The year 2024 bought significant changes to the rent taxation system in Romania. Understanding these new regulations is crucial for property owners to ensure they apply the correct tax treatment to rental income generated in 2024 and fulfil their annual tax return preparation and filing as per the new regulations.
This article outlines the key changes in the tax regime for rental income and offers practical advice for landlords to navigate the new landscape effectively.
Starting January 1, 2024, several important modifications have been introduced to the rent taxation system in Romania. Here are the main points you need to know:
We explain below in more detail of these tax changes and their implications for property owners in 2024.
One of the most notable changes in the rent taxation regime is the reduction in the lump-sum deduction rate. Previously – more exactly before 2023 – landlords were allowed to deduct 40% of their annual rental income as a lump-sum, to cover for regular expenses with the property. This deduction was repealed in 2023, however, in 2023 any taxpayer still had the option of deducting the actual expenses incurred with the property (such as renovation expenses, property taxes, etc.). This allowed them to reduce the taxable income if they had significant expenses during the year.
Starting in 2024, the lump-sum deduction has been halved to 20%, while the possibility to deduct actual expenses was repealed. Therefore, in calculating the taxable income for year 2024, the taxpayers have no other option but to only deduct the 20% lump-sum.
This change means that landlords will see a higher portion of their rental income subjected to income tax (10%). Here’s an example to illustrate this:
If before 2024 a landlord earned an annual rental income of 20,000 RON, they could deduct 40% (before 2023), or even a higher amount (if they applied deduction of actual expenses). This means they could have deducted at least 8,000 RON for the tax calculation purpose. This left 12,000 RON or less as taxable income.
In 2024, with only 20% deduction allowed, only 4,000 RON can be deducted (no other option of expense deduction applicable). This results in a taxable income of 16,000 RON.
Tips for compliance: landlords should recalculate their expected taxes under the new regime to avoid surprises and have a better control on their cash-flow.
As already mentioned above, previously landlords could choose to deduct actual expenses incurred from their rental income. This option provided flexibility and could significantly reduce taxable income for those with high maintenance and operational costs. As of 2024, this option is no longer available, as it was repealed from the Romanian tax law.
The removal of actual expense deduction system simplifies the taxation process but may result in higher taxable income for some landlords. If before 2024 a landlord with 20,000 RON in rental income and 12,000 RON in actual expenses could deduct the full amount of expenses, reducing the taxable income to only 8,000 RON, this is not possible anymore. So, for those taxpayers with heavy operational and maintenance expenses the new tax regime could significantly impact their tax costs.
In 2024, landlords can only deduct 20% of the rental income, regardless of the actual expenses incurred.
Tips for compliance: In the 2024 tax return (for which the filing deadline is 25 May 2025), make sure you limit your tax deduction to the lump-sum of 20%, to apply the correct tax treatment. If this change impacts you significantly, you could find ways to minimize operational costs, since not all of them can be deducted anymore.
While actual expenses can’t be deducted, maintaining detailed records may still be important for other financial purposes.
As an alternative for your business activity, it may be worth investigating if moving your property/properties into a company may be a better business model that could help you keep tax costs under control. Companies typically have more flexibility in deducting a wide range of business expenses. This includes not only operational costs but also expenses related to property management, marketing, or other professional services.
The government has increased the minimum national gross income applicable in 2024, which affects the taxable thresholds for health insurance contributions. More precisely, for the first half of 2024, the minimum national salary was set at 3,300 RON per month.
In practice, as the income thresholds for calculating the health insurance contribution on certain personal types of income (including rental income) are established by reporting to the minimum national salary, this means that these thresholds have also increased for 2024.
The applicable thresholds for rent taxation in 2024 are:
Depending on where your annual rental income is situated, you will have to pay the health insurance contribution as 10% of one of the thresholds listed above.
As landlord, you need to be aware of these new thresholds to determine correctly your health insurance contribution obligations at the end of the year. Otherwise, if your tax planning is not done taking into account the correct tax regulations, you may run into a cash-flow problem.
Tips for compliance: Carefully monitor your rental income to know when you cross each of these thresholds, and have an idea of the health insurance contribution amount that will be due after year end. This will help budget in time for the health insurance contribution amount and have a good tax planning.
For landlords renting out properties to legal entities, the tax reporting and payment obligations were completely changed. As of 1 January 2024, the legal entity paying the rent is responsible for calculating, withholding, paying and reporting the income tax to the authorities.
This change practically allows the authorities to collect the income tax earlier, at the moment of the rent payment. The income tax is now withheld at each rent payment, and not at year end, when the landlord would declare and pay the income tax through the annual tax return.
Thus, as part of the rental contracts where the tenant is a legal entity and not an individual, the tax reporting obligations stay with the legal entity, while the landlord has no income tax reporting or payment obligations. The landlord’s obligation remains only to declare the rental income for health insurance contribution purposes, if the annual income reaches the minimum threshold, according to the rules described above.
Of course, the tax reporting process is simplified for the individual landlord, as it is the obligation of the legal entity paying the rent to handle the income tax calculation and reporting. The landlord must still declare rental income through the annual tax return, if it reaches the health insurance contribution threshold.
Tips for compliance: Ensure that legal entity tenants understand their tax withholding obligations, and stay diligent about your declaration obligations, to avoid penalties.
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