• Regardless of the number of leases, individual owners can no longer deduct any expenses to determine taxable rental income
• Rental income will be taxed at 10% from 2024 after a flat rate of 20% costs
• The obligation to register lease agreements with ANAF within 30 days from the date of conclusion of the agreement has remained.

In search of the best ways to multiply their savings, more and more Romanians are thinking about investing by buying real estate to rent it out for a stable and predictable income. This option is perceived as very safe and can even be profitable in the long run. There are also cases when investors resort to loans and credits, bank rates are paid precisely from rental income, so that after paying off the debt, the investors become owners.

It must be taken into account that from these incomes, natural persons who own the property provided for rent pay taxes, which must be annually declared and paid to ANAF. Recently, the tax authorities made major changes in the taxation of rental income. These changes are included in the emergency decree 115 published on December 15, 2023, intensively publicized through the prism of important fiscal changes prepared by the government to ensure the reduction of the budget deficit.

Under these changes, individuals who receive rental income from self-owned property will no longer be able to report that income under the self-employment income category in the real system. More specifically, regardless of the number of leases in force, individuals will no longer be able to deduct any expenses to determine taxable rental income.

Rental income up to 2024 will be taxed at 10% after deducting a flat rate of 20% expenses without the need to document these expenses. Basically, the tax rate is 8%, which is applied to the total annual income of the owner. In the case of receipt of income from rent by entities that are required to keep accounting records, the tax is withheld by the payer.

Under the previous rules, which were in effect until 2023, individuals who received rental income taxed at the 10% rate could elect to deduct certain expenses when determining tax based on after-tax accounting data. to register In addition, natural persons who received rental income from the conclusion of more than five lease agreements were classified for tax purposes in the category of income from independent activities with the obligation to keep accounting records and prepare tax records and had the opportunity to deduct certain expenses for determining the appropriate tax. The authority has lifted these rules for rental income received from 2024.

We remind you that tax payers must pay rent income tax to ANAF by May 25 of the year following the year of receipt of income, in accordance with current rules. These incomes are declared in a single declaration. In addition, taxpayers are required to register rental agreements with ANAF within 30 days from the date of conclusion of the agreement or the appearance of a change in the agreement, such as a change in the rental price or rental period.

The tax legislation provides for special taxation rules for income received from the rental of premises in real estate for tourist purposes and income from the rental of agricultural property from personal inheritance.

We also remind you that the authorities introduced an additional tax by Law 296/2023, which applies from January 1, 2024, for people who own residential buildings located in Romania, in the amount of more than 2,500,000 lei. The tax will be 0.3% and will be applied to the difference between the taxable value notified by the authorities in the tax ruling and the maximum amount of 2,500,000 lei. The tax is declared and paid by April 30 of the year for which it is due.

Given the large impact of these changes on taxpayers who own property and receive rental income, individuals are encouraged to review the legislative changes and assess the impact of these changes on their own investments.

The article is signed by Corina Mindou, Partner, Income Tax and Social Contributions, EY Romania and Catalina Butan, Manager, Income Tax and Social Contributions, EY Romania

Article supported by EY Romania