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Romania: Taxes and Costs

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Rental income tax is moderate

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	12%	12%	12%
Click here to see a worked example
Source:			Disclaimer

INDIVIDUAL TAXATION

Non-residents are taxed on their income from Romanian-sources. Married couples can file tax returns jointly or separately. No allowances are available for non-resident taxpayers.

Non-residents are not allowed to directly own Romanian immovable properties.

INCOME TAX

Income from all sources are aggregated and taxed at a flat rate of 16%.

RENTAL INCOME
Rental income earned by non-residents is taxed at a flat rate of 16%. A fixed deduction of 25% of the gross income is allowed to account for income-generating expenses. Taxpayers may also opt for itemized deductions of all expenses.

A landlord in Romania has the legal obligation to pay the taxes levied on income from property, except in the case of a foreign landlord, when the tax is withheld and paid to the state by the person paying the revenue, meaning the tenant.

As of 01 January 2008, taxpayers who earn rental income from more than five simultaneous rental contracts can only be taxed under the direct method (gross income less itemized deductible expenses).

CAPITAL GAINS
No tax is levied on the capital gains realized by individuals from selling real property.

Transfer Tax

Individuals who sell Romanian property are liable to pay transfer tax, levied on the sales proceeds. The applicable tax rate depends on how long the property was held by the owner and how much the actual sales proceeds are.

Value Added Tax (VAT)

VAT is levied on sale of real property. However, this ruling is not applicable to transfers of real estate from a natural person to a legal entity, or for transfers between individuals.

PROPERTY TAX

Property Tax

A local tax is levied on buildings, payable by the owner. The applicable tax rate varies between 0.25% and 1%, depending on the building’s location and property value. If the building has not been revalued during the last three years, the applicable tax rate varies from 5% to 10%.

Land Tax

A local tax is levied on land in Romania, payable by the owner. The tax rate for urban land ranges from RON0.001 and RON0.59 per square metre for land in urban areas. Land outside urban areas is taxed at a fixed rate of RON1 (€3.51) per hectare.

CORPORATE TAXATION

Non-residents cannot directly own Romanian real property. Non-residents can put up a local corporation in Romania in order to purchase real property.

INCOME TAX

Income and capital gains earned by corporations are taxed at a flat rate of 16%. Expenses incurred that are directly related to obtaining income can be deducted from the gross income.

CAPITAL GAINS
Capital gains obtained from sale of immovable property by corporations are included in ordinary profits and taxed at the standard rate of 16%. However, a 10% tax rate will be available from the year 2006, provided that:

1. the property was acquired after 31 December 2003;
2. was held for more than 2 years; and
3. the buyer and seller are not related parties.

Tax depreciation for buildings is allowed using the straight line method. The useful life of buildings is estimated at 10 to 50 years.

Value Added Tax (VAT)

Though leasing is VAT exempt, taxable entities may choose to apply 19% VAT on fees charged for the rental or concession of real estate property.

Romania - more data and information

• Guide to buying houses and registering property sales in Romania

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