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      On 29 October 2025, Romania ratified the Andorra–Romania Convention for the Elimination of Double Taxation with respect to Taxes on Income and on Capital and for the Prevention of Tax Evasion and Avoidance (the "Treaty") through Law No. 170, published in Official Gazette No. 996. The Treaty had been signed on 27 September 2024 and aims to facilitate cross-border economic relations and fiscal cooperation between Romania and Andorra.1

      WHY THIS MATTERS

      The ratification and entry into force of this Treaty will directly affect internationally mobile employees, global mobility programs, and multinational organizations with connections to Romania and Andorra.

      The Treaty introduces coordinated rules to prevent double taxation and curb tax evasion, clarifies residency definitions, and establishes limits and procedures for the taxation of employment income, investment income, pensions, and capital gains.

      For HR leaders, payroll managers, and globally mobile employees, the Treaty may reduce compliance complexity, provide relief from double taxation, and introduce clear allocation of taxing rights and dispute resolution mechanisms. It also places specific requirements on documentation, reporting, and eligibility for treaty benefits, which organizations will need to monitor to achieve ongoing compliance.

      Key Highlights

      Scope and Covered Taxes

      Applies to taxes on income and capital imposed by both states, including Romania’s personal income tax and corporate profit tax, and Andorra’s corporate income tax, personal income tax, and non-resident income tax.

      Residency and Permanent Establishment

      • Defines “resident” for treaty purposes, including tie-breaker rules for dual residents (center of vital interests, habitual abode, nationality, and mutual agreement).
      • Establishes criteria for “permanent establishment” (fixed place of business, thresholds for construction sites, exclusions for preparatory/auxiliary activities).

      Allocation of Taxing Rights

      • Sets rules for taxing various categories of income (employment, business profits, dividends, interest, royalties, capital gains, pensions, director’s fees, artists/sportsmen).
      • Employment income is generally taxable where the work is performed, with exemptions for short-term assignments (less than or equal to 183 days).

      Withholding Rates

      • Dividends: 0 percent for substantial holdings (greater than or equal to 10 percent for 365 days), otherwise 5 percent.
      • Interest: Maximum 3 percent, with exemptions for government-related entities.
      • Royalties: Maximum 5 percent.

      Double Taxation Relief

      Each country provides credit for foreign tax paid, limited to the amount attributable to income or capital taxed in the other state.

      Anti-Abuse and Limitation to Benefits

      Benefits may be denied if one of the principal purposes of an arrangement or transaction was to obtain treaty advantages contrary to the object and purpose of the Treaty.

      Exchange of Information and Mutual Agreement

      Includes provisions for administrative cooperation, information exchange for tax purposes, and mutual agreement procedures for dispute resolution.

      Entry into Force and Application

      The Treaty enters into force upon diplomatic notification that domestic procedures are complete, with application from 1 January of the year following entry into force.

      KPMG INSIGHTS

      Steps to Consider

      In light of the changes, the organisations may wish to review employee and business arrangements involving Romania and Andorra to determine Treaty eligibility, update payroll and tax reporting systems to reflect new withholding rates and relief mechanisms and confirm proper documentation to support claims for Treaty benefits. They also may wish to monitor official guidance regarding implementation dates and administrative procedures.

      If assignees and/or their programme managers have any questions or concerns about the scope of the directive, its application and potential impacts, and appropriate next steps, they should consult with their qualified tax or social security professional or a member of the GMS/People Services team with KPMG in Romania (see the Contacts section).

      FOOTNOTE:

      1  (In Romanian) CONVENTIE 27/09/2024 - Portal Legislativ, CONVENȚIE din 27 septembrie 2024, Ministerul Justiției.

      Contacts

      daniel-jinga
      Daniel Jinga

      Associate Director

      KPMG in Romania

      Mădălina Racovițan
      Mădălina Racovițan

      Tax Partner, Taxation Services, Head of People Services

      KPMG in Romania

      More Information

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      The information contained in this newsletter was submitted by the KPMG International member firm in Romania.

      GMS Flash Alert is a Global Mobility Services publication of the KPMG LLP Washington National Tax practice. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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