IT freelancer moving to Romania in 2023

[MRot]

Hi all,

Am an EU citizen wishing to relocate to Romania.
Doing hybrid/remote IT freelance work for EU clients. I wonder if there are people for have gone this route.

I was exploring the fiscal possibilites in Romania, and I have come across two options;

Freelancer (PFA)
-Pay 10% of profit (on ~190k Eur profit) >> ~Eur 19.000
-Pay 35% social security contributions on 2x Romanian Minimum Wage, for 2023 >> =Eur 5.040
-Total taxes approx Eur 24.000, ~12,5% effective tax rate

Microcompany (SRL)
-Using the construction where I hire myself as full time employee, paying minimum wage
-Pay 1% of revenue in corporate tax >> ~Eur 1.900
-Pay 10% (inc. tax) + 35% (SS) on Romanian Minimum Wage in 2023 >> =Eur 3.240
-Pay 8% dividends on the remaining profit >> ~Eur 14.600
-Total taxes approx Eur 19.500, ~10% effective tax rate


Seems the Microcompany route has lower tax, but some complications.
-Have to hire myself as an employee (is this even allowed?)
-It does not allow for consultancy. Not sure if IT work could possibly be classified as such.
-Might have higher accountacy costs.
-Does it require hiring an office and such?

Curious if anyone have experience, or could point me to a good accountant specialized in this matter.

 

[Suzy Emerald]

Micro company is not anymore what it used to be
As far as i know you can hire yourself. IT work is not per definition consultancy but cover yourself by a correct function description in your contracts in case they check this (which is not very likely imo). I closed my micro company there last year because of the changing rules

 

[MRot]

That's great, that should make it a possibility for what I want to do here.

Microcorp may not be what it use to be, but still appears to hold comparative advantage over the Sole Proprietorship even in 2023.

Just wondering if the additional setup requirements and accounting costs, such as drafting an employment contract and filing more tax forms would be worth saving a couple thousands Eur.

 

[JustAnotherNomad]

Do you really want to live in Romania? If you care about low taxes, there should be many equal or better options.

 

[SimpleGuy]

Why not in Bangladesh? I heard they have a "state-of-art" freelancer visa.

 

[MRot]

Do you really want to live in Romania? If you care about low taxes, there should be many equal or better options.

It's the only option aside from BG, because I have to charge my clients from an EU business. Plus I need to return home often and don't want to suffer the extra travel time.

 

[JustAnotherNomad]

Have you considered Estonia? Malta? Cyprus? Portugal NHR?

 

[MRot]

I am not sure on the cap of social security/health contributions, but either of those options appear to incur an effective tax rate of at least 30%.

 

[spartan78]

Hi,

We can help you with all the setup and info you need regarding Romania company incorporation.

 

[Marshal]

Why not in Bangladesh? I heard they have a "state-of-art" freelancer visa.

Why on Earth would anyone want to leave EU for Bangladesh?

Do you really want to live in Romania? If you care about low taxes, there should be many equal or better options.

What's wrong with Romania? There are many beautiful places where you can live in Romania and it has pretty good taxation system. Every EU country has its advantages and disadvantages.

 

[JustAnotherNomad]

There's nothing wrong with Romania, I was just asking if OP was aware that it's not as attractive as it used to be and that there are other options even within the EU.
I would much rather live in Portugal than in Romania, for example.

 

[Marshal]

I would much rather live in Portugal than in Romania, for example.

That's absolutely fine, we all have our preferences. For example I would never choose Portugal for permanent residence, but that's me. Lovely place to spend a holiday, but not to live in permanently.

 

[MRot]

I realise Microcorp tax was lower up until this year. Romania is still best in EU at my income, with no near contestant other than Bulgaria.

 

[radup]

I would stay away from micro-corp for now. They recently changed the law again and they decided to put a "snake" in there. I discussed with a lawyer and he said the same thing. The law is not clearly defining the notion of consultancy or management. In RO we have these CAEN codes which are used to identify your business bracket. This new law is not clearly stating which CAEN is covered by this 20% exception and also they don't clearly define the notion of "consultancy" in the law either.

If you are ok with the PFA(Sole Proprietorship) then that would be probably the easiest way. I would pay an accountant anyway even for the PFA..
Also, be warned that with the PFA you don't get any legal protection. If you own money to the government, they will freeze your accounts until you pay. Or worse, if you client sues you, you have to pay from your personal money. Same problem, you might end up with your accounts frozen.

This is why the old micro was so awesome: low taxes + some legal protection.

 

[MRot]

That sounds very problematic. I don't want to have such an uncertainty.

PFA sounds like a great option indeed! It seems to me that the SRL would be hardly worth it for me, especially if the extra costs involved are high.

 

[Expatas]

Hi, i am based in Burgas, Bulgaria and have set up my IT consulting company here, invoicing clients in Germany.

 

[Dexur]

I can recommend Romania and micro company. I moved here myself a while ago and it's pretty good so far. There are some language barriers and opening a company is more tricky than in more advanced places. But overall it might be the best tax jurisdiction under GDPR.
You can check my post history for tips on cheap incorporation providers, tax details, etc.

I would recommend Micro company, just remember to avoid any "consultancy" wording in your contracts and job descriptions

 

[Onassis]

I don't understand why anyone would set up a full blown legal entity in such country when you can simply register a UK LTD and a branch office which has no legal personality and therefore allows you to avoid the Romanian legal system.

 

[MRot]

I can recommend Romania and micro company. I moved here myself a while ago and it's pretty good so far. There are some language barriers and opening a company is more tricky than in more advanced places. But overall it might be the best tax jurisdiction under GDPR.
You can check my post history for tips on cheap incorporation providers, tax details, etc.

I would recommend Micro company, just remember to avoid any "consultancy" wording in your contracts and job descriptions

I have read the posts, they are very useful.

One small question on the Micro company I am wondering about.
Perhaps you can tell if you are able to register your own lease as your office address? (if you are your own employee within the company)

Or do you need a virtual office, or even a physical office?
I saw the Youtube video form R&R Partners where I believe they mentioned your lease address will do just fine.
If office rent is needed, it is basically not worth it for me.

 

[Dexur]

I have read the posts, they are very useful.

One small question on the Micro company I am wondering about.
Perhaps you can tell if you are able to register your own lease as your office address? (if you are your own employee within the company)

Or do you need a virtual office, or even a physical office?
I saw the Youtube video form R&R Partners where I believe they mentioned your lease address will do just fine.
If office rent is needed, it is basically not worth it for me.

I haven't tried. If I'll buy an apartment here, I'll def register it as my office to save a few hundred eur a year.

You need a virtual office at least. Should cost around 200e yearly. I use one from Reinvent consulting. And I use R&R if I need some heavy lifting like getting CNP.