Romania is an attractive jurisdiction for IT companies and technology investors due to its competitive tax environment, access to the European market, and growing digital ecosystem.

Businesses operating in the Romanian IT sector must carefully assess the applicable tax rules.

Corporate Income Tax

In Romania, companies are generally subject to either:

  • corporate income tax – 16 %; or
  • microenterprise turnover tax – 1%.

A microenterprise is a company that fulfills the following conditions:

  1. has revenue of less than 100,000 euros;
  2. its share capital is held by individuals other than the state and local government entities;
  3. is not in the process of dissolution, followed by liquidation, as recorded in the commercial registry or with the courts;
  4. has at least 1 (one) employee;
  5. has shareholders who, directly or indirectly, hold more than 25% of the value or number of shares or voting rights, and it is the only legal entity designated by the shareholders to apply the microenterprise income tax;
  6. has filed its annual financial statements on time, if required to do so by law.

Taxation of Employees in the IT Sector

Starting from August 2016, salary income derived as a result of carrying out research and development (R&D) activities, including activities related to IT projects, is exempted from Romanian income tax.

The income tax exemption applies:

  • Only to individuals who are working in research and development departments;
  • To salary incomes paid by either Romanian or non-Romanian employers;
  • Not only to research and development companies, but also to companies which do not perform research and development as a main activity, but conduct such activities in certain specialized departments (e.g., companies in the automotive, pharmaceutical industries, etc.).

Also, the company benefits of supplementary fiscal facilities (such as a deduction of 50% of eligible expenses, accelerate depreciation for equipment).

The company that exclusively perform innovation and R&D activities on scientific research and technological development and related activities also benefits from profit tax exemption for the first ten years of activity.

The facility regarding the tax exemption of the reinvested profit is also extended beginning with 2023 for investments in assets used in the production and processing activity, as well as in assets used for the re-technology process.

VAT Considerations

The standard VAT rate in Romania is 21%.

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