• Value added tax (VAT)
• Profit tax
• Customs duties
• Withholding tax

VALUE ADDED TAX (VAT)

The Romanian Law no. 571/2003 regarding the Fiscal Code stipulates the following VAT rates:

• the general rate of VAT is 19% for activities in Romanian territory;

• the reduced rate of VAT is 9%. This rate applies only in few restricted areas: museum entry tickets, schoolbooks and newspapers, medical prosthesis, medicaments, hotel accommodation.

When set up, a company is allowed to choose to be VAT not-payer, but if its turnover exceeds 35,000 EUR it automatically becomes VAT payer.

Normally, VAT is calculated, declared and paid on a monthly basis.

When setting up, the companies must declare the yearly provisioned turnover.

Each company must drawn and deposit on a monthly basis a VAT declaration, to be deposited at the territorial Financial Administration until 25^th of the current month for the previous month.

In order to recuperate the VAT, the company must ask the reimbursement in the VAT declaration by ticking the row “Reimbursement request”. According to the law, within 30 days from the request date, the tax inspectors should come and perform the VAT control. The practical experience of the companies acting in Romania has shown that it is rather difficult to recuperate the VAT and that the tax inspectors use various arguments in order not to return VAT. Consequently, the reimbursement of the VAT is a difficult process, time and effort consuming for the companies

If the VAT to be reimbursed is less than 5000 RON (around 1,500 EUR), the company will not have the right to ask the VAT reimbursement. The VAT to be reimbursed will be automatically carried forward for the next fiscal period.

For the imported goods and services, the VAT regime is the following:

• For imported goods: VAT has to be paid when the goods arrive at the Customs Office. The VAT paid on the foreign invoice can be deducted from the VAT declaration for the next month;

• For imported services: no VAT should be paid, but only registered in the bookkeeping.

The companies importing following goods are exempted from paying the VAT, if the same goods are exempted from paying the VAT in Romania, according to the law appliable to the delivery of goods in Romania or from paying custom duties, according to EU Dirrectives.

PROFIT TAX

Profit Tax Quota

The Romanian Law no. 571/2003 regarding the Fiscal Code stipulates that the profit tax is 16%.

Profit tax is calculated, declared and paid on a quarterly basis. It is calculated for the cumulated profit since the beginning of the fiscal year.

The difference between the result in the books and the fiscal is linked with the principle of the deductibility of expenses. In order to be deductible, an expense should correspond to an income. When calculating the taxation base of a company, one should take into consideration the fact that Romanian Law considers many expenditures non-deductible.

For the calculation of the profit tax, previous loss can be recovered within five years. The Romanian Accountancy Law accepts the in-line and accelerated depreciation method.

CUSTOMS DUTIES

The Romanian Customs Duties Regulations (the Law no. 86/2006 regarding the Romanian Custom Duties Regulations) stipulate import duties for imported goods, and the percentages vary from one product to another, and from one origin to another. The classification of the goods and related custom duties can be found in the Customs Duties Regulations.

From 01.01.2002, customs taxes for the import of most products from member countries of the European Union, European Free Trade Association and the Central European Free Trade Association are 0%.

WITHHOLDING TAX

The Romanian Law no. 571/2003 regarding the Fiscal Code stipulates that any foreign company or natural person who stays in Romania less than 183 days in a calendar year must pay a withholding tax for the incomes obtained from activities run in Romania or from commercial operations with Romanian entities