Romania Tax Treaties with China

Email: buh4ww@evershinecpa.com
The Engaging Manager from Headquarter
Ms. Anna Wang, Speak Romanian English, and Chinese.
skype: burlinna

CN-Q-10:

China Parent Company, can apply for zero tax rate without PE under DTA in Romania?

CN-A-10:

Yes.
China has DTA with Romania, and if China Legal Resident company is without PE (Permanent Establishment), it will be deemed as “non-Romania Domestic Sourced Income”.
That means Romania will levy zero-tax.
However, China Legal Resident company still need to send zero-tax application to Romania Tax Bureau for being approved.

CN-Q-20:

When China Parent Company as an Investor, setup a Romania subsidiary, and provide services from China to Romania Subsidiary, can apply for zero tax rate without PE under DTA in Romania?

CN-A-20:

According to DTA Article 5 item 7, a Romania subsidiary will not be treated as PE of China Parent company as an investor because it is a separate legal entity.
That means if a Romania Subsidiary pay service fee to China Parent Company through service contract signed between subsidiary and China Parent company
as an investor, China Parent Company can apply zero tax.As for if paid amount being reasonable, it will get involved TP (Transfer Pricing) judgement by Romania Tax Bureau.

CN-Q-30:  

What is the procedure for Romania to apply for zero tax rate under DTA without PE?

CN-A-30:

Fill in the form for application for the certificate attesting the tax paid in Romania by foreign legal persons, 0% shall be filled in in column 3 “Tax rate”.
Application for the issuance of the certificate of tax residence in order to apply the Convention/ Agreement for the avoidance of double taxation.
The certificate shall be issued by the competent tax authority.

CN-Q-40:

When China Resident company having Romania domestic sourced income, what are the withholding tax rates for various incomes in Romania?

CN-A-40:

China has DTA with Romania, and if you are with PE (Permanent Establishment) in Romania, your income will be considered as Romania domestic sourced income.
As for levying Tax Rate, please be aware:
if Romania Tax rate > DTA Rate, adopt DTA Rate; if Romania Tax rate < DTA Rate, adopt Romania Rate.

If DTA applied, the DTA rates between China and Romania are as below:

*The withholding tax rate under domestic law may apply rather than the treaty rate where the domestic law rate is lower than the treaty rate.

CN-Q-50

When China Tax Resident having Romania domestic sourced income, what is Romania’s application procedure based on the DTA preferential tax rate?

CN-A-50:

Fill in the form for application for the certificate attesting the tax paid in Romania by foreign legal persons.
Application for the issuance of the certificate of tax residence in order to apply the Convention/ Agreement for the avoidance of double taxation. The certificate shall be issued by the competent tax authority.

Summary of TAX TREATY between Romania and CHINA

The Government of The People’s Republic of China and Romania concluded and signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Double Taxation Agreements, DTA), on 4 July 2016 and takes effects from 1 January 2018.

Permanent Establishment

Article 5 states the term permanent establishment (PE) means a fixed place of business which generally includes the followings:

*A place of management

*A branch

*An office

*A factory

*A workshop

*The furnishing of consultancy services through employees or other personnel for periods aggregating more than 183 days within 12 months period.

Withholding Tax

*Article 7 of DTA between Romania and China explained, Romania may not tax payments on business profits rendered by China corporation unless it is attributable to the permanent establishment situated in the relevant territory.

*In Article 10, dividends paid by Romania company to a resident of China shall be charged at 3%. An exemption applies to dividends paid to an entity wholly or mainly owned (where ownership exceeds 50%) by China.

*Article 11 states that interest arising in Romania may be taxed in Romania according to the laws applicable in Romania, the tax so charged shall not exceed 3% of the gross amount of the interest.

*Article 12 explained royalties means payment for (a) the use of, or the right to use, any copyright of literary, artistic, or scientific work including cinematograph films and films or tapes for radio or television broadcasting, any patent, trademark, design or model, plan, secret formula, or process; (b) the use of, or the right to use, industrial, commercial, or scientific equipment; or (c) information concerning industrial, commercial or scientific experience.

*Technical services are covered by the business profits in Article 7. Romania corporations may not tax payments for technical services rendered by a China enterprise unless it is attributable to PE. Technical services rendered in an independent capacity should be covered in Article 14 (see professional services) instead.

*A professional service or other activities provided by individuals of an independent character was explained in Article 14. Romania corporations may not tax payments for professional service rendered by a China resident unless the China resident has a fixed place or stay in Romania for 183 days or more. An independent activity includes physicians, lawyers, engineers, architects, dentists, and accountants.

Elimination of Double Taxation

Article 23 of the DTA states that double taxation shall be eliminated by allowing tax credit to be made available to the home resident territory. It shall be credited against the tax levied in the first-mentioned territory on that resident. However, the amount of credit shall not exceed the amount of the tax in the first-mentioned territory.

Exchange of Information

Article 27 states that the competent authorities of the territories shall exchange such information (including documents or certified copies of the documents) relevant to the provision of this Agreement.

Please be aware of below Warning:
The above contents are digested by Evershine R&D and Education Center in October 2021.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.

Contact Us

Bucharest Evershine BPO Service Limited Corp.
Email: buh4ww@evershinecpa.com
The Engaging Manager from Headquarter
Ms. Anna Wang, Speak Romanian, English and Chinese.
skype: burlinna

or
For how to exchange data files between your Finance Accounting System and Evershine Cloud Accounting Information System, please send an email to HQ4buh@evershinecpa.com
Dale Chen, Principal Partner/CPA in Taiwan+China+UK will be accountable for your case.
LinkedIn address: Dale Chen

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(version: 2022/03)

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