For tax purposes, anyone staying in Romania for less than 183 days during a period of 12 consecutive months is considered a non-resident. The 183 or more days can be consecutive or cumulative in order for one to be considered resident. Non-residents may be liable for taxes on income, capital gains and inheritance. There is no wealth tax in Romania. The tax year in Romania coincides with the calendar year.
There is no restriction placed on foreigners when purchasing apartments in Romania but the Romanian Constitution presently restricts the right of ownership of Romanian land by non-residents. Land and property must be bought through a Romanian company.
Tax Identification Number (Cod de Identificare Fiscala)
In order to receive income in Romania, non-residents should be registered with the Romanian tax authorities and to have a tax identification number.
The Cod de Identificare Fiscala is a tax identification number used in all interaction with government agencies and public administration in Romania by a non resident private person. It is a unique identity code devised from an individual's name, date, place of birth and other personal details. It is similar to the National Insurance number (NI) in the UK or the Social Security Number (SSN) in the US. The number is unique and consists of 13 alphanumeric digits.
The Cod de Identificare Fiscala is issued on petition by the Romanian Ministry of Public Finance.
Romanian Individual Income Tax (Impozit pe Venit)
Individual Income Tax applies to both resident and non-resident individuals. Non-residents are subject to Romanian Individual Income Tax only on income which is considered to arise in Romania. The income from rental and the selling of land and buildings falls under the Individual Income Tax regime in Romania.
The Romanian Income tax rate is 16%. Personal income tax returns must be submitted by May 15th.
Where no rental income is being generated from the property, no income tax is due.
There are two possibilities of determining net income arisen from property rental:
25% expense deduction:
Flat rate expense method with no allowable deductions for expenses;
Itemized expense deduction (real system taxation):
Each rental activity related expense can be deducted against the gross income. If the itemized expense deduction tax accountancy method is chosen, the taxpayer may carry forward losses into following five tax years;
Once a taxation method is chosen, the taxpayer has to respect it for at least 2 consecutive tax years.
Romanian Corporate Income Tax (Impozit pe Profit)
The standard rate of corporation tax in Romania is 16%. This rate applies to the companies owned by non- resident private person or companies as well.
Romanian Local Property Tax
Non-resident property owners are required to pay an annual building tax to the local authorities. Non-resident property owners are required to pay a rate of 0.1% on the taxable value of the building.
The taxable value of the property is determined by the local authorities with criterion based on; age of the property, property type and structure and location of the property.
Capital Gains Tax
Romanian capital gains tax varies from 1% - 3% and is payable on the selling price of the property. There are no deductions allowed when estimating the taxable base.
Value Added Tax / Transfer fees
VAT (TVA) @ 19% is charged on the purchase of new properties in Romania but is included inh the price charged by the developer/ agent. In the case of old properties (second hand properties), the VAT obligation depends on the VAT status of the seller.
Purchase registration tax @ 0.15% and 0.5% is payable on the value detailed in the sell-purchase contract when the new owner is either a private individual or legal entity.
Additional fees to note in Romania would be: notary/ solicitor/ agent fees, etc. excluding the registration tax amount to roughly 2.5% of the purchase price.
Estate agent fees would typically be 3% -5% of the actual value of the property.
Inheritance and Donations Tax
Non-residents are subject to Inheritance and Donations Tax on assets located in Romania.
The income arisen from property transfer is tax exempt in the case the property is obtained trough inheritance and donation between relatives and affinity up to, including 3rd degree relative relations, respectively between spouses; Otherwise Inheritance and Donation tax varies between 1% and 3% of the inherited value.
Worldwide income
If resident in Ireland or the UK, you are obliged to declare your Romanian income in your annual resident tax return. There is a Double Tax Treaty agreement between Romania, Ireland and the UK so relief for certain Romanian taxes will be given against Irish/ UK taxes payable on your Romanian property.
Property Tax International can organise the completion and filing of your individual Romanian income tax return in addition to advising on your property tax obligations in your home country.
The information provided here is intended as a guide only. While Property Tax International Limited makes every effort to ensure that the information contained herein is accurate, we take no responsibility or liability for any inaccurate, delayed or incomplete information, nor for any actions taken in reliance thereon.
Property Tax International Ltd is part of The Taxback Group incorporating Taxback International and Taxback.com, which have been providing international tax advice since 1996
