Company Cars in Romania: What Employers and Employees Need to Know

If your business in Romania provides cars to employees, or you're an employee who uses a company vehicle, you need to understand the tax implications. The rules around company cars are set out in the Romanian Fiscal Code and are relatively straightforward once you know the basics. This guide explains how the benefit is taxed, what employers can deduct and how fuel costs are handled.

When is a car considered a company car?

A company car is any vehicle owned or leased by the employer and made available to an employee for use, whether for business, personal trips or both. The tax treatment applies regardless of whether the car is used only occasionally for private purposes. Even if the employee uses the car mainly for work, the simple fact that it is available for private use creates a taxable benefit.

How is the benefit in kind calculated?

The private use of a company car is treated as a taxable benefit in kind for the employee. The monthly taxable value is calculated as a percentage of the car's purchase price, including VAT. The percentage depends on the car's CO2 emissions. For cars with emissions up to 130 grams per kilometre, the monthly benefit is 1.5% of the purchase price. For cars with emissions above 130 grams per kilometre, it is 1.7%. There is also a minimum taxable amount, which means that even for a relatively cheap car, the benefit cannot fall below a certain threshold set by law. This minimum is updated periodically, so it is worth checking the current figure with your accountant.

The taxable benefit is then added to the employee's salary and subject to income tax and social contributions. In Romania, income tax is a flat 10%, while social contributions include pension (CAS) at 25% and health (CASS) at 10%. The employer withholds these amounts from the employee's salary and pays them to the state budget.

Tax deductions for the employer

From the employer's perspective, the costs of acquiring, leasing, maintaining and insuring a company car are generally deductible for corporate income tax purposes, but with some limitations. The key rule is that if the car is used for both business and personal purposes, the employer can deduct only 50% of the related expenses, including depreciation, leasing payments, repairs and insurance. This 50% limitation applies unless the employer can prove that the car is used exclusively for business purposes, which is often difficult in practice. For cars used solely for business, such as delivery vans or vehicles assigned to a specific employee who does not take them home, full deduction may be possible with proper documentation.

Fuel and other costs

Fuel provided by the employer for private use is also a taxable benefit for the employee. The value of fuel for private journeys must be estimated and added to the benefit in kind, or the employee must reimburse the employer. Many companies opt for a fuel card system where only business-related fuel is covered, and employees pay for their own private fuel. Alternatively, employers can charge employees a monthly amount for private fuel use. The same 50% deduction limit applies to fuel costs if the car is used for mixed purposes.

Other benefits, such as paying for the employee's driving licence, road tolls for private trips, or parking at the employee's home, are also taxable benefits and must be reported accordingly.

Reporting and compliance

Employers must report the value of company car benefits in the monthly payroll declaration (Form 112) and withhold the appropriate taxes. It is important to keep accurate records of car usage, purchase prices and emissions data. The tax authorities may audit these records, so maintaining a logbook of business and private journeys is advisable, even if not strictly required by law.

Conclusion

Company cars are a popular employee benefit in Romania, but they come with clear tax obligations. Understanding how the benefit in kind is calculated and what expenses can be deducted will help both employers and employees avoid surprises at tax time. Always consult a local accountant for advice tailored to your specific situation, as tax rules can change and individual circumstances vary.