Romanian annual tax return for 2023/2024: the most important changes

At the beginning of this year, the tax authorities published a new form 212 – "Single Statement on the Income Tax and Social Contributions owed by Individuals" - for reporting private income earned in 2023, as well as estimated income for 2024.

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• The Romanian annual tax return, reporting private income earned in 2023 and estimated private income for 2024, must be submitted by 27 May 2024.
• Major changes have been introduced to the tax law for individuals who earn income from renting properties.
• Individuals who own high-value assets are subject to a special tax, which is declared through a separate form.
• Tax audits at the individual level have become more frequent.

Therefore, even though there are several months until the deadline for submitting the statement and paying the income tax and social contributions, 27 May 2024, individuals can submit the tax return in advance, after carefully analyzing their own sources of income, but also the latest legislative changes.

The types of income that need to be reported via the annual tax return include rental income. The trend of investing in real estate properties for rental purposes in order to secure a consistent, steady income has significantly increased in recent years, Romania included. For rental income earned in 2023, the tax is set at 10%. Taxpayers may qualify for certain expense deductions under specific conditions. Starting in 2024, new taxation rules will come into effect for rental income. Even though the tax rate will remain at 10%, a standard 20% deduction will be permitted without the need for supporting expense documentation or accounting entries. As a result, the effective tax rate will be 8%, calculated based on the total annual income accrued by the property owner. Starting on January 1, 2024, for rental income paid by entities, the income tax will be withheld at source and reported by the payer. In such cases, the property owner will not need to file an annual tax return for income tax purposes. Also, beginning in 2024, individuals earning rental income from properties they personally own will no longer be able to declare this income under the category of independent activity income in the real system. Moreover, losses incurred by owners due to property expenses exceeding the rental income will no longer be eligible for future reporting years as offsets against income, thus minimizing the tax payable.

Taxpayers report via the annual tax return also certain gains from transfers of securities, such as gains from the sale of shares traded on foreign exchanges, which are not intermediated by Romanian brokers, taxed at 10%. For such incomes earned from 1 January 2024, new rules apply regarding the carryforward of losses, in view of their compensation with future income. On the other hand, individuals who earn gains from the sale of shares through transactions carried out through Romanian brokers, continue to benefit in 2024 from a reduced taxation, of 1% or 3%, depending on the holding period of the shares. In this case, the tax is withheld by the broker, losses cannot be carried forward and compensated, and the individual does not have to submit the annual tax return for reporting income tax.

Other types of income that are reported through the annual tax return are interests and dividends earned abroad. Interest income is taxed at 10%, while dividends at 8%. It is important that individuals check if these types of income have been taxed abroad and if the respective taxes can be considered for tax credit in Romania, based on double tax treaties signed by Romania with other states.

Individuals earning private income may be subject to a capped health fund contribution for this income, in addition to income tax, if the private income exceeds certain thresholds, of 6, 12, and 24 minimum national wages. The health fund contribution is 10% of these thresholds and must be reported through the annual tax return. For 2023, the minimum wage to be taken into account for setting the thresholds is RON 3,000, and for 2024, RON 3,300.

From 2024, individuals earning private income no longer have the option to redirect, through the annual tax return, up to 3.5% of income tax to support non-profit entities or grant scholarships. This option remains valid only for salary income.

The authorities have introduced an additional tax, from 1 January 2024, for individuals who own high-value movable and immovable assets. Individuals who have residential buildings situated in Romania, with a building value exceeding RON 2,500,000, are subject to a tax of 0.3%, applied to the difference between the taxable value of the building notified by the authorities through a tax decision and the threshold of RON 2,500,000. The tax will be declared and paid by 30 April of the year for which it is due. Also, owners of cars registered in Romania with an individual purchase value exceeding RON 375,000 are subject to a tax of 0.3% applied to the difference between the purchase value and the threshold of RON 375,000. This tax will be declared and paid by 31 December of the year for which it is due. These additional taxes will not be reported through the annual tax return but through a separate form, which is due to be published by the authorities.

The tax on individuals' private income is an essential area of interest for tax authorities, with audits at the individual level becoming more frequent. According to the National Agency for Fiscal Administration's activity report for the first semester of 2023, during this period, there were over two thousand tax audits on individual taxpayers. The authorities have established additional payment obligations of RON 50 million for these audits.

Considering multiple legislative changes introduced recently in the law by the tax authorities, it is crucial that individuals analyze these changes and carefully verify their private income sources, as well as valuable assets they own, to declare in full and correctly, within legal deadlines, the corresponding taxes and social contributions.