Double Taxation Avoidance with the USA

If you are foreign investor in Romania (legal or natural person) you should be aware of the double taxation treaties that Romania has signed so that not to pay taxes in more than one country.

            Romania has been signing this kind of treaty since before 1989. This is also the case for the United States of America. These two Contracting Parties have signed such a convention in 1974.

            This Treaty refers to the following types of taxes which are under Romanian tax law: profit tax for mixed companies (Romanian and foreign); income tax obtained from agricultural activities; rentals; nonresidents; wages, salaries, fees, copyrights, and income from any other source received by individuals; enterprises other than mixed companies or state enterprises.

            In the case of the United States, the Federal income taxes imposed by the Internal Revenue Code (other than social insurance taxes). This enumeration is not limitative.

            Income from immovable property, including royalties and other payments in respect of the exploitation of natural resources and gains derived from the sale, exchange, or other disposition of such property or of the right giving rise to such royalties or other payments, may be taxed by the State in which such immovable property or natural resources are situated.

            In the case of dividends paid by a corporation of one of the Contracting States to a resident of the other Contracting State these may be taxed by both Contracting States.

            However the rate of tax imposed by the first-mentioned Contracting State on such dividends shall not exceed 10 percent of the gross amount of the dividend.

            Industrial or commercial profits of a resident of one of the Contracting States shall be exempt from tax by the other Contracting State unless the resident has a permanent establishment in that other Contracting State. If the resident has a permanent establishment in that other Contracting State, tax may be imposed by that other Contracting State on the industrial or commercial profits of the resident but only on so much of them as are attributable to the permanent establishment.

               This Convention for the Avoidance of Double-Taxation also contains stipulations on the taxation of capital gain, independent professions, pensions etc.

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The main management structure of the company in Romania is the general meeting of associates / shareholders. The constitutive act establishes the rules for convening and adopting decisions and whether the exercise of the vote can be delegated by special mandate by the associate / shareholder who cannot take part in the meeting. In the limited liability company, each shareholder entitles the holder to one vote in the respective meeting. The general meeting of associates has the following main obligations: ✓ to approve the annual financial statement and to establish the distribution of the net profit. ✓ to appoint the administrators and the censors, to revoke / dismiss them and to discharge them, as well as to decide to contract the financial audit, when it is not obligatory, according to the law; ✓ to decide the pursuit of the administrators and censors for the damages caused to the company, designating also the person in charge to exercise it; ✓ to modify the constitutive act.
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The limited liability company is the most common form of company in Romania, being the legal entity that best serves the interests of investors both from the point of view of the reliability of the activity, and from the perspective of its management. The limited liability company is abbreviated "SRL" in Romania and is the equivalent of the American limited liability company Limited Liability Company (abbreviated to LLC) or the German economic structure "Gesellschaft mit beschränkter Haftung" (abbreviated to GmbH), or the structure called "limited" , the structure used in most Latin American states.
The limited liability company is characterized by:
✓ the character intuitu personae, which means that this economic structure is based on the trust between the associates;
✓ the division of the share capital into fractions called shares, which cannot be negotiable securities;
✓ the liability of the associates is limited to their contribution to the share capital.
The limited liability company may also have a single partner, natural or legal person, of Romanian or foreign nationality, who will be the owner of all shares. Instead, the maximum number of associates is 50 people.
At present, the Romanian law no longer conditions the subscription and payment of a certain amount as share capital.
Through registration, the company acquires legal personality, becoming, under the law, a collective subject of law. The conclusion given by the judge is sent, ex officio, to the Official Gazette of Romania for publication at the expense of the company and to the Financial Administration in whose territorial area is the main headquarters of the company for fiscal registration, mentioning the registration number in the Trade Register .

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