Romania's Corporate Tax System: What Foreign Investors Need to Know

One of Romania's most compelling advantages for foreign investors is its tax environment. With a 16% flat corporate income tax rate — one of the lowest in the European Union — and a favourable microenterprise regime for smaller businesses, Romania offers a genuinely competitive fiscal framework. But understanding the system in detail is essential before you structure your business.

Romanian companies are subject to a 16% flat rate on taxable profit. Taxable profit is calculated as gross income minus deductible expenses, with specific rules governing what qualifies as deductible.

Key points:

• Quarterly advance payments are required, with an annual reconciliation
• Losses can be carried forward for up to seven years
• Dividends paid to non-resident shareholders are subject to a 8% withholding tax (reduced rates may apply under EU directives or double taxation treaties)
• Romania has an extensive double taxation treaty network covering over 80 countries, which can significantly reduce withholding tax obligations

For smaller companies, Romania offers an alternative: the microenterprise tax, which is applied to revenue rather than profit. This is particularly attractive for businesses in their early stages or those with high profit margins.

As of the most recent legislation, the microenterprise regime applies to companies with annual revenues below €500,000 and at least one employee. The tax rate is 1% of revenue (or 3% for companies without employees in certain conditions).

Eligibility conditions include:

• Annual revenue below the threshold
• At least one full-time employee (with some exceptions)
• The company must not be in banking, insurance, gambling, or certain other regulated sectors
• Shareholders must not hold more than 25% in more than three Romanian microenterprises

The microenterprise regime is applied automatically if you meet the conditions, but you can opt out and apply standard CIT if it is more advantageous for your situation.

Romania's standard VAT rate is 19%, with reduced rates of 9% (food, medicines, hotel accommodation) and 5% (certain social housing, books, newspapers).

VAT registration thresholds:

• Companies with annual turnover exceeding RON 300,000 (approximately €60,000) must register for VAT
• Voluntary registration is available below this threshold and is often advisable for B2B businesses that want to recover input VAT

Once registered, companies must file monthly or quarterly VAT returns and comply with Romania's e-invoicing system (RO e-Factura), which became mandatory for B2B transactions in 2024.

Dividends distributed to Romanian resident shareholders are subject to a 8% dividend tax. For non-resident shareholders, the withholding rate is also 8%, but this may be reduced or eliminated under:

• EU Parent-Subsidiary Directive — for EU-resident parent companies holding at least 10% for a minimum of two years
• Double taxation treaties — Romania's treaty network often provides reduced rates of 5–10%

If your Romanian company employs staff, you must account for significant social contribution obligations:

• Employee contributions: approximately 35% of gross salary (pension, health insurance)
• Employer contributions: approximately 2.25% of gross salary (work insurance fund)

Romania's labour costs remain competitive by EU standards, but the total employment cost is meaningfully higher than the net salary — a factor to model carefully in your business plan.

Romanian companies that transact with related parties (including parent companies, subsidiaries, or affiliated entities abroad) must comply with transfer pricing rules aligned with OECD guidelines. Companies exceeding certain thresholds must prepare and maintain transfer pricing documentation.

This is an area where professional advice is particularly important, as Romanian tax authorities have increased scrutiny of intercompany transactions in recent years.

A few points that frequently catch foreign investors off guard:

1. Romanian tax law changes frequently. The microenterprise regime, in particular, has been amended multiple times in recent years. What applied last year may not apply today.

2. E-invoicing is mandatory. Romania's RO e-Factura system requires B2B invoices to be submitted electronically to ANAF before or at the time of issuance. Non-compliance carries penalties.

3. Substance matters. Romanian tax authorities pay attention to whether a company has genuine economic substance — real employees, real operations, real decision-making in Romania. Shell structures face increasing scrutiny.

4. Double taxation treaties require documentation. To benefit from reduced withholding rates, you must obtain and maintain the correct residency certificates and follow the procedural requirements.

Tax structuring decisions made at the point of company formation can have significant long-term consequences. The choice between standard CIT and the microenterprise regime, the VAT registration decision, and the dividend distribution strategy all interact with each other and with your broader group structure.

At Mariner Pro, we work with qualified Romanian tax advisors to help our clients structure their Romanian operations efficiently and compliantly from day one.

Have questions about your specific tax situation in Romania? Contact our team for a no-obligation consultation.