Payroll in Romania
What tax considerations are there?
Personal Income Tax (PIT)
All Romanian residents living in the country are taxed on their worldwide income, apart from in cases where the salary is received from abroad for work carried out abroad; this is exempt. All foreign residents (regardless of whether they live in Romania) are taxed on income that comes from Romania, until such time that they become Romanian tax residents – in which case they are taxed on income from abroad too. Income tax is at a rate of 10%, regardless of salary, and this is paid in monthly instalments by the employer – after being withheld from employee salaries.
In addition to income tax, employees in Romania pay social contributions in the way of a social pension (25%) and a health fund (10%). Together with income tax, this means 45% of salaries are held back. In conjunction with this, employers must make their own contributions for staff; either 4% or 8% towards the pension (depending on the work sector), and 2.25% as a Labour insurance contribution.
Corporate Income Tax (CIT)
All Romanian companies and foreign companies operating in Romania must pay 16% profit tax rate. This applies to all companies apart from night clubs and gambling premises, which must either pay 5% on the revenue obtained, or 16% on taxable profit – whichever is higher.
There are also different corporate tax rates for micro-companies. A micro-company is one that had a maximum revenue of €1 million at the end of the previous year. These are subjected to 1% tax if there are any employees and 3% if there are no employees.
A company’s fiscal year does not need to align with the official financial year in Romania (1st January – 31st December). Annual profit tax returns are due by March 25th if the fiscal and financial years are the same, or the 25th of the third month after a company’s year end.
HR in Romania
What are the regular working hours in Romania?
The normal working week in Romania is 40 hours over a five day period (Monday to Friday), working from 9am until 5pm. Night shifts are usually 10pm to 6am. Law dictates that no employees can work more than 48 hours a week including overtime, unless they are below the age of 18. In this case the maximum is 30 hours a week, and six hours in any one day.
Vacation, maternity and sickness
There are 11 public holidays annually in Romania for which employees are given the day off fully paid. In addition to this, all employees are entitled to at least 20 days holiday a year, as well as supplementary days for personal reasons. These are 5 days for getting married, 2 days for a child getting married, and days in the event of the death of a family member.
Maternity leave in Romania is 126 calendar days. Usually, 63 days can be taken before the birth and 63 days can be taken after. 42 days after the birth of the child are compulsory however the rest does not need to be taken. All 126 days of maternity leave is paid at 85% of the average monthly income from the preceding six months.
In Romania employees are entitled to up to 5 days sick per year, for which they will be paid 75% of their salary. Any sick leave exceeding 5 days will be paid for by the state – for the maximum amount of time of 18 months.
Many companies in Romania have a 13th month scheme, which means employees get paid an extra month’s worth of salary as a bonus at the end of the year. This is not required by law though.
Unless an employee is in their probation period (up to 30 days for most employees, or up to 90 days for those in managerial positions), employers must give a minimum of 20 days notice for termination. The same applies to employees giving notice, unless they are a manager. In this case employers need to give at least 45 days notice.