The legislative bill to simplify taxation on the capital market, namely reducing the rates of capital gains tax, has received final approval from the Romanian Parliament.

Last week, the Romanian Parliament has adopted the legislative proposal to simplify the taxation of investors in the capital market. The bill provides for withholding tax on capital gains for individual investors to be retained at source, with two tax levels. The first level refers to the 1% tax on the holdings over one year, while the 2nd level refers to a 3% tax on holdings held for less than one year, while losses won’t be compensated.

The obligation to calculate, withhold at source, declare and pay the tax will fall on the intermediaries and fund managers. The law would enter into force on 1 January 2023. This change marks further development and growth for the Romanian capital market, which will surely attract more investments after this news.

As a point of comparison, in Croatia, the capital gains tax is 10% for all holdings held for less than 2 years (recently changed from 12%) and drops to 0% after 2 years of holding the investments. At the same time, on the 10% tax, there is an additional surtax depending on where you live. For example, if you live in Zagreb which has an 18% surtax, the total tax you would have to pay if you held any of your investments for less than 2 years would amount to 11.8%.