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8/8/2019 Double Taxation.CB

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Romania

&double taxation


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Contents

1. A history of tax

2. What double taxation means?

3. Romanian double taxationprevention

4. Convention between Romania

and Lithuania


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A history of tax

Tax has an extremely long-established history. ..

As a general rule, tax is the source that is best exploited bygovernment.

It is imposed on individuals and companies to finance servicesthat the State is obligated to provide and to meet its goals.

On extremely rare occasions, governments have used sourcesother than tax; for instance, income from natural resources.

However, as a general rule, most governments use the collectionof taxes as the main tool for financing their expenses.


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Tax is divided into two main categories, progressive and regressive

taxes.Progressive tax is graduated and its rate varies according to the

taxpayer's income.Regressive tax is a tax at a fixed rate irrespective of the taxpayer's

income.For example, sales tax is imposed on sales, at a fixed rate, on rich and

poor alike. It is regressive in that it is a tax that is proportionally greateron the income of a poor man than that of a rich man.


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Double taxation

Romania has signed a large number of Treaties for theavoidance of double taxation even before 1989. Partner-countries range from the United Kingdom and Germany to

Thailand, Ecuador, Kuweit etc.


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Romania Double Taxation PreventionTreaties

Romania is a signatory to a Treaty for the Prevention of DoubleTaxation with many countries all over the world. *

A Double Taxation Prevention Treaty, in principle, enables offsettingtax paid in one of 2 countries against the tax payable in the other, in

this way preventing double taxation.

Another important factor is the grant of an exemption or tax at areduced rate on certain receipts such as interest, royalties,dividends, capital gains and others that are connected with atransaction carried out between parties associated with the Double

Taxation Prevention Treaty.

When certain income is taxable under the Romanian Income TaxOrdinance but there is an exemption (reduced tax) under anyTaxation Treaty, the income is taxed, if at all, but only according tothe provisions of the Taxation Treaty.


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President of the Republic of Lithuania, received thehead of state of Romania and signed the agreement onavoidance of double taxation on 26 november 2001


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Convention between

Romania and Lithuania(art 2) The Republic of Lithuania and Romania,

desiring to promote and strengthen the economicrelations by concluding a Convention for the avoidanceof double taxation and the prevention of fiscalevasion with respect to taxes on income and on

capital, have agreed as follows:


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There shall be regarded as taxes on income and oncapital all taxes imposed on total income, on total capital, or

on elements of income or of capital, including taxes on gainsfrom the alienation of movable or immovable property, aswell as taxes on capital appreciation.

The existing taxes to which the Convention shall applyare in particular:

in the case of Romania:

-the tax on income derived by individuals;-the tax on profits;-the tax on salaries and other similar remuneration;

-the tax on agriculture income;-the tax on dividends;-the tax on building;-the tax on land;


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inthe case of Lithuania:

- thetax onprofitsof legal persons(juridini asmenpelnomokestis);

-thetax onincomeofnatural persons(fizini asmenpajammokestis);

- thetax onenterprisesusing state-owned capital(palkanos u valstybiniokapitalo naudojim);

- theimmovableproperty tax(nekilnojamojo turtomokestis);

- theland tax

(emsmokestis);


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(art 4) For the purposes of this Convention, the term "residentof a Contracting State" means any person who, under the laws

of that State, is liable to tax therein by reason of his domicileor any other criterion of a similar nature.

This term, however, does not include any person who isliable to tax in that State in respect only of income fromsources in that State or capital situated therein.

When an individual is a resident of both ContractingStates, then his status shall be determined as follows:


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(art 6) Income derived by a resident of a Contracting Statefrom

immovableproperty (including incomefromagricultureor forestry)situated intheother Contracting Statemay betaxed inthat otherState.

(art 7) Theprofits of anenterpriseof a Contracting Stateshall betaxableonly inthat Stateunless theenterprisecarries onbusiness in

theother Contracting Statethrough a permanent establishmentsituated therein.

( art 10 ) Dividends paid by a company which is a resident of a ContractingStatetoa resident of theother Contracting Statemay betaxed inthat other State.

(art 11) Interest arising ina Contracting Stateand paid toa resident oftheother Contracting Statemay betaxed inthat other State.


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(art 12-18) Commission androyalties arising ina Contracting Stateand

paidtoa resident of theother Contracting Statemaybetaxedinthatother State. (Andothers, like capital gains, independent personalservices, dependent personal services, directors` fees, artistesandsportsmes)

(art 19) Pensionspaidtoa resident of a Contracting Stateinconsiderationof past employment shall betaxableonlyinthat State.

(art 20) Salaries, wagesandother similar remuneration, other thanapension, paidbya Contracting State thereof toanindividualinrespect of servicesrenderedtothat State shallbetaxableonlyin

that State.


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(art 21) Paymentswhich a student, anapprenticeor a traineewho isor was

immediatelybeforevisiting a Contracting Statea resident of theotherContracting Stateand who ispresent inthefirst-mentioned Statesolelyfor thepurposeof hiseducationor training receivesfor thepurposeof hismaintenance, educationor training shall not betaxed inthat State,provided that such paymentsarisefromsourcesoutsidethat State.21

(art 22) Profesorsand reasearches. An individual who visitsa ContractingStatefor thepurposeof teaching and who isor wasimmediatelybeforethat visit a resident of theother Contracting State, shall beexemptedfromtaxationinthefirst-mentioned Contracting Stateonremunerationfor such teaching or research for a period not exceeding two yearsfromthedateof hisfirst visit for that purpose. 22


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(art 25) Elimination of double taxation

In the case of Romania double taxation shall be eliminated asfollows:

Where a resident of Romania derives income or ownscapital which, inaccordance withthe provisionsof thisConvention, may be taxed inLithuania, Romania shall allow:

asa deduction from the tax on the income / capital of that resident,

an amount equal to the income tax paid in Lithuania

In the case of Lithuania double taxation shall be eliminated asfollows:

Where a resident of Lithuania derivesincome or ownscapital which, inaccordance withthisConvention, may be taxed in Romania, unlessa more

favourable treatment isprovided in itsdomestic law, Lithuania shall allow:

asa deduction from the tax on the income / capital of thatresident, an amount equal to the income tax paid thereon in Romania


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(art 30 ) The Convention shall enter into force on the date of the later of thenotifications indicating that the constitutional requirements for the entryinto force of this Convention in each Contracting State have been complied

with.(art 31 ) This Convention shall remain in force until terminated by a ContractingState. Either Contracting State may terminate the Convention, throughdiplomatic channels, by giving written notice of termination at least sixmonths before the end of any calendar year.


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Funny tax picture


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Sources

http://www.worldwide-tax.com/

http://www3.lrs.lt/pls/inter2/dokpaieska.sho

wdoc_l?p_id=168429


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Thank you for your attention!

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