A company is considered a tax resident in Romania if it is incorporated under Romanian law, or its place of effective management is in Romania, or it is incorporated under European law, and its registered office/headquarters is in Romania.

Effective 1 January 2021, place of effective management is defined as the place where, unless otherwise proven; a foreign legal entity carries out operations corresponding to real and substantive economic purposes and where at least one of the following conditions is met:

The economic and strategic decisions necessary for the management of the activity of the foreign legal entity as a whole are taken in Romania by the executive directors/ members of the board of directors; or
At least 50% of the executive directors/members of the board of directors of the foreign legal entity are residents in Romania.

Romania issued an Order no.577 of 17 May 2021 whereby a foreign legal entity registered with its place of effective management in Romania, is required to submit a questionnaire form (Annex no.1) along with the specified documents to the central tax authority electronically, and subsequently a notification (Annex no.2) will be issued by the central tax authority within 30 days of the submission of Annex no.1 confirming whether or not the conditions for residence based on place of effective management are met. If the residence conditions are met, the foreign entity will have to register with the central tax authority within 30 days from the date of the notification issued. In case of any change, a revised questionnaire form may be submitted to change residence status. Foreign legal entities registered with their place of effective management in Romania until 31 December 2020, and in the period between 1 January 2021 and the date of entry into force of the order are required to submit the new questionnaire form and documentation by 30 June 2021.

Further, if a foreign legal entity is considered resident in both Romania and a signatory state of a tax treaty to which Romania is a party, the residence will be established according to the provisions of the tax treaty. As per the newly introduced anti-abuse provision, the establishment of residence in Romania by a foreign legal entity should not be based on artificial arrangements for the purpose of reducing taxes that should have been paid in a foreign state and should not create opportunities for non-taxation or lower taxation in Romania.

It is clarified that the taxable period for a foreign legal entity, with a place of effective management in Romania begins from the date of its registration with the central tax authority.

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