Setup for an US LLC + Romanian PFA

[Dexur]

As somebody who just moved to Romania from Finland for tax reasons, I'd say just have a micro company in Romania and pay the taxes.
It's the best deal in Europe for a IT freelancer: 1% revenue tax, 250e social security contributions from salary and 8% dividend tax.
So around 11-12% vs 40-50% I would have paid in Finland.

 

[radup]

As somebody who just moved to Romania from Finland for tax reasons, I'd say just have a micro company in Romania and pay the taxes.
It's the best deal in Europe for a IT freelancer: 1% revenue tax, 250e social security contributions from salary and 8% dividend tax.
So around 11-12% vs 40-50% I would have paid in Finland.

Yes, I agree that 1+8% it's a lot better that 50% but things are not so simple anymore. They changed the law last year and they put a snake in the law.

In order to be compliant with latest regulations to be a micro SRL you need to:
- have at least one employee from day one
- you are not allowed to make in gross revenue more than 500k EUR
- you are not allowed to do "management and consulting" work for more than 20% from the total work

Essentially you are forced to employ someone or yourself from day one and you have to pay at least the minimum salary in Romania. This can be an issue for some people because taxes on employment are 40%. If you own an IT company and you pay yourself the minimum salary to avoid taxes then Romanian IRS(ANAF) can invoke that you are breaking the law. They can invoke any law they like: transfer prices, BEPS profit shifting, anti-concurential practices agains other players on the market. You name it..

The 20% consulting part is pure evil. The "consulting" notion is not even defined in the Romanian law. Nobody knows what it means. The general consensus is that consulting means that you "give advice". If you do a code review, well that can be considered advice. If you do a tech debt that's also advice. If you write confluence documentation that can be advice. I am not talking about having a management position..

And what's worse, how are you going to measure 20% consulting?

Here is an article from some local advisors. You need to translate it with google translate: Impozit micro 2023: Veniturile din consultanta si management incotro?

And there is more. The government just discovered that they have big hole in the budget ) Guess what they want to do to cover that hole. Most likely they will introduce progressive taxation in RO starting next year

 

[Dexur]

Yes, I agree that 1+8% it's a lot better that 50% but things are not so simple anymore. They changed the law last year and they put a snake in the law.

In order to be compliant with latest regulations to be a micro SRL you need to:
- have at least one employee from day one
- you are not allowed to make in gross revenue more than 500k EUR
- you are not allowed to do "management and consulting" work for more than 20% from the total work

Essentially you are forced to employ someone or yourself from day one and you have to pay at least the minimum salary in Romania. This can be an issue for some people because taxes on employment are 40%. If you own an IT company and you pay yourself the minimum salary to avoid taxes then Romanian IRS(ANAF) can invoke that you are breaking the law. They can invoke any law they like: transfer prices, BEPS profit shifting, anti-concurential practices agains other players on the market. You name it..

The 20% consulting part is pure evil. The "consulting" notion is not even defined in the Romanian law. Nobody knows what it means. The general consensus is that consulting means that you "give advice". If you do a code review, well that can be considered advice. If you do a tech debt that's also advice. If you write confluence documentation that can be advice. I am not talking about having a management position..

And what's worse, how are you going to measure 20% consulting?

Here is an article from some local advisors. You need to translate it with google translate: Impozit micro 2023: Veniturile din consultanta si management incotro?

And there is more. The government just discovered that they have big hole in the budget ) Guess what they want to do to cover that hole. Most likely they will introduce progressive taxation in RO starting next year

Thanks for the link. I agree on most things, but hiring yourself costs around 250e in taxes, contributions and insurance, which is not that much for IT freelancer.
Consulting things is a dangerous issue though. But I have Software development as the main company activity and word my invoices carefully.
But I agree, you never know what the law will say next year.

 

[JimBeam]

To the original question:

Why just not have the Romanian company and just open a US/EMI bank account for that company.
The US companies will pay you same way they would pay a local company (account number and routing number) so no SWIFT/IBANs etc and you would save your self a hustle and risks of managing another company in a foreign country.
I think you could get this kind of US bank account with Wise or Payoneer.

Thanks for the link. I agree on most things, but hiring yourself costs around 250e in taxes, contributions and insurance, which is not that much for IT freelancer.
Consulting things is a dangerous issue though. But I have Software development as the main company activity and word my invoices carefully.
But I agree, you never know what the law will say next year.

Yes, it's still hell of a deal!
How long have you been in Romania? What city? (you can answer in private message)

 

[Dexur]

To the original question:

Why just not have the Romanian company and just open a US/EMI bank account for that company.
The US companies will pay you same way they would pay a local company (account number and routing number) so no SWIFT/IBANs etc and you would save your self a hustle and risks of managing another company in a foreign country.
I think you could get this kind of US bank account with Wise or Payoneer.


Yes, it's still hell of a deal!
How long have you been in Romania? What city? (you can answer in private message)

Bucharest for 2 months now So far so good: have an accountant, virtual office, etc.
Although, Cluj also seems like a good option, but it seemed too small for my liking.
If you're planning to set-up a company here, the initial spending can be from 500 to 3k depending on a law firm.

But yeah, no regrets about moving from Finland so far