are required to inform the taxpayer of their findings and the tax consequences and allow the taxpayer to express its point of view, within five or seven (for the large taxpayers) days from the ending of the tax inspection. Upon completion of the tax inspection, the authorities conclude a tax inspection report, based on which the tax assessment is made, which in turn is to be communicated to the taxpayer within 25 days from the ending of the tax inspection.
Statute of limitations
As a general rule, the statute of limitation is five years and it begins to run on 1 July of the year following the one for which the tax obligation is due, provided the law does not dispose otherwise. However, the statute can be suspended during of a tax inspection but will recommence after the inspection has been completed.
Due to the COVID-19 crisis, the expiration of the statute of limitation period was suspended; as such, an additional 253 days were added to the five years statute of limitation.
Topics of focus for tax authorities
Areas of focus during tax audits include:
- VAT recoverable reimbursable positions.
- Deductibility of service expenses and of related VAT.
- Transfer pricing.
- Transactions with tax havens.