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Changes in Double Tax Relief Supports Romanian Tax Residents

26 Jul 2010

Emergency Government Ordinance No. 58/2010 introduced specific criteria that mean Romanian tax residents can obtain double tax relief on the taxation of several income/revenue sources. These changes entered in to force on 1 July 2010. Taxand Romania details the changes below.

For taxes paid in a foreign country, a Romanian taxpayer is entitled to double tax relief in Romania (in the form of a tax credit) if provisions of the Double Tax Treaty ("DTT") concluded between Romania and that foreign state is applicable. The payment of the foreign tax must be certified through a document issued by the competent tax authority of that foreign state. Before the introduction of this requirement, the tax credit could be obtained irrespective of whether the provisions of the DTT concluded by Romania with that foreign state were applied or not.

Tax losses incurred starting 2010 by Romanian legal entities through permanent establishments located in member states of the EU, EFTA or in a state with which Romania has concluded a DTT can be offset against any taxable profits of the company, from any source. The tax losses incurred through such permanent establishments before 1 January 2010 could be credited only from the profits obtained by the permanent establishment from the same source. Such losses could be carried forward only for the next five consecutive years. This rule continues to apply to losses obtained through permanent establishments located in non-EU, non-EFTA or countries which do not have concluded a DTT with Romania.

Taxand's Take

These changes allow for the recovery of tax paid by a Romanian tax resident in a foreign state so long as the DTT concluded between Romania and that foreign state is applicable. Romanian taxpayers working abroad should review their situation to understand if they are eligible for relief and ensure they are benefiting from these changes.

Your Taxand contacts for further queries are:
Cristian Radulescu
T. +40 21 316 06 45

Manuela Licu
T. +40 21 316 06 45

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