In Romania, employers have several tax responsibilities. One of these is the flat income tax rate of 10% for all employment income. As an employer, you must withhold this tax from your employees' gross salaries and pay it directly to the Romanian tax authorities (ANAF). This tax must be paid monthly, by the 25th of the following month.

Social Security Contributions

Employers are also responsible for calculating, withholding, and paying social security contributions. These include:

• Pension Contributions (CAS): 25% of the employee's gross salary is withheld by the employer. The employer also contributes an additional 2.25% on behalf of the employee.
• Health insurance Contributions (CASS): 10% of the employee's gross salary is withheld.
• Unemployment Contributions (CAM): 0.5% of the employee's gross salary is withheld.
• Work Accident and Occupational Disease Insurance (CAIMM): Rates vary between 0.85% and 8%, depending on the company's business activity and risk classification. The employer is solely responsible for this contribution.

These contributions must also be paid monthly, by the 25th of the following month.

Payroll Reporting

Employers have certain reporting responsibilities as well. Form D112 is the standard form for declaring and paying income tax and social security contributions. This form needs to be filed along with payment by the 25th of the following month. Employers might also have additional reporting requirements, such as providing annual salary certificates to employees and making annual declarations to the tax authorities.

Romanian tax residents receive a monthly personal deduction based on their income level and number of dependents. The exact amounts are updated periodically.

Personal Deduction

This is a standard deduction that is automatically applied by employers during salary calculation and income tax withholding.

Additional Deductions

There are also additional deductions that employees can benefit from:

• Voluntary Pension Contributions (Pillar III): Contributions to Pillar III private pension funds are deductible up to an annual limit of €400.
• Private Health Insurance: Private health insurance premiums may be deductible up to an annual limit of €400.

These deductions are also automatically applied by employers during salary calculation and income tax withholding. However, employees may need to provide employers with supporting documents to claim these deductions.

Important Notes

Deduction amounts and eligibility criteria may change periodically. While employers withhold taxes based on deductions, employees might still need to file an annual tax return if they have additional income sources or want to make adjustments.

The standard VAT rate in Romania is 19%, applicable to most goods and services unless they fall under a reduced rate or are VAT-exempt. Romania applies two reduced VAT rates: a 9% reduced VAT rate for specific categories like hotel accommodation, restaurant services, medicine, books, and cultural activities, and a 5% reduced VAT rate for the sale of social housing.

VAT Exemptions for Services

Certain services in Romania are VAT-exempt. These include healthcare services provided within the public health system and other related services, educational and training services offered by recognized institutions, specific financial services like insurance and banking operations, and other services under Romanian tax law such as transportation of people by public transport and funeral services.

VAT Filing Procedures

Businesses surpassing a specific annual turnover threshold are required to register for VAT in Romania. VAT-registered businesses must file periodic VAT returns, usually monthly or quarterly, depending on turnover. This form must be filed online. VAT payments are generally due by the same deadline as the VAT return, usually the 25th of the following month.

Important Notes

VAT exemptions and regulations can be complex.

Tax incentives are a significant part of the fiscal policy in many countries, including Romania. They are designed to stimulate economic growth and development by reducing the tax burden on businesses.

Profit Tax Reinvestment Incentive

Companies can enjoy a 0% profit tax rate on profits reinvested in new technological equipment used for business purposes.

R&D Tax Incentives

Businesses conducting research and development (R&D) activities can benefit from two types of incentives:

• Super Deduction: An additional 50% of eligible R&D expenses can be deducted from their corporate tax base.
• Corporate Tax Exemption: Companies solely focused on R&D activities may qualify for a complete exemption from corporate tax for the first 10 years of operation.

Greenfield Investment Incentives

Various tax breaks exist for companies establishing new businesses in designated underdeveloped areas. These incentives may include:

• Profit Tax Exemption: Partial or full exemption from corporate tax for a set period.
• State Aid: Financial grants or reduced tax rates for companies operating in strategic sectors.

Job Creation Incentives

Companies creating new jobs might benefit from:

• Payroll Tax Relief: Reduced social security contributions for a specific period.
• Training Cost Deductions: Tax deductions for employee training and development expenses.

Qualification Criteria

Eligibility for each tax incentive program varies. Here are some general requirements:

• Business Activity: Incentives often target specific sectors like R&D, manufacturing, or investments in underdeveloped areas.
• Minimum Investment: Certain incentives may require a minimum investment threshold in the Romanian business activity.
• Job Creation: Programs promoting job creation might have minimum new employment quotas to be fulfilled.

Application Process

The application process typically involves these steps:

1. Gather Documentation: Prepare documents like business plans, financial projections, and supporting evidence for your chosen incentive program.
2. Submit Application: Applications are usually filed electronically through the official Romanian authorities or regional development agencies depending on the specific incentive.

Important Notes

• Official Sources: For the most up-to-date information and specific application procedures, refer to official Romanian government websites or consult a tax professional in Romania.
• Program Updates: Tax incentive programs might be subject to changes or renewals. It's crucial to stay updated with the latest regulations.