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%
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Rental Income

Rental income earned by nonresidents is taxed at a flat rate of 16%, effective from January 2005. Around 25% of the gross rental income from immovable property is deductible (no documents needed). No allowances are available for non-resident taxpayers.

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.

Property tax

For individuals, the annual property tax would arise from the fixed tax rate multiplied to the taxable value of the building. The fixed tax rate for urban buildings is at 0.2%; for rural buildings, 0.1%.

The taxable value of a building is determined by the size of the property in square meters multiplied to a coefficient depending on the type of property. The taxable value is further adjusted by multiplying a correction coefficient, which varies from 0.90 to 1.30, based on the location of the building. Taxable value of buildings completed before 1 January 1951 are to be reduced by 15%; for buildings completed before 1 January 1978, the taxable value would be reduced by 5%.

Land tax

Land tax is derived by multiplying the number of square meters of the land, the rank of the locality where the land is located, and the zone and/or category of use of the land. Land outside urban areas is taxed at a fixed rate of RON1 (€3.51) per hectare.

Corporate Route

The income a corporation earns in rent is considered ordinary income, and is taxed according to the corporate income tax (profit tax) rate, which is fixed at a flat rate of 16%. Expenses incurred that are directly related to obtaining income can be deducted from the taxable revenue as a whole.

VAT

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

Property Tax

Property tax for legal entities is at 0.5% to 1% of the value of their property. In case of a building owned before 1 January 1998, and not revalued after this date, local taxes range between 5% and 10% of the recorded cost of the building. For fully depreciated buildings, the taxable base for the building tax would be reduced by 15%.

Capital Gains

No capital gains tax applies to individuals on their earnings resulting from sales of real estate.

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.

Corporate Route

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.

Depreciation

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

Romania - more data and information

• Guide to buying houses and registering property sales in Romania

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