Last Updated on March 6, 2023 by
Before moving to Romania, you should first know the tax rules. You should understand the flat rate of 16%, the different types of taxation, the Exemptions and the Double taxation agreement. This article will also cover the Residency status.
Once you’ve read it, you’ll know the basics of Income Tax in Romania 2022. It may be helpful to visit the official tax site for Romania to get more information.
Table of Contents
16% flat rate
The Romanian Tax Code sets a flat rate of 16% on income from most sources. However, there are some exceptions. In some cases, income may not be taxable if it is unidentified. For example, income from rental and joint venture agreements is exempt from income tax.
Also, income from funeral aid for incurable diseases is not included in salary income. In some cases, income from gifts to employees or delegating employees may be taxable.
Exemptions
A variety of exemptions from income tax in Romania apply to certain activities and specific types of income. Agricultural activities, for example, include the production of agricultural products, their transformation and processing, and their sale in their natural state.
In addition to agriculture, this category of activities also includes the exploitation of vineyards, tree nurseries, livestock, and the sale of unprocessed products. For most activities, an income tax exemption is applicable within certain thresholds.
Agricultural income is tax-exempt under the standard basis, but a reduction may be required in cases of natural calamities that affect more than 30% of the surface area under production.
Double taxation agreements
Income taxation is an area that is often the subject of disagreement, especially when it comes to a person’s domicile. Fortunately, Romania has many double taxation agreements in place.
These agreements allow you to avoid paying taxes twice on the same income, and Romania is continuing to sign more of them. In Romania, income tax is primarily dealt with by the State where the taxpayer resides, as opposed to the State where the income was earned.
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Residency status
If you live in Romania, you must pay income tax in the country. Non-resident individuals should note that they are liable to pay income tax in Income Tax in Romania 2022 only on the Romanian-sourced income that they earn.
Romania has tax treaties with several countries, and you can be a resident in one of them without paying taxes in Romania. To become a resident in Romania, you must have been living in that country for at least three years.
Read more: Dividend Tax 2022
Social security contributions
In Romania, both employers and employees are responsible for social security contributions. Employees pay 15.5% of their salary as social security contributions, while employers pay up to 32.6%. Social security contributions fund health and unemployment benefits, as well as pensions.
Employers are permitted to issue payslips online, though payroll reports must be retained for 50 years. International businesses that want to stay compliant may hire a global payroll provider to deliver payments on time.
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