As a foreign citizen working in Romania or planning to start a business there, it is important to understand the concept of tax residency and its impact on your income.
Tax residency refers to the place where taxation takes place, depending on the physical region in which the income is generated. If you plan on doing any income-generating activity in Romania for more than 183 days a year, you should consider declaring your tax residency. After this period, you must declare the income earned in Romania and pay the relevant taxes.
To determine your tax residency status in Romania, you can obtain a tax residency certificate issued by the Romanian tax authority (ANAF). This certificate certifies the fiscal residency of an individual or company in a particular country. Any entity that is engaged in economic activity in Romania for more than 183 days must obtain this certificate in order to avoid double taxation. With this certificate, you can avoid double taxation of your income, as many countries have concluded double tax treaties with Romania. If you are outside Romania for more than 183 days a year, you must fill out a form to establish tax residency (as an individual) when you leave Romania.
To apply for a tax residency certificate, you need to complete an application form and submit it to ANAF. You can apply either through your SPV account or directly to your local ANAF office.
Required documents include:
- a copy of your ID,
- document of permanent residence or residence permit,
- documents confirming that you live in Romania (your property or rental agreement),
- a document issued by your home country proving that you are exempt from taxes.
After you submit your application, ANAF will review your ties to Romania, among other things. If you meet all the requirements, ANAF will issue a tax residency certificate.
Depending on your tax residency status, you may be taxed in Romania in different ways. Romanian citizens residing in Romania are considered Romanian tax residents and are taxed on their worldwide income, with the exception of income from wages received from abroad for work performed abroad, which is not taxed. Romanian citizens permanently residing in Romania who prove their tax residency status in a state that does not have a double tax treaty with Romania continue to be taxed in Romania on their worldwide income for the calendar year in which the change of residence occurs, as well as for the next three calendar years. Romanian citizens not residing in Romania and foreign persons, regardless of their permanent residence, are taxed in Romania only on income derived in Romania, until the moment they become Romanian tax residents, taxed on their worldwide income, if necessary. Non-resident individuals are taxed on their worldwide income from the date they become tax residents in Romania.
The personal income tax rate in Romania is a flat rate of 10% with some exceptions to this rule, such as the tax rate on dividends, real estate transfer income and gambling income, which depend on the level of income.
Finally, in order to determine your tax residency status in Romania, you must obtain a tax residency certificate issued by ANAF. Depending on your tax residency status, your income may be taxed at different rates in Romania.