Professional Documents
Culture Documents
of Investing in
Romania
September 2007
IRISH TAX
ROMANIAN TAX
UK TAX
WAYS TO INVEST
AN IRISH COMPANY
A ROMANIAN COMPANY
A HOLDING COMPANY
SUMMARY
Introduction
The following report outlines the tax aspects of the
various structures for investing in Romania. This report
is aimed primarily at Irish resident individuals.
I have also included a summary of the main UK tax provisions
applicable to a UK resident investor. The double taxation issues
which arise for Irish resident investors will also arise for UK
resident investors. Relief from double taxation operates in the
same manner under the UK/Romania double taxation agreement
as it does under the Ireland/Romania agreement.
Residence
You are a tax resident in Romania if :
1. you are domiciled in Romania
2. your centre of vital economic interests is in Romania or
3. you are physically present in Romania for more than 183 days in any 12
month period
As a foreign national, if you meet the conditions in (b) and (c) for three
consecutive years, you are treated as a Romanian tax resident from the start of
the fourth year
Wealth Tax
There is no wealth tax in Romania
www.kronstadt-estate.com kronstadt estate
Local Property Tax
Owners of buildings and special constructions are subject to building tax,
irrespective of their location or function. For individuals, 0.2% is applicable on
the value of buildings located in urban areas, and 0.1% elsewhere.
Corporation Tax
To own land in Romania, Irish and UK resident individuals have to set up a
Romanian company as the Romanian constitution does not allow foreign residents
own property – for apartments it is different as you do not own the land that
the apartment is situated on therefore you do not have to set up a Romanian
company ( it is common for the land associated with Apartment ownership to
be held in trust for foreign purchasers until the ownership legislation changes
which must happen before 2012 under EU law )
All corporations have to pay Corporation Tax on profits of 16%.Taxes payable
by a Romanian company is the gross income less the allowable deductions which
include the following:
• Depreciation
• Interest paid (the deduction is subject to a limitation imposed by the debt
equity ratio in the company, any unused interest can be carried forward)
• Maintenance Charges
• Management Charges
• Local taxes
• Repairs etc
Losses can only be carried forward for a five year period and losses can not be
carried back to a preceding year in any circumstances.
INCOME TAX
The income tax rates and band applicable in the UK for 2007-8
are as follows:
• Starting rate 10% £ 0 - £2,230 UK TAX
• Basic rate 22% £2,231 - £34,600
• Higher rate 40% Over £34,600
UK Tax treaty
CAPITAL GAINS TAX The tax treaty between
The amount chargeable to capital gains tax is added onto the top UK and Romania covers
of income liable to income tax for individuals and is charged to income tax, corporate tax
income tax at the appropriate rates, after deducting the annual and capital gains tax. This
exempt amount, which for 2007-08 is £9,200. means that a UK resident
in receipt of Romanian
CORPORATION TAX income is subject to UK
The corporation tax rates applicable in 2007-08 are as follows: £ tax on the income and
Small companies’ rate 20% £0 - £300,000 is given ‘a credit for the
Marginal relief Romanian tax on the same
income.
• Main rate 30%
• Marginal Relief £300,001 - £1,500,000
• Main Rate 30% 1,500,001 or more
GIFT AND INHERITANCE TAX
Inheritance tax is, a tax levied on the estate of individuals where
the value of the estate exceeds certain thresholds.The inheritance
tax threshold for 2007-08 is £300,000.The value of estates above
the threshold is taxed at 40%. The tax is levied on the worldwide
estate of a UK domiciled individual an on the UK estate only of
non UK domiciled individuals.
A lifetime gift is potential1y exempt from gift tax where the
disponer is living for 7 years fol1owing the date of the gift.
Marginal relief applies in the case of gifts within 7 years of date of
death of the disponer.
A HOLDING COMPANY
A HOLDING COMPANY
SUMMARY