Impozitarea persoanelor fizice nerezidente în România

In the context of a globalized business environment, Romanian companies are collaborating more and more with companies from abroad. Thus, we consider this situation opportune to present, in general terms, what are the obligations they have in relation to the income taxes obtained from Romania by non-resident business partners.

According to the Fiscal Code, non-residents who obtain taxable income from Romania have the obligation to pay tax for this income also in Romania. The income tax obtained by non-residents is a withholding tax, the Romanian payer of this income being the person who collects, declares and pays this tax.

The most common taxable incomes obtained in Romania by non-residents defined by the Fiscal Code are the incomes from dividends, interests, royalties, commissions, sports and entertainment activities, management and consulting services in any field, regardless of the place of supply, incomes from services in Romania except for international transport, etc.

Income derived by non-resident individuals from activities performed in Romania or from income sourced in Romania is generally subject to 16% tax, with certain exceptions (exceptions may also apply if the tax rate is reduced or eliminated under an applicable DTT concluded by Romania with the country of residence).

The applicable quotas in relation to non-resident companies are the following:

• 5% for dividend income;
• 16% in case of any other taxable income obtained from Romania;
• 50% for payments made by Romanian companies to the bank accounts of a non-resident company, opened in countries that have not concluded an information exchange agreement with Romania and only if such payments result from artificial transactions.

The moment in which the tax must be calculated and withheld is the moment of the payment of the income to the non-resident, by applying the tax rate on the gross income. The term for declaring and paying the tax to the state budget is given on the 25th of the month following the month in which the payment of the income to the non-resident took place.

Double taxation convention

If there is a double taxation agreement concluded between Romania and the country of the non-resident beneficiary of the taxable income obtained from Romania, the applicable tax rate may not exceed the rate provided in the agreement, applying the most favorable quota provided in the internal legislation, convention and / or the EU legislation for the European countries.

In order to be able to apply the provisions of the double taxation avoidance agreement, the non-resident must present to the income payer, at the time of payment, the fiscal residence certificate. The fiscal residence certificate presented during the year for which the payments are made is also valid in the first 60 calendar days of the following year, except for the situation in which the residence conditions change.

Failure to present the fiscal residence certificate implies the application of the provisions of the Fiscal Code in order to tax the income.

However, there are often situations in which the Romanian partner who carries out business relations with an external partner is the one who bears the income tax of non-residents, as the external partner requires that the payment of the consideration be made in full, regardless of whether it refers to taxable income on Romania’s territory. The full payment of the ventures obtained by non-residents, without withholding the tax due, as well as the existence of the clause of payment of the net amount in the contract concluded between the Romanian and the external partner are factors that do not allow the application of the double taxation convention. thus, the Romanian norms. This tax is borne, therefore, by the Romanian partner, applying the standard rate specified in the Fiscal Code, by the method of increased hundred, the value paid being considered net income.

Non-deductible expenses in regard with the corporate income tax

Another aspect to mention is the fact that, in the case of corporate income tax payers, the non-withholding tax on behalf of non-resident partners, for incomes obtained in Romania, represents non-deductible expenses when calculating the corporate income tax, as provided in the Fiscal Code.

It can be noticed that the payment to non-residents, often, produces to the Romanian company an additional cost regarding the income taxes obtained by non-residents. The most common types of income obtained by non-residents are income from services provided in Romania. As a rule, the double taxation agreements concluded between Romania and other countries provide for the non-taxation of income from services on the Romanian territory. Therefore, the provision to the Romanian company of the fiscal residence certificate of the external partner would imply the exemption of both companies from paying the tax in Romania.

On the other hand, the importance of double taxation avoidance conventions can also be emphasized in the case of companies carrying out economic activities in different countries, among which there is a permanent flow of cross-border services and investments. Companies in a group, which have their tax residence in different countries, will tend to comply with the conditions for avoiding double taxation, aiming at a minimization of costs at group level, including the costs of taxes paid in different countries.

Therefore, the tax treatment of an economic transaction carried out in connection with an external partner from the perspective of income tax obtained by non-residents in Romania requires a detailed analysis of the economic nature of the transaction, the fulfillment of criteria that could determine the application of tax exemptions by the double taxation avoidance conventions, by the European Legislation and by the existing relationship with the external partner, as well as the extent to which the tax payer is determined to bear the fiscal obligations due on the Romanian territory.