Romania Tax Treaties with other countries

Romania has signed Double Taxation Agreements (DTA) with 90 countries.
Generally, in accordance with the Romanian tax law, Romanian-sourced income derived by nonresident legal entities is subject to withholding tax if the nonresidents do not have a PE in Romania to which the income is attributable.
Notwithstanding the above, the domestic withholding tax can be reduced either:

• In accordance with the more favorable provisions of a relevant DTT, if any; or
• Under the provisions of the EU Parent-Subsidiary Directive, as implemented in the Romanian tax law, subject to certain specific conditions being cumulatively met in this case.

Romania Tax Treaties with Taiwan
Romania Tax Treaties with China

Email: prg4ww@evershinecpa.com
The Engaging Manager from Headquarter
Ms. Anna Wang, Speak Romanian English, and Chinese.
skype: burlinna

We set up below judgment criteria on Treaty application:

Scenario:
If you are not a Romanian legal resident, and if your resident country has DTA with Romania, and if you are without PE (Permanent Establishment), please go to Section A.
If you are not a Romanian legal resident, and if your resident country has DTA with Romania, and if you are with PE (Permanent Establishment) please go to Section B.
If you are not a Romanian legal resident, and if your resident country has no DTA with Romania, please go to Section C.

Section A:

Scenario:

If you are not a Romania legal resident, and if your resident country has DTA with Romania, and if you are without PE (Permanent Establishment), it will be deemed as “non-Romania Domestic Sourced Income”.
That means Romania will levy zero-tax.
However, your still need to send zero-tax application to Romania Tax Bureau for being approved.

Below, we will let you understand through Q&A.

DTA-Q-10:

In Romania, which foreign legal resident company can apply for zero tax rate without PE under DTA?

DTA-A-10:
Romania has signed DTAs with the following 90 countries:

DTA-Q-20:

Why does the Country’s foreign capital without a permanent establishment (PE) in Romania, under the DTA enjoy zero tax rate?

DTA-A-20:

It follows Article 5 and Articles 7 in the DTA Treaty. Article define if foreign entity having PE in Romania. Article 7 regulate if no PE, non-Romania domestic sourced income will not be levied tax in Romania.

DTA-Q-30:
Under what circumstances are deemed to have no PE, and will the establishment of a foreign-funded subsidiary in Romania be regarded as a foreign-funded subsidiary in Romania?

DTA-A-30:

According to DTA Article 5 item 7, A Wholly Foreign Owned subsidiary in Romania will not be treated as PE because it is a separate legal entity.
That means if a Romania Subsidiary pay service fee to non- Romania Parent Company through service contract signed between subsidiary and non – Romania Parent company
as an investor, non- Romania Parent Company can apply zero tax.
As for if paid amount being reasonable, it will get involved TP (Transfer Pricing) judgement by Romania Tax Bureau.
Please see Romania Transfer Pricing webpage.

DTA-Q-40:

If foreign company establishes a branch or office in Romania, can the zero-tax rate without PE be applied?

DTA-A-40:
According to DTA Article 5 item 2, If foreign company set up a branch or Office in Romania, then will be considered as Romania domestic Income.
But According DTA Article 5 item 4，if an Office is only doing preparatory or auxiliary activity, will apply zero-tax rate.

DTA-Q-50:

What is the procedure for Romania to apply for zero tax rate under DTA without PE?

DTA-A-50:

Fill in the form for application for the certificate attesting the tax paid in Romania by foreign legal persons, 0% shall be filled in in column 3 “Tax rate”.
Application for the issuance of the certificate of tax residence in order to apply the Convention/ Agreement for the avoidance of double taxation.
The certificate confirms that the non-resident is a resident in a state which signed a double tax treaty with Romania. It shall be issued by the competent tax authority, and it is valid in the year of issuing.

Section Ｂ:

Scenario:

If you are not a Romania legal resident, and if your resident country has DTA with Romania, and if you are with PE (Permanent Establishment), your income will be considered as Romania domestic sourced income.
As for levying Tax Rate, please be aware:
if Romania Tax rate > DTA Rate, adopt DTA Rate; if Romania Tax rate < DTA Rate, adopt Romania Rate.
Below, we will let you understand through Q&A

DTA-Q-60:

What are the factors that deemed to be the country’s domestic source income?

DTA-A-60:

Romania source of income includes the following:

1. Rental income from property situated in Romania.
2. Dividends paid by a Romanian legal entity.
3. Royalties paid by a Romanian resident.
4. Commission fees paid by a Romanian resident.
5. Income for services performed in Romania.

DTA-Q-70:
Does Article 5 and Article 7 in the DTA take precedence over the Romania determination factors on Romania domestic sourced income?

DTA-A-70:

When DTA is applied, in the event of a different PE definition between Romania domestic tax laws and Article 5 in the DTA, the definition under the DTA shall prevail the domestic regulations.
When DTA is applied, if foreign company being defined as without PE (Permanent Establishment) in Romania, then will be considered non-Romania domestic sourced income, in the event business profit is relevant to this issue, the clause in Article 7 in the DTA zero-rate tax can be applied accordingly.

In this scenario, please see section A.

DTA-Q-80:
When non-tax residents of Romania having Romania domestic sourced income ，what is the withholding tax rate according to Romania tax regulations excluding DTA?

DTA-A-80:

The withholding tax rates under domestic law are:

Business Profits – 10% (Note 1)

Dividend – 5% (Note 2)

Interest (General loan) – 16% (Note 3)

Royalties fee – 16% (Note 3)

Technical services – 10% (Note 1)

Professional services – 10% (Note 1)

Note:

1. Payments derived by nonresidents (whether companies or individuals) for services rendered in Romania are generally subject to a final withholding tax at 10% on a gross basis. Where the services concerned are management services, consultancy in any field, marketing, technical assistance, research and design in any field, advertising, or publicity irrespective of the form in which the services are performed, or services provided by accountants, architects, auditors, engineers, lawyers or notaries public, the withholding tax is also imposed where the services are performed outside Romania if the person paying for the services, is a Romanian resident. Where a payment for services is made to a services provider resident in a country with which Romania does not have an agreement providing for the exchange of information and the payment is made in the context of a transaction that is characterized as artificial under Romanian domestic law, the rate of withholding tax is 50%.
2. 50% if dividends paid under an artificial arrangement to a recipient resident in a country with which Romania does not have an effective exchange of tax information. 0% if dividends paid by a Romanian resident company to a parent company resident in another EEA country. EEA parent company has held at least 10% of the share capital of the Romanian company.
3. 50% if interest/ royalties paid under an artificial arrangement to a recipient resident in a country with which Romania does not have an effective exchange of tax information. 0% if interest/ royalties’ payments made by a Romanian resident company to an associated company resident in another EU Member State. 2 companies are regarded as associated companies if one company has a direct minimum holding of 25% of the capital of both companies for a minimum consecutive period of 2 years.

DTA-Q-90:

If DTA Tax Rate is higher than Romania tax rate, apply which tax rate?

DTA-A-90

As for levying Tax Rate, please be aware:
if Romania Tax rate > DTA Rate, adopt DTA Rate; if Romania Tax rate < DTA Rate, adopt Romania Rate.

DTA-Q-A0:        

When non-tax residents of Romania having Romania domestic sourced income, what is Romania’s application procedure based on the DTA preferential tax rate?

DTA-A-A0:

Fill in the form for application for the certificate attesting the tax paid in Romania by foreign legal persons.
Application for the issuance of the certificate of tax residence in order to apply the Convention/ Agreement for the avoidance of double taxation.
The certificate shall be issued by the competent tax authority.

Section Ｃ:

DTA-Q-B0:

As an investor, if your country has not signed DTA with Romania, what kinds of tax rates when you have Romania relevant income?

DTA-A-Q0:

The withholding tax rates under domestic law are:

Business Profits – 10% (Note 1)

Dividend – 5% (Note 2)

Interest (General loan) – 16% (Note 3)

Royalties fee – 16% (Note 3)

Technical services – 10% (Note 1)

Professional services – 10% (Note 1)

Note:

1. Payments derived by nonresidents (whether companies or individuals) for services rendered in Romania are generally subject to a final withholding tax at 10% on a gross basis. Where the services concerned are management services, consultancy in any field, marketing, technical assistance, research and design in any field, advertising, or publicity irrespective of the form in which the services are performed, or services provided by accountants, architects, auditors, engineers, lawyers or notaries public, the withholding tax is also imposed where the services are performed outside Romania if the person paying for the services, is a Romanian resident. Where a payment for services is made to a services provider resident in a country with which Romania does not have an agreement providing for the exchange of information and the payment is made in the context of a transaction that is characterized as artificial under Romanian domestic law, the rate of withholding tax is 50%.
2. 50% if dividends paid under an artificial arrangement to a recipient resident in a country with which Romania does not have an effective exchange of tax information. 0% if dividends paid by a Romanian resident company to a parent company resident in another EEA country. EEA parent company has held at least 10% of the share capital of the Romanian company.
3. 50% if interest/ royalties paid under an artificial arrangement to a recipient resident in a country with which Romania does not have an effective exchange of tax information. 0% if interest/ royalties’ payments made by a Romanian resident company to an associated company resident in another EU Member State. 2 companies are regarded as associated companies if one company has a direct minimum holding of 25% of the capital of both companies for a minimum consecutive period of 2 years.

Please be aware of below Warning:
The above contents are digested by Evershine R&D  and Education Center in October 2021.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.

Contact Us

Bucharest Evershine BPO Service Limited Corp.
Email: prg4ww@evershinecpa.com
The Engaging Manager from Headquarter
Ms. Anna Wang, Speak Romanian, English and Chinese.
skype: burlinna

or
For how to exchange data files between your Finance Accounting System and Evershine Cloud Accounting Information System, please send an email to HQ4buh@evershinecpa.com
Dale Chen, Principal Partner/CPA in Taiwan+China+UK will be accountable for your case.
LinkedIn address:Dale Chen

Additional Information

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Email: kerrychen@evershinecpa.com
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(version: 2022/03)

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