Withholding tax Romania: which payments to non-residents are taxed
Withholding tax in Romania works through the payer. When a Romanian company pays a non-resident for something the Fiscal Code treats as income obtained from Romania, the Romanian company calculates the tax, withholds it from the payment, declares it and pays it to the budget. The non-resident receives the net amount. If the payer gets this wrong, the assessment lands on the payer.
The categories are listed in the Fiscal Code and cover, in practice: dividends from a Romanian company, interest, royalties, commissions, management and consultancy services, other services performed in Romania, income from independent activities carried out here, and income from immovable property located in Romania. A straightforward purchase of goods from a foreign supplier is not in the list. A management fee charged by a parent company is.
The domestic rate applied to most of these categories is 16%. That is the starting point, not the answer: a double tax treaty may reduce it or remove it entirely, and EU directives may exempt certain flows within a group. The consolidated Fiscal Code is published by ANAF.
The three questions that decide the tax
Every file we look at reduces to the same three questions, asked in this order.
What is the payment, in tax terms? Not what the invoice calls it. A payment described as a service fee may be a royalty; a cost recharge may be a management fee; a lump sum for software may be a licence or a purchase. Characterisation decides both the domestic treatment and the treaty article that applies.
Is there a treaty, and does it help? Romania has an extensive treaty network. Treaties allocate taxing rights and usually cap the Romanian rate on dividends, interest and royalties. The cap is only available with documentation.
Was the documentation in place before the payment? This is where most of the money is lost. A treaty rate applied without a valid tax residency certificate is a finding waiting to happen, and recovering an over-withheld amount later is a refund procedure rather than a formality.
Treaty relief and the residency certificate
The tax residency certificate is issued by the tax authority of the recipient’s state and confirms that the recipient is resident there for the purposes of the treaty. Romanian practice expects it to cover the year in which the income is paid, to be presented to the payer, and to be accompanied by a translation. Where the treaty or domestic rules require it, evidence of beneficial ownership is also part of the file.
Two practical rules follow:
- Ask for the certificate at contract stage, not at payment stage. Foreign tax authorities issue them on their own timetable, and a payment run does not wait.
- Keep the file, not just the certificate. During an inspection the question is not only whether a certificate exists but whether it existed at the relevant moment and whether it matches the person actually receiving the income.
Where no certificate is available, the domestic rate applies. That is a correct outcome, not an error — the error is applying the treaty rate and hoping the document arrives later.
Dividends, interest and royalties
Dividends. Distributions by a Romanian company to a non-resident shareholder are subject to dividend tax withheld at payment; the rate is 16% from 2026. A treaty may reduce it, and the EU parent-subsidiary regime can exempt the distribution where the holding percentage and holding period conditions are met and documented. The accounting side comes first: only distributable profit determined under the Romanian regulations can be paid out. The detail is in the guide to dividend tax in Romania.
Interest. Interest paid abroad, typically on shareholder or group loans, falls within the withholding categories. Two other regimes usually apply at the same time and are easy to forget: the interest limitation rules on deductibility and transfer pricing on the rate charged. A group loan can therefore be attacked on three fronts at once.
Royalties. The characterisation problem is at its sharpest here. Payments for the use of a trademark, a patent, know-how, a distribution right or software are treated differently from each other, and treaties carry their own definition of royalty which may be narrower or wider than the domestic one. We settle the characterisation in writing before the first invoice, because the pattern repeats monthly.
Services. Management and consultancy services are within the categories regardless of where they are performed. Other services fall in when they are performed in Romania. Group service recharges are consequently one of the most frequently reassessed items in Romanian inspections.
Permanent establishment: the alternative regime
Withholding at source and taxation through a permanent establishment are alternatives. Where a non-resident carries on activity in Romania through a fixed place of business, or through a dependent agent habitually concluding contracts, the profit attributable to that presence is taxed as Romanian business profit, with the corresponding registration, bookkeeping and filing obligations.
We describe the test as it is and apply it to the facts. We do not advise on arranging matters so that a Romanian taxable presence is avoided. Where a permanent establishment does exist, the practical consequence is a full Romanian tax file — corporate tax, accounting and the compliance cycle — rather than a line on a payment.
The VAT concept of a fixed establishment is a separate test with a separate answer. A company can have one and not the other. The VAT side is covered in the guide to VAT in Romania for foreign companies.
Declaring and paying: the monthly cycle and the D207
The tax withheld is paid to the budget on the monthly cycle, together with the return covering payment obligations to the state budget, by the 25th of the month following the payment. Annually, the payer files the D207 informative return, reporting per beneficiary the income paid to non-residents and the tax withheld.
The D207 is a reporting obligation in its own right, separate from paying the tax, and it is not a summary the accounting system produces by itself. It needs, per beneficiary, correct identification data, the correct income category and the amounts as actually paid. Because the data feeds exchange of information with other administrations, a mismatch between what Romania reports and what the recipient declared at home is visible on both sides. The exact filing term for the year concerned should be checked against the ANAF calendar, since the terms of the informative returns have been amended more than once.
Non-resident payers and recipients that need their own Romanian tax registration are registered through the dedicated procedure for taxpayers without a permanent establishment; where the file also involves VAT, it connects to VAT registration for non-residents.
What we do
We work on the whole chain rather than on the rate alone.
- Characterisation. We read the contract and the actual flow, and state in writing what the payment is for Romanian tax purposes and which treaty article governs it.
- Documentation. We list what must exist before the payment — residency certificate, beneficial ownership evidence, translations — and check it against the payment calendar.
- Calculation and reporting. The withholding is calculated per payment, declared on the monthly cycle and reported annually on the D207.
- Written positions. Where an outcome is uncertain, it goes into a written opinion with the counter-argument ANAF would make, so it can be handed to an auditor or produced during an inspection.
- Defence. Where an inspection has already raised the point, the work moves to ANAF inspections and appeals.
The errors we see most often
- Treaty rate applied without a certificate, or with a certificate covering the wrong year.
- Payments never analysed, because the invoice said “services” and nobody asked what the service was.
- Group recharges treated as cost transfers with no withholding analysis and no transfer pricing support.
- The tax paid but never reported, so the annual informative return does not match the payments.
- Beneficiary data taken from the invoice header rather than from the identification of the actual recipient of the income.
- Nothing withheld at all, on the assumption that the non-resident will tax the income at home. Domestic law does not work that way, and the payer carries the assessment.
