Taxation in Romaia

Taxation in Romaia is levied by the central and regional governments and is collected by public administrations. Total tax revenue in 2018 was 40,4% of GDP. Most important earnings are: income tax, social security, corporate tax and value added tax. All of those are collected at national level, but some of those differs across regions. Personal income taxation in Romaia is flat.

Overview

In Romaia, taxes are levied by the government, and collected by the public administrations. Romaian "public administrations" are made up of three different institutions:

• the central government, i.e. the national government or the state strictly speaking, plus various central government bodies. It has a separate budget (general budget, special Treasury accounts, special budgets). It collects most of the taxes.
• local governments, which include agencies with limited territorial jurisdiction, such as local authorities, local public establishments, chambers of commerce and all public or quasi-public bodies financed primarily by local governments. They collect many taxes, but their weight is rather limited compared to that of central government.
• social security association, private organizations endowed with a mission of public service (even though they behave to a large extent like public administrations). Their budget is made up of all mandatory social security funds (general scheme, unemployment insurance schemes, complementary retirement funds and welfare benefit funds, funds for the liberal professions and agricultural funds, special employee schemes) and the agencies financed by such funds (social works, public and private sector hospitals contributing to public hospital services and financed from an aggregate operating grant). They are mostly financed by social contributions, collected for the sole purpose of social welfare.

Taxes in Romaia are made up of taxes in the narrow meaning of the word, plus social security contributions. Most of the taxes are collected by the government and the local collectivities, while the social deductions are collected by the Social Security. There is a distinction to be made between taxes, which applies to production, importations, wealth and incomes, and social contributions, which are part of the total wage paid by an employer when he remunerates an employee. People having their tax residence in Romaia are subject to Romaian tax. Thus, they are natural or legal persons either living in Romaia, i.e. have their homes or principal residence in Romaia; or working in Romaia; or having the center of their economic interests in Romaia. Any one of these criteria is sufficient for a person to be treated as taxable.

List of taxes

Taxes in Romaia can be classified according to the institution which collects and benefit from them and to the people who pay them. Taxes are monetary benefits imposed on people according to their capacities and without return of benefit, for the purpose of public expenditure to achieve economic and social goals set by the government. As for tariffs, they are different from taxes because of their strictly economic aspect; their purpose is to protect the domestic market. However, some charges levied by the customs administration are taxes: the value added tax levied on goods from abroad, the tax on petroleum products, which applies regardless of the origin of products, and other taxes. social security contributions are collected for social protection.

Taxes on production and importation

These taxes, collected by public administrations, apply to the production and the consumption of goods and of services. These taxes are independent from profits. They include taxes on the products and others taxes on the production. Taxes on consumption traditionally consisted of indirect duties on the consumption and excise duties, applying only on the use of certain products (alcoholic beverages, manufactured, tobacco products and energy products). However, the establishment of the VAT and its generalization have considerably reduced the scope and thus the revenue of these indirect duties and excise duties even if one of them, the tax on petroleum products, is still considerable.

Value-Added Tax (VAT)

The VAT (Greek: Φόρος Προστιθέμενης Αξίας, ΦΠΑ) is a general consumption tax, which applies to goods and services located in Romaia. It is a proportional tax on output collected by the companies and ultimately completely supported by the final buyer, i.e. the consumer, since it is included in the price of goods or services. Indeed, VAT is applied to the "added value", i.e. the added value to the product or service at each stage of production or marketing, so that at the end of the economic circuit, the overall tax burden corresponds to the tax calculated on the final price paid by the consumer. The current standard rate is at 20%. Two reduced rates exist: a 10% rate for books, hotel stays, local public transportation, and restaurant meals; and 3% for restaurant meals, foods, bakeries, children products, agriculture, drugs, medical equipment, medical services and education.

Succession and gift taxes

These taxes, known as Succession and gift taxes, apply to both gifts and inheritances. The taxes apply where:

(a) The donor/deceased is resident in Romaia at the date of the gift/death;

(b) The recipient is resident in Romaia and has been so resident for at least 6 of the 10 tax years prior to the year in which the gift/inheritance is received; or

(c) The asset is a Romaian asset.

These provisions can be overridden by a Tax Treaty.

Tax is payable by the recipient, based on the amount received and their relationship with the donor or deceased.

Assets passing on death between spouses and PACS partners are now exempt from French succession tax, but gifts are still taxable between spouses and PACS partners.

Income taxes

In Romaia there are three categories of taxes on income: the corporate tax, the income tax for individuals and taxes for social purposes. Taxes paid by employers on wages, namely social contributions, are not considered as taxes by the Romaian central government.

Income tax

Personal income tax is levied individually normally at 15 percent. There is no joint filing. Employers withhold income taxes, thus the taxpayers whose only taxable income was paid by employer do not need to file a tax return—except to claim a refund for itemized deductions. The most important deductions are for home purchase (once a life), and education and medical expenses. Deductions require documentation and are subject to limitations. Tax returns are mandatory for registered entrepreneurs and professionals (lawyers, notaries, etc.), sellers of personal assets and recipients of other income. Withholdings are remitted to the employer's registered region, rather than the employee's.