Income from electricity production, including renewable energy sources such as solar, wind, and hydro, is subject to specific taxation rules

In Romania, income from electricity production, including renewable energy sources such as solar, wind, and hydro, is subject to specific taxation rules. Here’s a detailed overview of the taxes applicable to income from electricity production:

1. Corporate Income Tax

• Rate: The standard corporate income tax rate in Romania is 16% on the net profit. Companies involved in electricity production are generally subject to this tax.
• Calculation: Net profit is calculated as total income minus deductible expenses. This includes revenue from electricity sales, including any subsidies or green certificates, less operational costs, depreciation, and other allowable deductions.

2. Microenterprise Tax

• Eligibility: If a company qualifies as a microenterprise (annual revenue under €1 million), it may be subject to the microenterprise tax instead of the standard corporate income tax.
• Rate: The microenterprise tax rate is:
  • 1% if the company has at least one employee.
  • 3% if the company has no employees.

3. Value Added Tax (VAT)

• Standard Rate: The standard VAT rate in Romania is 19%. Electricity producers typically charge VAT on their sales of electricity unless the transaction is exempt or qualifies for a reduced rate under specific circumstances.
• VAT Registration: Companies must register for VAT if their annual turnover exceeds the threshold of €88,500 (RON 300,000).

4. Specific Taxes for Electricity Producers

• Renewable Energy Tax (Green Certificate Tax): For producers of renewable energy, income from the sale of green certificates is also subject to taxation. This income is treated as part of the company’s overall revenue and taxed at the standard corporate income tax rate.
• Excise Duty: Some forms of energy production may be subject to excise duties, but renewables like solar and wind are typically exempt.

Summary

Income from electricity production in Romania is mainly subject to the standard corporate income tax rate of 16% or the microenterprise tax if applicable. Additional taxes include VAT, withholding tax on dividends, and personal income tax for individuals. Renewable energy producers may benefit from specific incentives and exemptions, though they must navigate various tax compliance obligations to optimize their financial outcomes.

For precise tax planning and compliance, it is advisable to consult with a tax professional familiar with Romania’s energy sector and current tax regulations.