Romanian Tax Rules On Non-Residents Challenged

By Lorys Charalambous, Tax-News.com, Cyprus

02 December 2014

The European Commission has asked Romania to stop the discriminatory tax treatment of non-resident individuals receiving income from Romania.

Currently, non-resident individuals based in a European Union or European Economic Area state who lack a permanent establishment (PE) in Romania are unable to deduct business expenses from their tax liability. However, residents of Romania receiving comparable income can make a deduction for expenses and are therefore taxed only on the net amount.

The higher burden on non-resident individuals without a PE in Romania constitutes an unjustifiable restriction on the freedom to provide services and on the free movement of capital, the Commission said, as in previous cases of the European Court of Justice in Gerritse (C-234/01), FKP Scorpio (C-290/04) and Centro Equestre (C-345/04).

In its reasoned opinion, the EC has therefore requested that Romania amend its rules in order to comply with EU law. It says that the matter may be referred to the ECJ unless a satisfactory response is received within two months.

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