RO micro-companies revenue threshold to be lowered in a couple years. Looking for structure options

[fuzzypen]

I'm a freelancer and run a consultancy as a RO SRL micro-company (I own a RO passport).
I was just shy of 500k EUR in revenue last year and I'm already projected to go a few hundred above that for 2023. I've elected to open yet another SRL micro-company, I can have a maximum of three (I can hire family members to meet all criteria, etc). I am fine for a year or two maybe, while pissing off customers cause I keep changing legal entities.

What scares me are articles like this Micro-company revenue may be lowered to 300k EUR from 2024 and 100k EUR from 2025. From what I know of the RO govt I'm 100% certain this will end up being the case.
I do not want to end up paying 16% on profits (am almost pure profit) instead of the 1% CT I pay now.

I'm planning on massively growing my business and I already have the customers locked, problem is it's all B2B work for EU countries such as DE and asking their legal dept to contract directly to say a Dubai FZ company would absolutely not fly.

What are my options for 2025 and onward to legally lessen my tax burden for the companies? I'm not particularly looking to relocate as it's not the personal income tax that's killing me.
Is there any way to structure some sort of offshore holding company (whether Dubai FZ or anything else) and have the tax authorities not bat an eye when I'm extracting profit from the existing SRL(s) receiving customer payments?

Thanks!

 

[Marzio]

I'm not particularly looking to relocate

If you don't want to relocate what about setting up an Estonian OU + director and working for the Estonian OU in Romania.

Estonian OU pay taxes ONLY when dividends are distributed and salaries paid to non residents are tax free so you'll end up paying 10% personal income tax in Romania.

Maybe @Don could chime in and clarify if then he decide to move and distribute dividends to a holding company in UAE for example, those dividends will be tax free or not.

 

[yngmind]

I'm a freelancer and run a consultancy as a RO SRL micro-company (I own a RO passport).
I was just shy of 500k EUR in revenue last year and I'm already projected to go a few hundred above that for 2023. I've elected to open yet another SRL micro-company, I can have a maximum of three (I can hire family members to meet all criteria, etc). I am fine for a year or two maybe, while pissing off customers cause I keep changing legal entities.

What scares me are articles like this Micro-company revenue may be lowered to 300k EUR from 2024 and 100k EUR from 2025. From what I know of the RO govt I'm 100% certain this will end up being the case.
I do not want to end up paying 16% on profits (am almost pure profit) instead of the 1% CT I pay now.

I'm planning on massively growing my business and I already have the customers locked, problem is it's all B2B work for EU countries such as DE and asking their legal dept to contract directly to say a Dubai FZ company would absolutely not fly.

What are my options for 2025 and onward to legally lessen my tax burden for the companies? I'm not particularly looking to relocate as it's not the personal income tax that's killing me.
Is there any way to structure some sort of offshore holding company (whether Dubai FZ or anything else) and have the tax authorities not bat an eye when I'm extracting profit from the existing SRL(s) receiving customer payments?

Thanks!

You can use your RO company as a processing company for UAE FZ.

 

[Marzio]

You can use your RO company as a processing company for UAE FZ

He will pay 9% CIT on any income received in UAE since those are not dividends but business income.

 

[yngmind]

He will pay 9% CIT on any income received in UAE since those are not dividends but business income.

That's just an example. Use any other company you want, but if you need an EU company, you can use it as a processing company, let's say for your HK, SG, US, holding company.

The effective tax is still less since 375k is not taxed + salary + business expenses.

 

[Don]

If you don't want to relocate what about setting up an Estonian OU + director and working for the Estonian OU in Romania.

Estonian OU pay taxes ONLY when dividends are distributed and salaries paid to non residents are tax free so you'll end up paying 10% personal income tax in Romania.

Maybe @Don could chime in and clarify if then he decide to move and distribute dividends to a holding company in UAE for example, those dividends will be tax free or not.

In this position I would use the Romanian company shares to make a capital contribution to the Estonian holding company.
Now you have Estonian company as a parent with a Romanian subsidiary.
As per EU parent-subsidiary directive the profits distributed by a subsidiary to its parent company are exempt from withholding tax. Similarly, Estonia may not and will not charge withholding tax on the profits that this company receives from its subsidiary and can redistribute them tax free.
Lets say we used discounted cash flow method and valued the romanian subsidiary as EUR 500k.
Now the holding will be generating 500k surplus cash over time. As we are sort of miser and don't want to pay 20% tax we will not distribute dividends from the operating profits of the Estonian holding. Instead, at some point we would consider the holding company to be overcapitalized and decide to reduce the capital up to the extent of the previous capital contributions leaving us with additional EUR 500k tax-free income (which will not even be considered income, although technically it is).
Because the amounts are so low and we have structured everything appropriately we don't need to involve auditors in the process.
In terms of personal tax residency, Estonia or UAE both work well with this setup. The latter can be quicker for certain citizens, and better for those who like frying eggs at the mere sunlight, but for the EU citizens Estonia can be a pretty decent choice, especially those into building startup ventures.
Its worth noting that income taxed in a foreign state is exempt from tax in Estonia, and as per Romania-Estonia double tax treaty, the WHT on commissions is 2%, which is quite reasonable rate to pay for reducing the corporate tax base in Romania.

Dream of a grand life with only 0-1% tax? Team up with Papa Don, contribute a modest token, follow his golden rules, keep it real and wise, and witness the grand scheme come alive!