Romanian SRL micro-enterprise dividends + Cyprus non-dom ?

[gnud]

Yes, Micro company sucks for trading. In Romania, you can trade on a personal account and you will only pay capital gains at 10%. You keep your non-trading activities in a Micro company, everybody wins. But you will have to establish tax residency in Romania. I personally prefer that over Malta where I have lived for 3 years.

You never made it clear you were using trading and with that you easily reach 1 million turnover. Especially when you want to make a living out of this. Then it is out of the topic of this thread.

What's up with Malta btw? Why didn't you like it there?

 

[orangekangaroo]

What's up with Malta btw? Why didn't you like it there?

I have lived there for 3 years. It has 450,000 people and is in the top 5 countries in the world of population density. Throw in that it has very high car ownership. Almost every inch is developed and not to nice standards. Where it is a bit rural, hunters will shoot every bird, protected or not that tries to fly over Malta. It is also very dusty. But most important is if you have never lived on an island, is the small size. Lovely friendly people though, but I could not wait to leave.

 

[blackmax]

Why is a holding setup expensive? A Cyprus company formation is considered expensive and costs only 500 EUR in fact, for example. Opening a bank account is a PITA, but you need to plan for it, and in the EU you have a freedom to open a bank account with any institution anywhere.

To give you an example.

Lets say you trade with 10k 10 times a day. 6 times you win, 4 times you lose, each time 20%. You're in profit. But your turnover is already 12k / day, whereas profit only 4k. In a year that is 2M88 turnover, well above the threshold, and you're taxed with 16% now, not 1% or 3%.

So you have to restrict yourself (terrible for any business growth but ok).

Ok lets say you trade less. You trade only with only 1k. Turnover in a year is only 288k, well within the threshold, profit is 96k, but then oops, you have a series of losing trades or there's a market crash that wipes out your 96k profit (easily done when you use leverage which you have to use if you want to achieve 20% on each trade), yet you still have to pay -2880 tax, and I don't even count into this your salary or your employee's salary, otherwise it'd be -8640 tax.

Are you sure that 1% is paid from all trades made on crypto exchange? I think you should pay 1% only on the funds which you withdraw from exchange to bank acc.

 

[gnud]

Are you sure that 1% is paid from all trades made on crypto exchange? I think you should pay 1% only on the funds which you withdraw from exchange to bank acc.

yes I'm sure

 

[blackmax]

yes I'm sure

And if your first trade is eur/btc and after you trade only btc/alts how to calculate all this trades? It sounds strange such approach. Did you ask ANAF? Do you have any official reply from them? I also have micro SRL in Romania and i invested profit from SRL in crypto, but i am not aware of such taxation.

 

[gnud]

And if your first trade is eur/btc and after you trade only btc/alts how to calculate all this trades? It sounds strange such approach. Did you ask ANAF? Do you have any official reply from them? I also have micro SRL in Romania and i invested profit from SRL in crypto, but i am not aware of such taxation.

I have a reply from 2 lawyers. And that's what I suspected given that the company is taxed on revenue, not profit. The ANAF didn't offer any useful reply ever.

You calculate it the same way as if you were left with BTC only in your account at the end of the year. You take the current value in RON. Except, you have to do this for every trade each month.

 

[gnud]

I have lived there for 3 years. It has 450,000 people and is in the top 5 countries in the world of population density. Throw in that it has very high car ownership. Almost every inch is developed and not to nice standards. Where it is a bit rural, hunters will shoot every bird, protected or not that tries to fly over Malta. It is also very dusty. But most important is if you have never lived on an island, is the small size. Lovely friendly people though, but I could not wait to leave.

LOL

 

[Marzio]

No surprises. Malta is one of the worst places where i've been. Overcrowded, dirty and polluted.

 

[orangekangaroo]

View attachment 3112

LOL

Initially, I went with the idea of English speaking, lots of sunshine, med life, zero tax for non-doms etc. This was 2008 and a got a bargain on a house with a large swimming pool. The first year was all right, every town has its own saint and own festa. This festa consists of loud explosions, waking you up at 8 AM to let the rest of the island know there is a party in your town. For one week you wake up with world war 2 type explosions at your doorstep. The parties are fun with local food and activities cumulating in a firework show on the weekend. Maltese love fireworks and these shows are amazing. However, all these shows are done by volunteers and they do not have the strictest safety rules. So expect once every 3 to 4 years a fireworks factory to explode, you will hear this island-wide (world war 3 explosion). They promise safety rules, but eventually, nothing will be done. But all these parties are actually all the same, same food, same sort of fireworks etc. Good for one year when I visited 12, but for the next year hmmmmm.

Eventually, you will feel the size of the island, and how crammed it is. The roads are potholed and bad, they get fixed when the pope arrives and only the roads his car drives on. Locals are bored too and want to show off their driving skills by driving fast and dangerous. Rich Libyans that fled their country have nothing better to do than race their loud cars around town.

Real estate development is done by putting up as quick as possible the skeleton of the building. If you want your own apartment, you will have to put the walls in and do the interior. What this has done is that you find these skeleton buildings everywhere on the islands.

Next you have the refugees that

As you have 450,000 people on a tiny rock, you run out of resources quick. Where to put the rubbish, how to develop sustainability, how to have enough drinking water and water for pools etc. You will be surprised about the number of illegal boreholes pumping out water, this is how my pool was filled.

When you want some quiet time and go around the bit of nature that is left you will be surrounded by hunters trying to kill every bird that flies over. This goes on for 6 months of the year. If you say something, you become the target.

oh, when it comes to schooling, local schools are very religious, this is a 95% Catholic island. So your kids will get brainwashed. The only international school as a long drive and with traffic bad you will feel those school runs.

I feel for the Maltese they are so friendly and they have to live with all this sh!t.

 

[Jonathan169]

Romania v. Hungary.
Divide the 3% tax (ROM) by 11% tax (HUN) = " .2727 " (1-.2727=.7273) This is the break even point in business costs = 72.73% of Revenue.
So, up to 73% business costs; Romania is the better option, over 73% then Hungary is the better option.
Of course: 'Ceteris Paribus': (assume all other costs are the same) JUST on CT.
[OF COURSE...need to do a deep dive on ALL other aspects: e.g. salary/social/office/admin/legal/banking/forex/visa/living etc.... ]
Just looking at CT not dividends as its not clear where the dividends are going.

The Romanian 1% tax is on turnover. The 5% Divi tax is on profits as you can offset costs. Depending on your business model and profit margins there is a point to be made for Hungary and its fixed 9%. In Hungary to get 0% withholding tax on Divi you need to pay it to a non resident.

Initially, I went with the idea of English speaking, lots of sunshine, med life, zero tax for non-doms etc. This was 2008 and a got a bargain on a house with a large swimming pool. The first year was all right, every town has its own saint and own festa. This festa consists of loud explosions, waking you up at 8 AM to let the rest of the island know there is a party in your town. For one week you wake up with world war 2 type explosions at your doorstep. The parties are fun with local food and activities cumulating in a firework show on the weekend. Maltese love fireworks and these shows are amazing. However, all these shows are done by volunteers and they do not have the strictest safety rules. So expect once every 3 to 4 years a fireworks factory to explode, you will hear this island-wide (world war 3 explosion). They promise safety rules, but eventually, nothing will be done. But all these parties are actually all the same, same food, same sort of fireworks etc. Good for one year when I visited 12, but for the next year hmmmmm.

Eventually, you will feel the size of the island, and how crammed it is. The roads are potholed and bad, they get fixed when the pope arrives and only the roads his car drives on. Locals are bored too and want to show off their driving skills by driving fast and dangerous. Rich Libyans that fled their country have nothing better to do than race their loud cars around town.

Real estate development is done by putting up as quick as possible the skeleton of the building. If you want your own apartment, you will have to put the walls in and do the interior. What this has done is that you find these skeleton buildings everywhere on the islands.

Next you have the refugees that

As you have 450,000 people on a tiny rock, you run out of resources quick. Where to put the rubbish, how to develop sustainability, how to have enough drinking water and water for pools etc. You will be surprised about the number of illegal boreholes pumping out water, this is how my pool was filled.

When you want some quiet time and go around the bit of nature that is left you will be surrounded by hunters trying to kill every bird that flies over. This goes on for 6 months of the year. If you say something, you become the target.

oh, when it comes to schooling, local schools are very religious, this is a 95% Catholic island. So your kids will get brainwashed. The only international school as a long drive and with traffic bad you will feel those school runs.

I feel for the Maltese they are so friendly and they have to live with all this sh!t.

Basically... if you are a dickhead, and have a large percentage of Alien DNA...move to Malta...you're welcome, not for me, I left the only Island I lived on 30 years ago. Never been so contented since. Maltese Falcon...is a classic movie though...Bogart and Lorre.

 

[gnud]

I've made it to Hungary. So far my impression is not the best, my new landlord has tried to rip me off right in the beginning. Wouldn't even wait for the end of the lease to try to steal the deposit like everywhere else ... just right from the get go tried to squeeze out fraudulently as much money as possible. What kind of a culture is that ...

 

[orangekangaroo]

I've made it to Hungary. So far my impression is not the best, my new landlord has tried to rip me off right in the beginning. Wouldn't even wait for the end of the lease to try to steal the deposit like everywhere else ... just right from the get go tried to squeeze out fraudulently as much money as possible. What kind of a culture is that ...

I hope that is a one off. Deposit stealing happens almost in every country, but when you want to leave. But ripping you of as you just arrived is new to me. Hope it all works out.

 

[uplana]

Can anyone confirm that a Cyprus non-dom resident owning a Romanian SRL micro-company will be exempt from the 5% tax on dividends in Romania, so in total dividends will be totally tax free?

I'm suprised that @CyprusLaw and @CyprusLawyer101 didn't comment on this, both may know how this could work ?

 

[CyprusLaw]

I'm suprised that @CyprusLaw and @CyprusLawyer101 didn't comment on this, both may know how this could work ?

I seem to have missed this, so thanks for pointing out
To begin with it would be better to seek advise from a Romanian advisor for this.
Will the Romanian company be the shareholder of the Cyprus company and therefore the RomanianCo will receive dividends from the CyprusCo? If this is the case it is likely that the Parent-Subsidiary Directive (2011/96) will kick in, exempting such payment from withholding on dividend payments.

 

[gnud]

I seem to have missed this, so thanks for pointing out
To begin with it would be better to seek advise from a Romanian advisor for this.
Will the Romanian company be the shareholder of the Cyprus company and therefore the RomanianCo will receive dividends from the CyprusCo? If this is the case it is likely that the Parent-Subsidiary Directive (2011/96) will kick in, exempting such payment from withholding on dividend payments.

No it does not, I've already described it somewhere in the forum. I got a reply from a Romanian lawyer who confirmed me what I suspected - the exemption only applies to companies taxed on profit. Since a micro-company is taxed on revenue, the exemption is not applicable and has to pay 5% no matter what.

 

[CyprusLaw]

No it does not, I've already described it somewhere in the forum. I got a reply from a Romanian lawyer who confirmed me what I suspected - the exemption only applies to companies taxed on profit. Since a micro-company is taxed on revenue, the exemption is not applicable and has to pay 5% no matter what.

Noted - this part you need a Romanian tax advisor. From a Cyprus perspective there won't be any wth on dividend, so any wth will be at the Romanian level

 

[CyprusLawyer101]

The 5% tax in Romania would normally apply. This is in essense a witholding tax and it could be reduced or eliminated through an applicable double tax treaty between Romania and Cyprus. If i am not mistaken, the treaty rate in place is not 0%. Muat be either 5 or 10%.
If no treaty relief can be obtained you could resort to the Parent Subsidiary Directive and see whether you could satisfy the requirements there. Of course, local practice and requirements are important to be assessed as well and that is where an additional opinion on the ground would be required.

 

[EliasIT]

The 5% tax in Romania would normally apply. This is in essense a witholding tax and it could be reduced or eliminated through an applicable double tax treaty between Romania and Cyprus. If i am not mistaken, the treaty rate in place is not 0%. Muat be either 5 or 10%.

That's helpful actually, I was looking for what to expect to pay for a Romanian Micro company, I think in taxes.

 

[ElBotellon]

hi All

i see that all of you suggest that micro company is subject to wht 5% on dividends distributed to its mother but according to a recent ordinance and an emendament included it seems that the EU directive should be applicable also to micro-companies (they extended the EU directive implementation to companies using a taxation different from CIT).

So the structure CY+RO micro company 1% should be fine. Glad to hear the opinion of people more expert than me about RO (i am just reading online).

What instead i believe should be considered is the holding period, which is 1 year in RO, differently from CY where it is immediate.

https://www.orbitax.com/news/archive.php/Romania-Publishes-Ordinance-fo-47532

 

[Marzio]

they extended the EU directive implementation to companies using a taxation different from CIT

Good find!