Given the membership to the European Union, Romania has a fully integrated employment market within the Single EU market and, as such, citizens of EU countries can freely come to Romania, reside here and perform activities, either as freelancers or employees of Romanian employers, as well as non-resident employers.
As such, foreigners working in Romania can either conclude employment contracts with Romanian companies, they can work in Romania based on foreign employment agreements concluded with foreign employers and further seconded to Romania, or can perform activities as self-employed individuals.
Generally, in accordance with the Romanian tax rules, foreign nationals performing employment or freelancer activities in Romania are liable to pay personal income tax on their Romanian sourced income, or if they spend sufficient time in Romania and depending on their personal and professional situation they become Romanian tax residents, they will be liable to pay personal income tax in Romania on their worldwide income.
Advantageous flat tax rate for salary income
All salaries and related income are reported via a monthly tax return and are subject to a flat personal income tax rate of 10%, which is one of the lowest tax rates worldwide. Also, certain remuneration items, such as assignment allowances, housing allowances, travel costs covered by employers, received during international assignments of foreign nationals may qualify as non-taxable for Romanian tax purposes (within certain limits).
Foreign nationals on assignment to Romania may benefit from social security payment privileges based on the Social Security Regulation or bilateral Social Security Agreements signed by Romania with the country where they are rightfully employed. Otherwise, social security contributions will be due at employee level (25% – pension contribution, 10% – health insurance contribution) and employer level (2,25% – work insurance contribution).
The payment of payroll taxes in Romania is performed on a monthly basis, by the 25th of the month following the one in which the salary income is earned.
Favorable tax regime for investment income
For the personal income earned in the form of capital gains, rental income, interest, a flat personal income tax rate of 10% is applicable.
Dividend income received by a Romanian tax resident is taxable at a special individual tax rate of 5%. Also, if the company distributing the dividend is Romania, the 5% will be withheld at source by the payer of the dividend.
The taxable private income (i.e., income from self-employed activities, investment, rental and other sources) is subject to a health insurance contribution of 10% if the level of the income derived from all these types of activities exceeds 12 times the minimum salary (RON 1,900 per month in 2018). Also a pension contribution of 25% may be applicable for income derived from independent activities.
Simplified annual tax compliance
A unique statement has to be filled annually, thus the reporting and payment process of the personal income tax liabilities derived by the taxpayers is in general straightforward and simplified.
The estimated annual personal income derived must be reported by 15th of March of the following year The submission of the tax return is performed electronically. When starting a certain economic activity in the course of the year, the single tax return must be submitted within 30 days.