Is it mandatory to establish your tax residency?
Yes, this new obligation was imposed by the 2015 Romanian Tax Code. Any expat who has a long stay in Romania or any Romanian who leaves the country for a long period of time has to declare their prolonged stay or leave.
How do I know if I have to establish my tax residency in Romania?
According to the Tax Code, you need to submit your personal file to the Romanian tax authorities if you meet either 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 has been ‘transferred’ to Romania (for expats) or to a foreign state (for Romanians);
What is a person’s vital interests?
The Tax Code sees a person’s vital interest as a mixture between your ‘financial relationships’ and your ‘personal relationships’:
- Financial relations: your statute as a Romanian employee, property you own (shares or real estate), bank accounts, debit or credit cards.
- Personal relations: 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.
What happens if I meet one of the above conditions?
We advise you to discuss your situation with to a tax lawyer, in order to evaluate the consequences of moving your residency to Romania. A pre-analysis of 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 have to submit a personal file to the Tax Authorities and a questionnaire through which you present your economical and personal ties to Romania.
What happens if I become a Romanian tax resident?
After you become a Romanian tax resident, all the income you receive from different countries will be taxed in those countries and thereafter transferred to Romania, abiding the applicable conventions for avoiding double taxation.
Also, being a Romanian tax resident is useful if you receive income from abroad and you wish to become a Romanian citizen. By becoming a tax resident in Romania, all the income you received from aboard will be considered as gained in Romania and taxed here. Therefore, you will be able to easily prove your means of living should it be the case.
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 of your long stay or long leave from the country. The authorities will issue a tax decision, through which they will establish the tax obligations and penalties that 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 impose any income that you gain in other states.
However, you will still have to pay taxes for all the income gained in Romania to the Romanian state.
Is it better to become a Romanian tax resident or remain a foreign tax resident?
This depends from case to case, taking into consideration how high the foreign taxes on income are in your case, what international conventions are applicable etc. We advise you to consult a tax lawyer or financial consultant in this respect, to assess your situation appropriately.
I was declared a Romanian tax resident and now I have to pay more taxes. Can I do something about this?
The tax notification can be appealed at the Romanian courts of justice within 45 days from receiving it. You have to notify your lawyer or legal advisor as soon as you receive this notice.
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R&R Partners Bucharest is a Romanian boutique law firm specialized in litigation, business law, tax matters and civil statute (residency, citizenship).