As an expat in Romania, do I have to set up my tax residency?
Yes, establishing your fiscal residency is a new tax obligation, imposed by the 2015 Romanian Tax Code. Any foreign citizen who lives minimum 183 days within one year in Romania has to declare their stay in this country, in order to establish their fiscal residency.
In other words, you have to notify your situation to the tax authorities (ANAF) and based on your file, they will decide whether you become a Romanian tax resident or not.
How do I know if I have to establish my tax residency in Romania?
According to Romanian law, you have to submit a set of documents with a questionnaire to the Romanian tax authority, if you meet one of the following conditions:
- you have your legal domicile in Romania
- you spend more than 183 days within 12 consecutive months inside/outside Romanian borders
- your vital living interests have been ‘transferred’ to Romania (for expats) or to a foreign state (for Romanians)
What is a person’s vital interests?
The Tax Code refers to a person’s vital interest as a mixture between ‘financial relationships’ and ‘personal relationships’:
- Financial relations refer to your statute as a Romanian employee, property owned (shares or real estate), bank accounts, debit or credit cards, depending on the case
- Personal relations refer to having a spouse, a child or a person you take care of in Romania, membership in a Romanian association, foundation or church
Basically, the Tax Authorities make an audit report of your life, in order to deduct if you have many ties to Romania and, therefore, if you can be considered a Romanian tax resident or not.
What happens if I meet one of the above conditions?
We advise you to discuss your situation with a tax lawyer, in order to evaluate the consequences of moving your residency to Romania. A pre-analysis with an expert can save you thousands of euros in taxes. Moreover, it is a lot easier to prevent a taxation problem than to fix it.
If you fulfill any of the above conditions, you must submit a personal file to the Tax Authorities and a questionnaire, where you detail your economic and personal ties to Romania.
What happens if I become a Romanian tax resident?
After you become a Romanian tax resident, all income you receive from different countries will be first taxed in those countries and later transferred to Romania, also complying with any applicable conventions against double taxation.
Being a Romanian tax resident is also useful if you receive income from abroad and you wish to become a Romanian citizen. By becoming a tax resident in Romania, all income you receive from aboard will be declared in Romania and you will be able to easily prove your means of living when you file for citizenship.
What happens if I do not submit the tax statement?
If you do not declare your tax residency after meeting one of the above criteria, the Tax Authority will issue a tax fine as soon as they notice your long stay or long leave from the country.
The authorities will issue an official taxation decision, by which they set the tax obligations and penalties you have to pay.
What happens if I do not obtain my Romanian tax residency?
If you do not obtain the tax residency, you will remain a foreign tax resident and the Romanian authorities will not tax any income you gain in other countries.
However, you still have to pay taxes in Romania for all income gained in this country. For example, if you own a Romanian company, you will pay income tax in Romania for any proceeds of your business.
Is it better to become a Romanian tax resident or remain a foreign tax resident?
This depends from case to case, considering how high income the taxes are in your home country compared to Romania, what international conventions are applicable etc.
It would be best to consult a tax lawyer or financial consultant, in order to make the best decision in your particular case.
I was declared a Romanian tax resident and now I have to pay more taxes. Can I do something about this?
The tax notification from ANAF can be appealed at the Romanian courts of justice within 45 days from receiving it. So you have to notify your lawyer or legal advisor as soon as possible when you receive this unfavorable notice, otherwise you might lose your term for appeal.
Managing Partner – R&R Partners Bucharest
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