By Viviana Popa
Are you an Expat in Romania and want to become an entrepreneur? Even if there are many uncertainties that lie ahead, you should know that anyone can open a company in Romania, regardless of their residency, but you must meet certain conditions and know what laws will regulate your business. Here is everything you need to know and what you need to do for opening and operating a business in Romania.
What Does Non-Resident Mean?
The Romanian Fiscal Code defines a non-resident as
- any foreign natural or legal person
- and any other foreign entities,
- including collective investment undertakings in securities without legal personality, which are not registered in Romania, according to the law.
On the other hand, a non-resident person is
- any person who does not meet the conditions for classification as a resident person,
- as well as any natural person that is a
- foreign citizen with diplomatic or consular status in Romania,
- foreign citizen who is a civil servant or employee of an international and intergovernmental body registered in Romania,
- a foreign citizen who is a civil servant or employee of a foreign state in Romania and members of their families.
Why Should You Open a Business in Romania?
In recent years, due to the growing economic environment and the optimal tax system, many investors and entrepreneurs have become more interested in developing their business in Romania. Here are some reasons why it is beneficial for a non-resident to open a business in Romania:
- The 16% profit tax is not necessarily very attractive to foreign investors, but it is significantly lower than some of Western European taxes
- 3% tax from all revenues for micro-enterprises (companies with a turnover below 1 million Euros) made the Romanian business environment attract even more non-residents
- If you hire a Romanian resident in the company you will pay a reduced tax of only 1% of the income tax
- Overall salaries in Romania are lower than in other countries, so hiring a virtual or physical assistant in Romania is a very good option. The only professional sector that is an exception is IT, where professionals are very qualified and almost on par with their Western counterparts, at their wages, too.
What You Need to Know and to Do for a Opening a Business in Romania?
Do you have a business idea with growth potential and do you feel attracted to the Romanian business environment? Even if you are a non-resident, you can open the business here and with the help of a professional accountant you will be able to make the right decisions and implement them successfully. Here are some tax and administrative aspects you need to know before embarking on the road to Romanian entrepreneurship.
Taxes and Dues in Romania
Any newly established company has the status of “micro-enterprise”, which has several advantages:
- you have to pay an income tax (3% without employees, or 1% with at least 1 employee) – but not a profit tax (of 16%)
- accounting is simpler and may cost less (but you must keep in mind that the fee may be even higher, depending on several aspects: the business field, the complexity and the number of the documents generated, a.s.o..)
- you are exempted from VAT until you reach an amount of 88,500 Euros turnover per year
- a micro-enterprise is a perfect option especially for online activities and for digital nomads, who will not need too much expenses deducted.
- The tax of 3% (or 1% if you have at least one Romanian employee) of the “invoiced income” is declared and paid every three months.
- If the turnover exceeds the value of 1,000,000 Euros per year, you will lose the status of micro-enterprise and you will be due a profit tax of 16%.
- Bear in mind that micro-enterprises cannot be primarily active in areas such as: insurance, stock market, banking, oil or gas, gambling.
Value Added Tax
You should know that in Romania there are several VAT rates:
- Standard rate of 19%
- Reduced rate of 9% that applies to the tax base for operations such as the delivery of food and medicine, for water supply and sewerage services and so on
- The reduced rate of 5% that applies to the tax base for operations such as the sale of books, cultural events, accommodation, a.s.o.
Please ask your accountant or your lawyer that deals with opening your company for all those details in your business planning phase.
Remember: VAT is due by taxpayers when:
- their annual turnover, declared or realized, exceeds the ceiling of 300,000 lei (88,500 Euros)
- if they choose to switch to VAT at their will.
If you have employees, you should know that this involves
- salary costs and
- payrolls, which differ depending on the gross salary and working hours (part-time or full-time).
What Do you Need for a Operating a Business in Romania
What Accounting Services Do You Need?
- Tax assistance and consultancy services
- Establishment services
- Fulfilment of annual / monthly / quarterly tax obligations
- Monthly preparation of the salary tax return for expats (if you also have non-resident employees)
- Registrations with the tax authorities
- Obtaining residency tax certificates
- Advice on taxation of different types of income
- Assistance on social contributions
How Do You Choose The Right Accountant?
Do you need to understand how the Romanian tax system works and do you want to make sure that you always make the right decision from a financial and fiscal point of view? Well then, the MBV Tax Expert team is all you need. Here are 10 reasons why I recommend the collaboration with Mădălina Vlad and her team of accounting experts and consultants:
- They “translate” the fiscal legislation into entrepreneurial language.
- Optimizing figures and tax optimization are their superpower.
- They evaluate your business constantly and come up with quick and legal solutions to any tax problem.
- They have consultants specialized in European Funds projects and can help you get the financing you need to develop your business with EU money.
- Collaborating with them means you will get an expert and a senior accountant dedicated to your business.
- They have a lot of experience with businesses set up by non-residents in Romania.
- They act professionally, predictably and with integrity.
- They give you GUARANTEED response to any request within a timeframe of 8 working hours.
- You don’t have to worry about the distance, they work remotely very well.
- They continuously monitor your tax situation and notify you in time about exceeding legal ceilings and unpaid payment obligations.
You have a question about the process of initiating your business in Romania? Or do you have an accountant which doesn’t match your needs? You shouldn’t hesitate to contact the accounting and auditing company MBV Tax Expert! Thanks to their vast experience with the companies of other expatriate clients, they will help you comply with the Romanian tax rules and turn your idea into a successful business.
Get on board!
Visit www.mbv-tax.ro/ for more information.