Tax time! 27 May 2024 is the deadline for the single declaration on income tax and social contributions. What's new in this year's statement - you may read in the new Tax & Training

a. Income from self-employment taxed in real system, based on accounting records

Taxpayers must declare through the single declaration both the net income realised in 2023 and the estimated net income for 2024. Thus, individuals who earn income from self-employment taxed in the real system must take into account some rules that have changed in 2024, regarding expenses that can be deducted from gross income:

• Health insurance contribution (CASS) due according to the new rules, less the difference in CASS due up to the level corresponding to the calculation base equal to 6 gross minimum wages per country in force at the deadline for submitting the estimated annual income declaration, is deducted from the income tax calculation base (CASS was not deductible from the net taxable income in 2023);
• sponsorship and patronage expenses become non-tax deductible (in 2023 they were subject to limited deductibility);
• The equivalent value of subscriptions that include the right to use sports facilities, paid for the personal purpose of the taxpayer is a deductible expense within the limit of the RON equivalent of EUR 100 annually (instead of EUR 400 annually in 2023) for each person;
• The expenses with the acquisition cost of fiscal electronic cash registers are tax deductible from 2024 and can no longer be deducted as a tax credit from the income tax;
• Expenses recorded in the books, regardless of their nature, subsequently proven to be related to acts of corruption, according to the law, are also considered non-deductible.

Also, tax losses carried forward will be offset from net revenues of 2024 and future tax years only up to 70% of net annual income. Tax losses incurred from 2024 onwards are carried forward only for 5 consecutive years instead of 7 years as previously regulated.

Also, as a novelty, IT activities can no longer be taxed at income norms from 2024. IT PFAs must estimate the net annual income for 2024 and include it in the single tax return due by 27 May 2024.

Beneficiaries of income from sports contracts (assimilated to income from independent activities) have not to fill in the sections regarding realized income / estimated income in the single tax return, because their due income tax is calculated and withheld at source.

Individuals earning income from self-employment taxed on the income norms will only fill in the section dedicated to estimated income for 2024, unless they started their activity in December 2023, in which case they will also fill in the section dedicated to income earned in 2023.

Also, taxpayers who obtain income from self-employment will fill in the fields dedicated to public pension contribution (CAS) as we will show below, in the section dedicated to social contributions, the rules being the same, both in 2023 and in 2024. Some situations entail the obligation to fill in the single declaration by the beneficiaries of income from sports activities (assimilated to income from independent activities), in order to regularize the CAS withheld at source.

Regarding CASS, the rules are different for 2024 compared to 2023, so filling in the CASS section for 2023 is different from how to fill in the CASS section estimated for 2024, as we will show in the section dedicated to social contributions. Some situations entail the obligation to fill in the single declaration by the beneficiaries of income from sports activities (assimilated to income from independent activities), in order to regularize the CASS withheld at source.

b. Income from intellectual property rights (e.g. when we write an article, a book, a song, innovate and register income from a patent, or deliver a course, etc.)

For these types of income, the single return is submitted only if the tax is not withheld at source. Withholding tax occurs when the payers of the income are legal entities or other entities that have the obligation to keep accounting records, and the income beneficiary has not opted for the calculation of the tax in the real system. Both the sections dedicated to income earned in 2023 and estimated revenue for 2024, as well as the sections on CAS & CASS due in 2023, respectively CAS and CASS estimated for 2024 are to be filled in.

The income tax is calculated by applying a rate of 10% on the difference between gross income and a flat rate of expenses of 40% from the gross income, or on the net income determined in the real system, if the individual opts and keeps the accounting records in the single entry for income and expenses.

As a novelty for 2024, if the income recipient opts for real taxation system, he/she will be entitled to deduct the CAS due for this type of income from the taxable base. Please be reminded that CAS is not due to income from intellectual property rights derived by taxpayers who also obtain salary income or who are already retired.

c. Proceeds from the disposal of the use of property (i.e., rental income, e.g. when we rent an immovable property or a car)

For 2023, income tax is calculated by applying the 10% rate on gross income, without any deduction. 

The following represent exceptions from this rule:

• Landlords with less than 5 leases at the end of 2022, who opted for real taxation, landlords who, at the end of 2022, had income from more than 5 rental contracts and landlords who rented more than 5 rooms for tourism purposes (in buildings other than those in specialized reception units) – for them, the calculation of the income tax for 2023 is done in the real system, similar with the rules for income from self-employment – the single declaration is filled in similarly to income from self-employment.
• Landlords who rent between 1 and 5 rooms for tourism purposes (in buildings other than those in specialized reception units) – for them the tax is calculated based on income norms – the single declaration is filled in only under the heading for realized income (not also for estimated income).
• Landlords who obtain income from renting agricultural plots of land, for which the tax in 2023 is calculated as 10% of gross income minus the flat rate of expenses of 40% of income, the tax being due by withholding tax – for this income, the fields dedicated to the realized / estimated income in the single declaration are not filled in.

For 2023, landlords will fill in the headings dedicated to CASS from types of income other than salaries, if the cumulated income from these other types of income (including rental income for 2023) exceeded 6 minimum wages in 2023 or if they are below this threshold, in certain conditions. Details are presented in the section of this article dedicated to social contributions.

For 2024,

• The net annual rental income, other than that paid by legal entities or other entities that have the obligation to keep accounting records, from the lease of agricultural plots of land, as well as from the rental for tourism purposes of rooms located in personal dwellings, is established by deducting from gross income the expenses determined by applying the 20% rate on gross income. For this income, owners shall fill in the single return the heading on estimated income from disposal of the use of goods for 2024.
• Revenues from more than 5 rental contracts at the end of 2023 are subject to the same rules for determining annual net income based on the 20% flat rate deduction (they are no longer taxed in the real system, as income from independent activities).
• The possibility to calculate net income in the real system and, correspondingly, to carry forward tax losses is abolished. Landlords must declare the estimated annual income through the single return only if the tenant is not a legal entity or other entity obliged to keep the books. The loss carried forward, not compensated with taxable net income in 2023, as well as the tax loss recorded in tax year 2023, represents the final loss of the taxpayer who had opted for real taxation in 2023.
• Starting with 01.01.2024, the obligation to calculate, withhold and pay income tax is introduced  for rental income, other than those from the lease of agricultural plots of land and from the rental for tourism purposes of rooms located in personal dwellings, paid by legal entities or other entities that have the obligation to keep accounting records. The owner does not declare these incomes in the single declaration, under the estimated income heading for 2024, but will fill in the heading related to the estimated CASS for other types of income than those from salaries or from self-employment.

For 2024, the owners will fill in the headings dedicated to CASS estimated from other types of income than from salaries and other than income from independent activities, if the income from these other types of income (including the estimated rental income for 2024) exceeds 6 minimum wages in the economy or if this ceiling is not exceeded, in certain conditions. Details in the section dedicated to social contributions.

d. Dividends

Dividends distributed and paid during 2023 were taxable at the rate of 8%. The tax is paid by withholding at source, the tax being final, so for dividends derived from Romania, the single declaration is not filled in in the income tax section, but, possibly, they are taken into account in the calculation of CASS.

Dividends derived from abroad, however, are declared by Romanian tax residents under the heading of income from abroad. For example, employees benefiting from stock option plan schemes, who received dividends during 2023 from shares held with the employer or a firm affiliated with the employer, or individuals who invested on stock exchanges abroad and received dividends in 2023 for shares held in portfolios at foreign companies / funds,  must declare them in the single declaration. The tax paid abroad, according to the double taxation conventions to which Romania is a party, can be deducted as a tax credit (generally, double tax treaties provide for this method of avoiding double taxation for passive income).

e. Capital gains from trading shares or derivatives

The single return must also be filed if the taxpayers derive gains or losses from the transfer of securities and any other transactions with financial instruments, including derivatives, as well as from the transfer of investment gold. In both 2023 and 2024, gain/loss on the transfer of securities shall be calculated, as appropriate:

• on the date on which the transaction is concluded, on the basis of supporting documents, by the intermediary if the transaction is carried out through an intermediary, or
• on the date of payment of the transaction price, on the basis of supporting documents, by the recipient of income, if the transaction is not carried out through an intermediary.

From 2023 onwards, intermediaries withhold the income tax at source, the tax being final. Also, the tax rate decreased in 2023 from 10% to 1% or 3%, depending on the duration of holding the traded securities (above or below 365 days), when trading through an intermediary. In order to determine the period in which they were held, securities and financial instruments are considered to be alienated/redeemed in the same order in which they were acquired, respectively first in – first out (FIFO), on each symbol. For the calculation of gains, the income tax is determined by applying the weighted average price method, including the costs related to the transfer/operation, on each symbol, regardless of the holding period. Losses arising from transfers of securities and derivative transactions carried out through intermediaries shall not be carried forward or set off, representing definitive losses of the taxpayer.

Therefore, starting with 2023, gains / losses from transactions made through intermediaries are not declared in the single return under the heading for  realized income / estimated income, their taxation being made by intermediaries, the income tax withheld at source being final. The intermediaries defined according to the relevant legislation, investment management companies, self-managed investment companies, alternative investment fund managers can be both Romanian tax residents and non-residents who have a permanent establishment in Romania.

Only for transactions that are not made through an intermediary, the taxpayer declares in the single return its annual income (cumulated gains and losses for the whole year from transactions in securities, influenced by losses brought forward, if applicable) and the related income tax, the tax being computed as 10% of the annual net gain. The same rules apply to gains from the transfer of investment gold, as defined by law.

f. Transactions with cryptocurrencies

Gains from cryptocurrency transactions are also to be declared through the single declaration. The gain from the transfer of virtual currency equals the sale price minus the purchase price (including directly related transaction costs). The gain below 200 lei/transaction is not taxed, provided that the total gains from the transfer of virtual currency in a fiscal year do not exceed 600 lei. The rules are unchanged since 2019.

Tax residents in Romania declare both Romanian and foreign sourced income. For foreign sourced income, taxpayers include in their return both foreign income and tax paid in the source state and apply the double taxation avoidance method from the convention concluded between Romania and the source state (i.e. credit method or exemption method).

We will not declare in the single declaration the salary income obtained from a non-resident employer, for work carried out abroad, for which the right of taxation belongs to the foreign state, which is considered the source state of these salary incomes.

Non-residents have the obligation to declare the income derived from Romania as the source country, when Romania has the right to tax according to domestic legislation, and the tax is not calculated and is not paid by withholding at source. If the tax is due only in the country of residence, according to the conventions, the non-resident submits the single declaration and attaches the tax residence certificate to prove the reason for declaring zero tax payment in Romania. If, however, Romania has the right to tax income according to conventions, or there is no such convention, then the tax is due in Romania.

In terms of social contributions, we have different income ceilings for which they are due, and different calculation bases in 2023 and 2024.