Guide to Property Taxes in Romania

Nonresident individuals are generally taxed in Romania on Romanian-source income, including income arising from real estate situated in Romania.

EU/EEA nationals can generally acquire Romanian land under the same conditions as Romanian nationals. For nationals of countries outside the EU/EEA, ownership of land is subject to treaty and reciprocity requirements and may therefore require an alternative ownership structure depending on the investor's nationality.

Income Tax

Romania generally applies a flat 10% personal income-tax rate. Nonresident individuals are taxable on Romanian-source income, subject to the provisions of any applicable double-tax treaty. Certain types of income are subject to separate or special rates.

Rental Income Tax

Rental income from Romanian real estate earned by an individual is generally subject to 10% income tax after a statutory expense deduction of 20% of gross rental income. Consequently, the taxable rental income is normally 80% of gross rent, producing an effective income-tax burden of 8% of gross rental income.

The former 40% standard expense deduction is no longer applicable to ordinary rental income. The current standard deduction is 20%, and ordinary landlords do not simply choose between the 20% allowance and unrestricted itemized deduction of actual expenses.

Where rent is paid by a Romanian legal entity or another entity required to maintain accounting records, the payer generally calculates and withholds the 10% tax after applying the 20% statutory expense deduction. In other situations, the individual generally reports the rental income through the applicable annual tax return.

A separate health insurance contribution (CASS) can also become relevant when qualifying annual income exceeds statutory thresholds. 

Corporate Taxation

The standard Romanian corporate income-tax rate is 16% of taxable profit. Rental income earned through a Romanian company is generally included in corporate taxable income, with qualifying business expenses taken into account in determining taxable profit.

Capital gains earned by a Romanian company from real estate are generally included in ordinary taxable profits and taxed at 16%. Gains derived by a nonresident company from Romanian real estate can likewise be taxable in Romania at 16%, subject to applicable treaty provisions and other specific rules.

Capital Gains Tax

The disposal of Romanian real estate by an individual is subject to a special tax calculated on the transaction value, rather than simply applying the ordinary 10% income-tax rate to the economic capital gain.

The applicable rates are:

• 3% of the transaction value where the property has been owned for up to and including three years.

• 1% of the transaction value where the property has been owned for more than three years.

The tax is generally calculated and withheld by the notary handling the transaction. If the declared transaction value is below the applicable minimum value established under the notarial valuation rules, that minimum value can generally become the tax base.

Buying and Selling Costs/Taxes

Property Taxation

Building Tax

Owners of buildings in Romania are subject to an annual local building tax, payable to the municipality where the property is located.

For residential buildings, the applicable rate is set by the local council and is generally at least 0.1% of the taxable value of the building.

For non-residential buildings, the rate is generally at least 0.5% of the taxable value.

The actual rate can therefore vary between municipalities, and the tax burden depends on both the locally determined rate and the taxable value assigned to the property. Consequently, Romania should not be presented as having a single nationwide annual property-tax percentage.

Land Tax

Owners of land in Romania are also generally liable for an annual local land tax, separate from the building tax.

Unlike the building tax, the land tax is generally determined using statutory amounts based on factors such as the area of the land, location, classification and category of use, rather than applying a single national percentage to the property's market value.

The amount therefore varies according to the municipality and characteristics of the land. For a residential real-estate investment consisting of both a building and land, the investor may consequently be liable for both the annual building tax and the applicable land tax.