Tax-exempt income in Romania: pensions, inheritances, gifts, compensation

The Fiscal Code (Law no. 227/2015, Article 62) establishes several categories of income for which individuals are exempt from income tax. These include special-purpose allowances, certain indemnities, scholarships, compensation payments, as well as sums or assets received through inheritance or donation, for which the law sets out distinct rules in the case of immovable property.

How income tax works

Income tax is a fiscal obligation owed to the state budget in respect of individuals' taxable income. The standard rate is 10% and applies, as a general rule, to salaries, self-employment income, intellectual property rights income, and rental income; the calculation may start from the amount after deducting certain expenses, contributions, or deductions provided for by law.

Separate rates apply to certain types of income: dividends paid to individuals will be taxed at 16% from 1 January 2026, pursuant to Law no. 141/2025. Depending on the type of income, tax is either withheld and remitted by the payer, or declared and paid directly by the recipient. Importantly, an exemption from income tax does not automatically mean an exemption from social insurance or health insurance contributions, which are governed by separate rules.

Non-taxable allowances and indemnities

The law exempts from taxation allowances, indemnities, and other forms of special-purpose support received from the state budget, the social insurance budget, local budgets, public funds, or non-reimbursable external funds, as well as those received from non-governmental organisations or other persons.

Also non-taxable are indemnities for temporary incapacity for work granted to persons who do not earn salary income, as well as indemnities for maternity risk, maternity leave, child-raising and child-care, care of patients with oncological conditions, together with rewards granted from public funds.

Scholarships and entitlements for pupils and students

Exempt from tax are scholarships received by those attending any form of institutionalised schooling or professional development, as well as scholarships, prizes, and other entitlements (accommodation, meals, transport, work equipment) granted to pupils in vocational and technical education or to pupils and students in dual education. The same benefits apply to prizes and entitlements received by pupils and students, including non-residents, in domestic and international competitions held in Romania.

Sports prizes and indemnities

Not subject to tax are prizes received by athletes who have won medals at World Championships, European Championships, or Olympic/Paralympic Games, as well as prizes, bonuses, and indemnities awarded to athletes, coaches, technical staff, and other specialists for finishing in places 1–6 at European Championships, World Championships, and Olympic/Paralympic Games, or for qualifying for and participating in the final tournaments of such competitions.

Also exempt are bonuses and indemnities for the preparation and participation of Romania's representative squads in official international competitions, as well as bonuses awarded from amounts received by clubs for qualifying for and participating in European or world inter-club competitions.

Compensation and damages payments

Non-taxable are sums received from insurance of any kind (compensation, insured sums, and other entitlements), with the exception of winnings received from insurance companies in connection with prize draws. Likewise not subject to tax are compensation payments in cash or in kind for material damage, including moral damages, sums received in respect of compulsory purchase for public utility purposes, and sums received as compensation for damage caused by natural disasters or in cases of disability or death.

Recovery of waste materials under national programmes

Income derived from the recovery of movable property in the form of waste materials through collection centres, within the framework of national programmes financed from the state budget or other public funds, is not taxable.

Pensions exempt from tax

Non-taxable are pensions for war invalids, war orphans, and war widows or widowers, as well as pensions awarded for disability or death sustained by personnel who have participated in missions and operations outside Romania. The same treatment applies to pensions for disability or death occurring during or as a result of service, for personnel of public institutions responsible for defence, public order, and national security, as well as fixed sums for the care of pensioners classified as having first-degree disability.

Other pensions may be non-taxable, but this category does not include those paid from funds constituted through mandatory contributions to the social insurance system, from voluntary or occupational pension funds, or those financed from the state budget. For taxable pensions, the non-taxable threshold is 3,000 RON per month – above this threshold, the 10% tax rate applies to the difference remaining after deducting the threshold and, where applicable, the health insurance contribution (CASS).

Benefits for persons with disabilities

The law provides for an exemption from tax on income representing benefits in cash and/or in kind, granted in accordance with the law, to persons with disabilities, war veterans, invalids, and orphans (information partially reproduced in source).