In the tax practice of the law firm Costaș, Negru & Asociații, we frequently encounter taxation issues affecting Romanians living abroad. Recently, their situation has come under the scrutiny of the National Agency for Fiscal Administration (ANAF), which aims to clarify the income sources of Romanian tax residents and levy taxes where applicable. The anticipated wave of tax audits has also attracted media attention.
It is worth noting that the taxation of individuals is an issue that Romanian tax authorities have addressed only sporadically. There was the era of major real estate developers and the period of audits targeting high-net-worth individuals; interest remains regarding income generated through economic platforms (especially following the implementation of DAC 7 and easier access to information on income sources).
In reality, however, for many Romanians living abroad, the situation has remained unchanged since the entry into force of the first post-1989 Fiscal Code: income derived from dependent activities performed abroad is neither taxed nor declared in Romania. Consequently, the vast majority of these individuals declare no income and pay no taxes in Romania.
It appears that a time of challenges has arrived for the diaspora regarding taxation.
Indeed, the mobility of Romanian citizens is vastly different today than it was twenty years ago. The model of buses transporting Romanian citizens to Italy, Spain, or France for fruit and vegetable harvesting is no longer the dominant one. Today, we are discussing doctors who have established their careers and are acquiring small businesses in France; engineers working in Dubai, Singapore, or Germany; professors leaving Romanian universities to teach at American university branches in the Caribbean; innovative young people selling Romanian businesses to major British or American companies; the large number of compatriots working on cruise ships; and retired Romanian military personnel providing consultancy services in Sudan.
However, Romanian citizens earning income from other jurisdictions rarely consider the issue of how that income is taxed in Romania—or, indeed, whether or not they qualify as Romanian tax residents. Most often, they simply move to another country, operating under the impression that they have no tax obligations in Romania.
From a practical standpoint, matters concerning changes in tax residency are critically important. For instance, even if a change in tax residency is formally notified to the tax authorities, it does not take effect for three years in cases where an individual establishes residency in a country with which Romania does not have a double taxation avoidance agreement. Consequently, in such a scenario, the Romanian citizen must continue to declare foreign-sourced income in Romania and provide proof of taxes paid abroad to avoid double taxation.
In many instances, the ties between Romanian citizens—even those with tax residency elsewhere—and Romania are not entirely severed. Acquiring or, conversely, selling real estate in Romania brings the issues of tax residency and taxing jurisdiction back into play.
Nor should one overlook the fact that taxation rules differ where multiple tax systems intersect. Take the example of inheritances and gifts: as a general rule, these are not taxable in Romania. However, accepting an inheritance or receiving a gift entails significant tax liabilities for American or French citizens, making it advisable to discuss the available options beforehand.
Our practical experience shows that many other scenarios are possible. For instance, some Romanian citizens have acquired tax residency in other countries—which they subsequently left for various reasons to return to Romania—without regularizing their tax status. Consequently, the state where tax residency was established often claims taxing rights (for example, in cases involving the acquisition of real estate).
This matter is of critical financial importance, given that a punitive tax rate of 70% on income from unidentified sources has been in effect in Romania since July 1, 2024.
Against this backdrop, a proactive approach—adopted prior to the initiation of any tax audit—is highly advisable. Such an approach, undertaken with the assistance of a tax law specialist, allows for the definitive determination of tax residency, the identification of applicable statutory or treaty provisions, and the outlining of the potential tax treatment. Furthermore, this proactive strategy enables voluntary compliance measures that can help avoid or mitigate additional tax liabilities otherwise assessed by the National Agency for Fiscal Administration (ANAF). Technological advancements now allow for such clarification meetings with lawyers to take place remotely, regardless of physical distance.
Costaș, Negru & Asociații offers a comprehensive range of legal services in this field, designed to clarify issues regarding tax residency determination and the taxation of individuals, the avoidance of double taxation, and—where appropriate—the administrative and judicial challenging of decisions assessing additional tax liabilities. The firm’s lawyers also provide representation in dealings with all tax authorities in Romania.
The tax practice of the law firm Costaș, Negru & Asociații is led by Cosmin Flavius Costaș, PhD, a professor at the Faculty of Law of Babeș-Bolyai University in Cluj-Napoca and Vice-Chair of the Supervisory Board of the International Fiscal Association – Romania Branch.
Costaș, Negru & Asociații is a law firm with offices in Cluj-Napoca, Bucharest, and Arad, providing legal assistance, representation, and consultancy across various practice areas through a team of 16 lawyers and consultants. Details regarding the legal services offered and the team composition can be found on the website https://www.costas-negru.ro.
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