Gianmauro Nigretti - ROMANIA - corporate and tax highlights

ROMANIA 2016

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Web Site: www.shermannigretti.it E-mail: info@shermannigretti.it Tel. +39 (0)2 7722951 Mob. +39 335 6030346 Twitter: @ShermanNigretti Linkedin: Gianmauro Sherman Nigretti

GEOGRAPHY AND POPULATION

CAPITAL:

BUCAREST

POPULATION:

19,6 MILLION

POLITICAL SYSTEM:

PARLAMENTARY REPUBLIC

FORMS OF BUSINESS ORGANIZATIONS • Limited liability company • Joint stock company • General partnership

• Limited partnership • Limited partnership on shares • Branches and subsidiaries of a foreign company

ACCOUNTING • Companies are generally required to use double-entry bookkeeping and prepare annual financial statements.

• Small companies (as defined) may opt to use a simplified accounting system.

• Annual financial statements must be accompanied by the directors’ report, the audit report (if applicable), and the proposal for the distribution of profit for covering the loss.

• Parent companies are generally required to prepare individual and consolidated annual financial statements.

• Companies are required to prepare their financial statements and consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) (mandatory for certain companies) or the Romanian Accounting Standards. Simplified Romanian Accounting Standards may be used by qualifying small companies.

• The annual financial statements of the following entities are subject to a statutory audit: (i) legal entities of public interest, (ii) unincorporated subunits in Romania belonging to legal entities domiciled abroad , (iii) entities required to do so by specific legislation or by order of the relevant Minister.

• Accounts must be kept in the Romanian language and currency.

• Accounting transactions in a foreign currency must display the national and foreign currencies.

• Accounting records and supporting documentation underlying the financial accounting records are required to be maintained for 10 years (50 years for payroll). The relevant Minister may permit records and supporting documentation to be kept for a period of five years.

CORPORATE TAXATION • The standard corporate income tax rate is 16% applied to taxable profit.

• Certain activities, including nightclubs, casinos, and sports betting, are subject to a minimum tax of 5% from the revenues derived from such activities.

• Qualifying microenterprises (as defined) are generally subject to microenterprise income tax at the rate of 3% applied on total revenues.

INDIVIDUAL TAXATION Romanian resident individuals are generally subject to tax on their worldwide income. Other resident individuals are generally subject to tax on their worldwide income from 1 January of the calendar year following the calendar year in which they become a resident in Romania.

Non-resident individuals are generally subject to income tax on their Romanian source income.

However, Romanian resident individuals that change their state of residence to a country with which Romania has a double tax treaty, are generally subject to tax on their worldwide income for the calendar year in which the change of residence occurs, and the following three calendar years.

The standard personal income tax rate for the taxable income of individuals is 16%, subject to personal allowances, deductions and exemptions. Income from gambling in excess of set limits is generally subject to withholding tax at the rate of 25%. Taxable income must generally include any taxable capital gains.

Gains from real property are generally subject to tax at rates of between 1% and 3%, subject to exemptions (eg for qualifying relatives). Income or goods received by way of gift or inheritance are not generally subject to tax. However, inherited estates may be subject to tax at the rate of 1% if succession occurs more than two years after death. There is no wealth tax in Romania.

VAT The standard VAT rate is 24% (set to be reduced to 20% from 1 January 2016 and19% from 1 January 2017).

A reduced rate of 9% applies to certain supplies, including drugs, prostheses and related accessories, orthopaedic aids, hotel or similar accommodation, foodstuffs, non-alcoholic beverages, seeds and plants, and restaurant and catering services.

A reduced 5% rate applies to certain supplies including textbooks, books, newspapers and magazines (except those used solely or principally for advertising), admissions to castles, museums, exhibitions and cultural events, and social housing.

VAT exempt supplies include medical care and dental services, certain financial and banking services, insurances and reinsurance services, and most exports. The registration threshold is generally annual turnover of the RON equivalent of EUR 65,000.

DISCLAIMER This publication must not be regarded as offering a complete explanation of the taxation and corporate matters that are contained within this publication.

This publication has been prepared on the express terms and understanding that the publishers are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication.

The publishers and the authors expressly disclaim all and any liability and responsability to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication.

Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person, and ensuring that such edvice specifically relates to their particular needs.