In its tax law practice, the team of Costaș, Negru & Asociații is confronted with several practical problems, which are not easily solved even by the fiscal authorities. One of these problems is related to the the taxation of income according to tax residence.
This article is addressed to resident or non-resident natural persons, who leave or arrive in Romania, and in whose case it is necessary to establish or change the fiscal residence , respectively the taxation of the income obtained.
Tax residency has an impact on the taxes you pay in your home or country of residence.
Tax residency becomes an essential aspect when you live in a country for more than a few months. If we are talking about Romania and you have exceeded the period of stay of 183 days during a year, you must consider establishing tax residency. In other words, after this period, you are obliged to report all the income you make on the territory of the country. And to avoid double taxation, it is to your advantage to obtain the tax residence certificate.
Therefore, as a tax resident of a country, you are required to report all income you have in that country. For example, if you work in Romania and have tax residency in Canada, you are obliged to report to Canada all the income you obtain in Romania and to tax it according to Canadian law.
First of all, when establishing the fiscal residence of natural persons, the double taxation avoidance conventions that Romania has concluded with other countries are taken into account , not only the fiscal legislation that defines in art. 7 point 28 of the Fiscal Code resident natural person as any person who meets at least one of the listed conditions [1].
If a natural person is considered a resident both in Romania and in a signatory state of the double taxation convention , the residence of the natural person is determined according to the following criteria:
- residence is in the state in which he has his domicile, respectively the permanent residence at his disposal. A home is considered permanent if it is the personal property of the natural person, if it is rented by that person or if it remains available at any time to that person;
- residence is in the state in which she has her center of vital interests, respectively in the state with which her personal and economic relations are closer, if she has a home in both states. More precisely, residence is established in the country where the individual lives most, works, has his family and most of his possessions, but matters such as in which country he has bank accounts or credit/debit cards are also taken into account, basically where personal ties and economic are closer;
- the residence is in the state in which he ordinarily lives, if the individual does not have a permanent home anywhere or if it cannot be determined in which state he has his center of vital interests;
- the residence is in the State of which the person is a national or citizen, if he ordinarily resides in both States or in neither of the two States;
- residence is established amicably if the natural person has the nationality of both states or neither of them. In this situation, it is established on the basis of the amicable procedure from the double taxation convention, that is, the competent authorities of both states resolve the issue by mutual agreement.
In the opposite situation, natural persons resident in Romania who leave the country for a period or several periods of stay abroad that exceed a total of 183 days, during any interval of 12 consecutive months, have the obligation to complete the Questionnaire for establishing the tax residence of natural person upon departure from Romania to the competent central fiscal body (where the natural person has fiscal domicile) 30 days before departure from the country.
Natural persons have the obligation to attach to the Questionnaire for establishing the tax residence of natural persons upon departure from Romania, any documents that can be the basis for determining the residence of the natural person, as well as, as the case may be, the tax residence certificate issued by the foreign tax authority or a another document issued by an authority other than the fiscal one, which has powers in the field of fiscal residence certification according to the internal legislation of that state.
Of course, other elements can be taken into account when establishing residency in Romania or in a foreign state, but only together with those previously mentioned. We show, by way of example:
- a motor vehicle registered in Romania or in a foreign state;
- a driving license issued by the Romanian or foreign authorities;
- a passport issued by the Romanian or foreign authorities;
- if the natural person is insured in the pension and/or health insurance system in Romania or in a foreign country during the period in which he stays in Romania or in the foreign country.
The supporting documents, certificates or any other documents that will be attached to the Questionnaire and are in a foreign language will be accompanied by translations into Romanian certified by translators authorized by the Ministry of Justice, in accordance with the law.
The competent central fiscal body (where the natural person has fiscal domicile), taking into account the provisions of the double taxation convention or the Fiscal Code as the case may be, the submitted Questionnaire, the tax residence certificate issued by the foreign tax authority or another document (issued by an authority other than the fiscal one) as the case may be, as well as any other relevant documents [2], establishes the residence and, within 15 days from the submission of the Questionnaire, notifies the natural person and determines whether he still has a full fiscal obligation in Romania or will be removed/maintained from/in the tax records.
In the case of the full fiscal obligation, the resident natural person is still subject to income tax for the income obtained from any source, both in Romania and outside Romania.
In the event that there are changes to the data entered in the notification, as a result of completing the documentation presented by the natural person for establishing residence upon departure from Romania with new information/documents, the competent central fiscal body issues a new notification and cancels the previous one, for establishing the fiscal obligation of the natural person in Romania.
The Romanian resident natural person, domiciled in Romania, who proves the change of residence in a state with which Romania does not have a convention to avoid double taxation, completes the Questionnaire for establishing the tax residence of the natural person upon departure from Romania and is still obliged to pay tax on income obtained from any source, both from Romania and outside Romania, for the calendar year in which the change of residence takes place, as well as in the following 3 calendar years.
By way of example, we point out that no double taxation avoidance convention has been concluded between Romania and the Principality of Monaco, therefore any interested person must inquire about the conditions and formalities for obtaining the tax residence certificate in the Principality of Monaco, so that later to attach it to the aforementioned questionnaire.
Failure to submit the two questionnaires on time (establishment of residence upon arrival/departure in/from Romania) may be sanctioned with a fine from 50 to 100 lei .
Also, the failure to submit the “Questionnaire for establishing the residence of the natural person upon arrival in Romania”, respectively the “Questionnaire for establishing the residence of the natural person upon departure from Romania” constitute facts for which they are registered in the tax file.
This article was prepared for the blog of the law firm Costaș, Negru & Asociații by atty. Diana Badiu, from the Cluj Bar Association.
Costaș, Negru & Asociații is a law firm with offices in Cluj-Napoca, Bucharest and Arad, which provides assistance, legal representation and advice in several practice areas through a team of 20 lawyers and consultants. Details of the legal services and the composition of the team can be found at https://www.costas-negru.ro.
All rights for materials published on the company’s website and via social media belong to Costaș, Negru & Asociații, reproduction is permitted for information purposes only and with full and correct citation of the source.
[1] a) is domiciled in Romania;
b) the center of the person’s vital interests is located in Romania;
c) is present in Romania for one or more periods that exceed a total of 183 days, during any 12 consecutive month period, ending in the calendar year in question;
d) is a Romanian citizen working abroad, as an official or employee of Romania in a foreign state;
[2] Supporting documents are attached to the questionnaire in zip format.
-if there is an SPV account, the zip is uploaded to the anaf website, the single declaration submission section and other forms.
– if there is no SPV account, it is necessary to be present at the counter, with the documents and the questionnaire on the stick.
