The standard corporate tax rate is 16%.

However, other rates/ taxes apply as follows:

Specified businesses (mainly nightclubs and gambling halls) are subject to tax either at 5% on their turnover or at the standard 16% corporate tax rate, whichever is higher.
A two-rate system is introduced for micro-enterprises effective 1 January 2024, (see Sec. 10.1. for details):

1% tax rate where annual turnover does not exceed EUR 60,000; and
3% rate where annual turnover ranges between EUR 60,000 and EUR 500,000 or specified business activities are carried out, including software development activities, IT service activities, operation of accommodation facilities, restaurant activities and certain others.

Until December 2023, micro-enterprises were taxed at the single tax rate of 1% of the revenue.

Representative offices of foreign legal entities are subject to tax in Romania on an annual basis. The amount of tax due for a fiscal year is RON 18,000 (increased from RON 4,000 effective from 1 January 2018).

Pillar 2 Global Minimum Tax

The EU Global Minimum Tax (GMT) Directive entered into force on 23 December 2022, and EU Member States were required to enact laws, regulations, and administrative provisions necessary to comply with the EU GMT Directive by 31 December 2023.

Essentially, the EU GMT Directive provides for the implementation of an Income Inclusion Rule (IIR) and an Undertaxed Profits Rule (UTPR) with respect to in-scope MNEs, being those with annual consolidated revenues of EUR 750 million or more in at least two of the four fiscal years immediately preceding the tested fiscal year. The IIR and the UTPR are in combination referred to as the GloBE Rules. The Directive also allows Member States to opt for the adoption of a Qualified Domestic Minimum Top-Up Tax (QDMTT) for domestic low-taxed entities.

On 5 January 2024, Romania published a law implementing the Directive in Romania, including an IIR, an UTPR and a Qualified National Additional Tax (intended to be a QDMTT). The IIR and the QDMTT apply in Romania for financial years beginning from 1 January 2024 and the UTPR applies for financial years beginning from 1 January 2025. However, the UTPR applies from 31 December 2023 for constituent entities of groups whose ultimate parent entities (UPEs) are located in an EU Member State that has opted to postpone the implementation of the IIR and UTPR for six consecutive years as permitted by GMT Directive (according to a Notice released by the EU Commission, as on 12 December 2023 these are Estonia, Latvia, Lithuania, Malta and Slovakia). The Romania implementing legislation also includes a transitional safe harbor (see below), aiming to simplify compliance and reduce complexity for certain entities.

The transitional safe harbor applies for fiscal years beginning on or before 31 December 2026 but ending before 1 July 2028. Under the transitional safe harbor rules, the Top-up tax is set at zero for a jurisdiction upon application if any one of the following three tests is met by the jurisdiction:

De-minimis test: Total revenue of less than EUR 10 million and profit or loss before income tax of less than EUR 1 million;
Simplified ETR test: The ETR is equal to or greater than 15% (in 2024), 16% (in 2025), or 17% (in 2026); or
Routine profits test: The profit or loss before income tax is equal to or less than the substance-based income exclusion amount.

The following entities are out of the scope of the EU GMT Directive:

Government entities, international organizations, non-profit organizations, and pension funds;
Investment funds and real estate investment vehicles but only when they are the ultimate parent entities (UPEs) of an MNE Group; and

Entities directly or indirectly owned by the above-mentioned entities.

Filing of Top-Up Tax Information Return

The informative declaration (Top-up Tax Information Return) and any relevant notifications must be filed within 15 months (18 months for the first year of application) from the last day of the relevant fiscal year. The deadline for submitting the first informative declaration is 30 June 2026. The required forms and procedures for filing are expected to be issued within 12 months from 8 January 2024 (date of entry into force of the law).

The obligation to file is waived if a constituent entity within the MNE group has filed the Top-up Tax Information Return in another jurisdiction provided there exists a competent authority agreement between Romania and that jurisdiction for the automatic exchange of annual Top-up Tax Information Returns. In such cases, the constituent entity located in the Romania must notify the tax authorities of the identity of the entity that has filed the Top-up Tax Information Return.

Failure to file the Top-up Tax Information Return may attract penalties prescribed by the relevant EU Member State.

Key Differences from the OECD Model Rules

Domestic Groups

In contrast to the OECD Model Rules, the EU GMT Directive extends the application of the GloBE Rules to purely domestic groups. Under the OECD Model Rules, only low-taxed foreign entities (or permanent establishments) are considered for applying the IIR. However, under Articles 5, 6, and 7 of the EU GMT Directive, the EU Member State of a constituent entity applying the IIR, is required to apply it to not just foreign low-taxed subsidiaries but also to low-taxed constituent entities resident, and permanent establishments located, in that Member State. The Romanian legislation includes a similar provision to align with the EU GMT Directive.

The OECD Model Rules provide that where a UPE is a low-taxed entity, top-up tax is applied through the UTPR rather than the IIR. However, in the EU, this would only happen when the UPE is located outside the EU. If the low-taxed UPE is located within the EU, it is required to apply the IIR to itself and its domestic subsidiaries.

Claw Back Provisions

The EU GMT Directive further provides that where the current tax is not expected to be paid within three years following the end of the relevant fiscal year, the tax is clawed back and included in the top-up tax calculation for that fiscal year. This is an extension of Art. 4.1.3(e) of the OECD Model Rules that recaptures current tax not paid in a similar timeframe. The Romanian legislation includes a similar provision to align with the EU GMT Directive.

Deferred Tax

A special transitional rule in Art. 9.1.2 of the OECD Model Rules applies effective 30 November 2021 to deferred tax assets arising from permanent differences that are included in calculating taxable income but are not GloBE income. The transitional rule is retained in the EU GMT Directive but applies effective 15 December 2021. The Romanian legislation provides for a transitional date of 30 November 2021 to align with the OECD Model Rules.

Solidarity Contribution on Fossil Fuel Sector (Windfall Tax)

On 28 December 2022, Romania implemented a solidarity contribution (windfall tax) for the years 2022 and 2023 on the surplus profits of companies operating in the crude oil, natural gas, coal, and oil refining industries. The contribution is charged at the rate of 60% on taxable profits exceeding 120% of the average taxable profits in the preceding four years, 2018 to 2021. A company is subject to the contribution if at least 75% of its turnover during a tax period is derived from activities in the fields of extraction, mining, petroleum refining, or production of coke oven products.

The contribution is due by the 25th of the sixth month following the close of a tax year (25 June for taxpayers following the calendar year ending).

Capital Gains

Capital gains earned by Romanian resident entities are considered as ‘ordinary income’ and subject to tax at the standard corporate tax rates. However, under the participation exemption regime, gains derived by a resident entity on the disposal of qualifying participations are exempt from tax provided the seller has held an interest of at least 10% for an uninterrupted period of at least one year. The participation exemption regime applies to gains on the disposal of qualifying participations in EU subsidiaries, as well as in subsidiaries established in tax treaty countries.

Dividends

Effective 1 January 2016, dividends received by a resident company from another resident company were excluded from the recipient’s taxable income; however, such dividends are subject to final withholding tax at the rate of 8% (increased from 5%) effective from 1 January 2023. There is no withholding tax if the recipient company holds at least 10% of the shares in the payer company for a period of at least one year on the date of payment of the dividends. Foreign-source dividends are generally taxable at the standard corporate tax rate or another tax substituting the corporate income tax unless the participation exemption is available.

Under the EU Parent-Subsidiary Directive, the participation exemption is available on dividends received from qualifying companies resident in other EU Member States, provided the Romanian recipient of the dividends holds a minimum interest of 10% for an uninterrupted period of at least one year in the capital of the EU payer. However, the participation exemption is denied if the dividends are tax deductible in the hands of the paying subsidiary.

The participation exemption is also available to dividends received from companies resident in jurisdictions with which Romania has a tax treaty in force. The exemption is available if the recipient holds a minimum shareholding percentage of 10% for an uninterrupted period of at least one year.

Effective 1 January 2023, the withholding tax exemption on dividends distributed to private pension funds and voluntary pension funds is removed.

Additional Tax Based on Turnover

Effective 1 January 2024, a tax in addition to corporate tax is introduced on the turnover of banks, which includes interest income, dividend income, revenue from commissions, gains (losses) from different financial assets, and other specified income. The additional tax is payable at a rate of 2% in 2024 and 2025 and 1% from 2026.

Similarly, a tax in addition to corporate tax is introduced on the turnover of companies engaged in the oil and natural gas sector with annual turnover exceeding EUR 50 million in the previous year. The tax applies from 1 January 2024 until 31 December 2025 at the rate of 0.5% on turnover using the same formula as the minimum turnover tax (given below), 0.5% x (VT - Vs - I - A). From 1 January 2026, minimum turnover tax rules will apply to oil and natural gas sector companies.

An exemption from the additional tax is granted to companies engaged in activities of distribution/supply/transport of electricity and natural gas that are regulated/licensed by the National Energy Regulatory Authority (turnover, deducted income, etc. in relation to exempt activities is excluded from the formula if not exclusively engaged in exempt activities).

Alternative Minimum Tax

Effective 1 January 2024, a 1% minimum turnover tax is introduced on companies with annual turnover exceeding EUR 50 million in the previous year (except for banks and oil and gas companies). The minimum tax applies when the standard corporate tax is less than the minimum turnover tax, including for tax groups. The minimum turnover tax is computed according to the following formula 1% x (VT - Vs - I - A), where:

VT is total turnover (revenue);
Vs is income that is deducted from total turnover, including:

non-taxable income provided by the tax code;
income related to product inventory costs;
income related to the costs of services in progress;
income from the production of tangible and intangible assets not included in "I" below;
income from subsidies;
compensation income obtained from insurance/reinsurance companies for damages caused to goods of the nature of stocks or own tangible assets; and
income representing excise taxes that were simultaneously reflected in expense accounts;

I is the value of fixed assets in progress caused by the acquisition/production of assets, recorded in the accounting records starting from 1 January 2024 or the first day of a modified fiscal year starting in 2024 (eligible assets for this purpose to be established by a ministerial order); and
A is accounting depreciation at historical cost related to assets purchased/produced starting 1 January 2024 or the first day of a modified fiscal year starting in 2024, excluding accounting depreciation of assets included in "I" above (eligible assets for this purpose to be established by a ministerial order).

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