The Romanian Finance Authorities are a law unto themselves. This is no more apparent than in the field of the prevention of Double Taxation. Treaty obligations do not necessarily apply in all cases and my comments below deal only to payments made to companies based in the EU.
We are often asked by clients why they cannot pay money abroad (inside the EU) without having to make a retention for tax which is payable here in Romania and paying it over to the Romanian tax authorities. The Ministry of Finance refuse to accept that the transfer of funds to an EU person in another EU country should not require the obtaining of a certificate of tax residency as is required for a non EU country.
The question therefore arises as to how to solve this problem. For the companies who are resident in the EU this is often served by obtaining from their own tax authorities a certificate which confirms that the company is resident in that country and pays it’s taxes.
However, for some countries this can be more complicated. For example the tax authorities in the United Kingdom will only issue a certificate after the end of the tax year. In some circumstances they will issue an interim certificate. The result of this is that a payment made outside of Romania will still have to have the tax deducted and paid to the Romanian authorities which will then have to be reclaimed from the tax authorities after the year’s end.
There is the question as mentioned above about the legality of the Romanian tax authorities requirement. As a member of the EU it is a requirement that all business persons inside the EU are treated equally giving a level playing field as far as possible. There is no requirement that when you make a payment inside Romania that the Romanian company has to deduct tax and pay it to the Romanian tax authorities. As mentioned above there should therefore be no reason for them to require evidence of tax liability when a payment is made to a company based in the EU. This is clearly in breach of the EU treaty obligations which Romania agreed to adhere to when it joined the European Union in 2007.
Unfortunately, no-one seems to have challenged the Romanian authorities in Court on this matter and therefore the Romanian authorities continue to apply their rules. Until someone does so then the Romanians will by continue to apply their own rules make life unnecessarily difficult for foreign companies and individuals registered outside Romania who receive payments from Romania.