News - Romania

Romania - November 2013

Romania addresses unfair tax treatment of EU/EEA resident workers

Background

Romania has been asked by the European Commission to amend its discriminatory tax treatment of employment income of non-residents.

Currently, non-resident individuals who are not resident in Romania but who have employment income that is taxable in Romania are unable to claim personal and family deductions against the income subject to Romanian tax. This may result in unfair higher taxation in Romania, compared to that payable by a Romanian resident.  

According to a Commission press release issued on 26 September 2013, these Romanian provisions are contrary to the principle of free movement of workers as set out in the EU Treaties and EU case-law.  Those provisions establish that non-resident taxpayers earning all or most of their income in an EU Member State must receive the same treatment as resident taxpayers (Case C-279-93 Schumacker).

Modifications of the Romanian law

The Romanian Government has decided to modify the Tax Code with effect from 1 January 2014 in order to implement the  European Commissionís requirements.

The new provisions state that individuals who are residents in an EU or EEA Member State will benefit from the same deductions as individuals resident in Romania when the basis for calculating taxable income is determined. These deductions are granted within the limits set by Romanian legislation and only if the resident of an EU or EEA member state provides supporting documents and the deductions have not been made in that personís state of residence.

Under the new provisions, it will also be possible for Romanian taxpayers to deduct the following from gross salary:

  • contributions of up to EUR 400 per year to voluntary pension funds established in EU/EEA member states and qualified as such by the Romanian Financial Supervision Authority;
  • monthly mandatory employee social security contributions, whether due in Romania according to local law or in another state, according to the EU regulations, or bilateral conventions / agreements on the coordination of social security systems.

Finally, in order to fully comply with the European Commission, foreign income which is similar in type to Romanian source income that is not subject to  Romanian income tax under the provisions of the Tax Code, will also be deemed non-taxable in Romania.

Resources

Tax Code 2013 published by National Agency for Fiscal Administration.

http://static.anaf.ro/static/10/Anaf/Legislatie_R/Cod_fiscal_norme_2013.htm

For further information or to discuss any of the issues raised, please contact Marilena Ene on +4021 230 01 71 at Ratiu & Ratiu - www.ratiu.ro/en.

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