Romanian micro-company

[Suzy Emerald]

3% on all income and 5% on what you extract as dividend

 

[gerozop]

Maybe someone knows if IT software consultancy is an activity that micro company is eligible to do? 100% of my revenue comes from IT contracting and client SW development - this activities are usually referred as consulting. Is it in line with the requirements for micro company?

 

[Suzy Emerald]

Consultancy may just be 20% of the activities of a micro company

 

[micand]

Maybe someone knows if IT software consultancy is an activity that micro company is eligible to do? 100% of my revenue comes from IT contracting and client SW development - this activities are usually referred as consulting. Is it in line with the requirements for micro company?

Every SRL is considered a micro company, as long as the turnover does not exceed 1 million euro per tax year.

Consultancy may just be 20% of the activities of a micro company

This is outdated information.


Also note: tax rate for a romanian micro company is 1% with at least one employee, which could be the director of the company - even when paid just the legal minimum wage 1,413 RON net, which is currently around 293 euro per month.

If there is no employee, then a tax rate of 3% applies on the corporate level and another 5%withholding tax for dividends made to the shareholders.

 

[Perry8]

This is outdated information.

So, there are no requirements as to what type of business you can run under this scheme? I do remember that there was a 20% cap on consultancy, and then I also seem to remember that this cap was raised to around 50%. Is it gone now?

I also thought that the Romanian tax on micro companies was a "gross tax" - you are not allowed for any deductions. So, if you have a business model with a lot of costs, it is not necissarily a good ide.

Some years ago, I looked into this structure as it seemed interesting. If the cap on consultency is gone, this might be a very interesting choice as these types of businesses does not have that much costs.

 

[micand]

Correct, there is no limitation for consultancy activities anymore and the tax for micro companies applies to the revenue, not the profit.

You still can deduct business expenses but the effect will rather apply once you make profit distributions (dividends), the tax on the corporate level is not reduced by business expenses. In any case the maximum tax on the corporate level is less than 10,000 euro per year for a micro company, assumed that there is at least one employee.

 

[Mr Magoo]

Correct, there is no limitation for consultancy activities anymore and the tax for micro companies applies to the revenue, not the profit.

Hi, do you have a web link where the current micro company rules are lined out such as that there is no limitation on consultancy activities? I just have some old documentation where it is still 20%. Also when employing e.g. myself as director and paying myself a wage, what other costs like healthcare, social security need to be paid as well in that case?

 

[Financelady45]

I spoke with some lawyers in Romania, a group told me that everything is possible, the other group said to forget Romania due the large burocracy. I believe Romania is worth only for those saving at least 250K per year and for at least 3 years. Also note a lot of EU countires have implemented anti avoidance policy if you move the dividends from Romania to other EU Holding.

 

[micand]

Hi, do you have a web link where the current micro company rules are lined out such as that there is no limitation on consultancy activities? I just have some old documentation where it is still 20%. Also when employing e.g. myself as director and paying myself a wage, what other costs like healthcare, social security need to be paid as well in that case?

Sure, have a look at the fiscal code of Romania published by ANAF:
https://static.anaf.ro/static/10/Anaf/legislatie/Cod_fiscal_norme_2018.htm#A52
Example Calculation based on the gross minimum wage in RON for an employee:

Total Gross: 2,350
Social Insurance (25%): 588
Health Insurance (10%): 235
Deductions: 345
Income Tax (10%): 118
Total Taxes and Contributions: 941
Net Salary: 1,409

Example Calculation based on the gross minimum wage in RON for an employer:

Work Insurance (2,25%): 53
Total Contributions: 53

I spoke with some lawyers in Romania, a group told me that everything is possible, the other group said to forget Romania due the large burocracy. I believe Romania is worth only for those saving at least 250K per year and for at least 3 years. Also note a lot of EU countires have implemented anti avoidance policy if you move the dividends from Romania to other EU Holding.

Bureaucracy is almost everywhere, but that´s why you hire a professional to fulfill all legal obligations on time, right?

How do you come up with this belief "only for those saving at least 250K per year and for at least 3 years"?
It´s quite simple: The higher the taxable income, the more leverage a (low) tax rate has.

 

[Suzy Emerald]

Is there any requirement for that employee to be resident in Romania or have an address locally? Just calculated the break even point for me and it turns out to be slightly cheaper to just pay the% w/o employees.

 

[micand]

It is not a requirement to hire an individual with romanian citizenship or residency.
But the place of management and control might decide about where the company is taxable.

It might be cheaper in your case but bear in mind, that many fiscal authorities around the globe require economical substance
e.g. local director to be accepted as a legit foreign entity, rather than a mere 'letterbox'.

Having that one resident employee as a director can make a huge difference and pay off multiple times.

 

[Financelady45]

Sure, have a look at the fiscal code of Romania published by ANAF:
https://static.anaf.ro/static/10/Anaf/legislatie/Cod_fiscal_norme_2018.htm#A52
Example Calculation based on the gross minimum wage in RON for an employee:

Total Gross: 2,350
Social Insurance (25%): 588
Health Insurance (10%): 235
Deductions: 345
Income Tax (10%): 118
Total Taxes and Contributions: 941
Net Salary: 1,409

Example Calculation based on the gross minimum wage in RON for an employer:

Work Insurance (2,25%): 53
Total Contributions: 53



Bureaucracy is almost everywhere, but that´s why you hire a professional to fulfill all legal obligations on time, right?

How do you come up with this belief "only for those saving at least 250K per year and for at least 3 years"?
It´s quite simple: The higher the taxable income, the more leverage a (low) tax rate has.

I spoke with a few lawyers in Romania and they told me to stay away if I try to save less than 250K because the country is Europe on paper but very different in terms of corruption, fraud,cheaters, etc

 

[micand]

I spoke with a few lawyers in Romania and they told me to stay away if I try to save less than 250K because the country is Europe on paper but very different in terms of corruption, fraud,cheaters, etc

What´s your point and the correlation between 'less than 250K', (...) corruption and fraud,cheaters etc'.?

Everybody can make a break even calculation to figure out, if it is worth it or not and you as an entrepreneur decide yourself with whom you are doing business. The only local 'stakeholders' you have to deal with in Romania are the taxman and the bank. Law and order apply, accordingly.

 

[Mr Magoo]

Having that one resident employee as a director can make a huge difference and pay off multiple times.

Agree, but problem arising here is to have a trusted guy in Romania.

 

[JohnLocke]

I wonder if that guy could possible be a lawyer or consultancy from a larger trusted firm?

 

[micand]

Agree, but problem arising here is to have a trusted guy in Romania.

I wonder if that guy could possible be a lawyer or consultancy from a larger trusted firm?

Could help with that.

Sure you can implement a lawyer or tax consultant, but also bear in mind that if that person is already
involved in dozens of companies, that might be considered as a nominee director and cause a red flag
in terms of economic substance for tax authorities looking up publicly available information.

If you consider just hiring an ordinary employee I don´t see why you would hire a lawyer.

 

[tacokai]

What is the latest with the Romanian micro company is it useful for all not living in Romania and can we get some solid banking if we setup a company there?

Can someone in short terms tell what the corporate tax is that apply for such micro companies in Romania?

 

[blizz]

What is the latest with the Romanian micro company is it useful for all not living in Romania and can we get some solid banking if we setup a company there?

second that, someone know if it is still something we can work with?

 

[heaven]

I am also interested in good lawyers/accountants in Romania to setup a structure. It's essentially a tax-free vehicle in europe, low wages and no tax on dividends to EU holdings as always.

 

[Ssrn]

It is not a requirement to hire an individual with romanian citizenship or residency.
But the place of management and control might decide about where the company is taxable.

It might be cheaper in your case but bear in mind, that many fiscal authorities around the globe require economical substance
e.g. local director to be accepted as a legit foreign entity, rather than a mere 'letterbox'.

Having that one resident employee as a director can make a huge difference and pay off multiple times.

I could not find anybody who would offer a local director service as they'd be liable from an accounting perspective and it seems to be a risk not many a willing to take? If I'm the director but I live abroad, there's nothing won in regards to local substance, even if I'd pass myself a salary in Romania (if that's possible at all if I'm not a resident there)?