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Romania micro company not worth it anymore?

sarlio

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May 11, 2023
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First of all, let me clarify each persons situation is different. If you are making between 100-499k per year this will still be a viable option for you.

Now, let me explain my reasoning here.
I was making numbers for my low income situation (30-50k per year).
It's just not worth it.

SRL Micro is 1% + 8% dividends.
To qualify for it you need to have 1 employee which means paying a 3,000RON (250€ aprox) salary + Social (around 250€). In total it's about 500€ you lose per month by this. If you self-employ yourself (which might lead to an accusation of fraud I guess) you could get 140€ aprox from this, which doesn't make it much better, you are still -360 per month with this.

Now let's say you earn 3k per month this means 2500 with an employee.
Then you also need to rest taxes which, according to a fiscal advisor I spoke with, goes to the gross profit in the current law, this is 1% of 3k.
30€, not bad, 360€ per year.

But now let's imagine you want to take that money out as a dividend.
2880€.

Now let's sum up everything.

9240€ per year (26760 left from 36000)

In total you are basically losing 25.6% without counting paperwork, legally requires accountant, office space if your home address is not suited, and so on.
I might be wrong but this is the conclusion I came up to after several consultancies.

This is only good if you are making enough money to the point of not caring about the -500€/pm of having an employee.

Without the employee requirement (like it was last year), it would actually be quite good. 3% + 8% dividend which would result in the example above as 32040€ per year from 36000€.
But now that option does not exist anymore.

There are alternatives such us using company funds over dividends, but that could also be considered fraud I guess, company expenses should be aligned with it's activity.

What can I say... maybe I am completely wrong but what seemed like a good option it doesn't look so good anymore. At first I was told taxes went into net profits, not gross, which somehow saved the situation a bit, but guess that person was not aware of the current law?

Sharing it as my hope is my reasoning is completely wrong.
 
last year it was 3% tax on gross revenue and 5% dividend tax. Now it is 1% on gross revenue, not profit. In my opinion SRL / micro comp can be worth it if you make like 15K a month. An accountant will cost you around 100 euro a month
 
I see.
I was not wrong then.
This is nuts, I either grow big enough to make the whole effort worth it or I should quit.
Leaving Europe doesn't seem like an option right now so I think I will cease my activities before I run into issues. Quite sad as I really wanted this to work out and have a side business but totally not worth it, being a corpo slave pays better. I guess that's what they want after all, full control over your life.
 
Were you expecting to start a business and make millions in the first year? Of course it takes work and, most importantly, time...

Making 30K-50K a year for a business that is starting is actually pretty good. Just pay your 25% tax wherever you are and forget about tax optimization at this point. Even in Romania, being left with 27K a year of pocket money (according to your math above) gives you a pretty good lifestyle with room to save money.
 
I made some calculations regarding the use of Romanian companies for receiving dividends from the US at a reduced 10% WHT rate. However it makes no sense even at 200k euros per year. You would be effectively be paying 20% (minimum directors fee included) whereas you can just pay the 30% WHT rate instead and avoid the hassle of dealing with Romanian/EU bureaucracy.

 
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Min salary is 3k RON of which you pay around 250e in taxes and social. The other 350e is your salary.
Accountant around 80e if we include the extra fees for yearly/quarterly reports and salary service. Let's round to 100e.
Virtual office 12-15e/month
From 3k you pay 30e tax.
So you pay around 400e/month.
2600e - 208e dividend tax = 2392e.

All expenses are around 600e. That's 20% from 3k income.
My advice is to figure out how to scale or find better clients and make more.
6k income will have 850e in taxes ( 14.6%)
10k will be 12.3%
15k will be 11.2%
20k will be 10.6%.
And you need to make 41.7k/month to reach the top bracket.

Seems like a good deal considering you're in the white list country and under GDPR. I originally wanted to get Emirates residency to avoid dividend tax, but I'm glad I didn't considering all the recent news related to blocking accounts. I'd rather pay 12-15% tax ( and 10% capital gains tax ) and not raise any red flags or face possible criminal charges for tax evasion :)
 
Min salary is 3k RON of which you pay around 250e in taxes and social. The other 350e is your salary.
Accountant around 80e if we include the extra fees for yearly/quarterly reports and salary service. Let's round to 100e.
Virtual office 12-15e/month
From 3k you pay 30e tax.
So you pay around 400e/month.
2600e - 208e dividend tax = 2392e.

All expenses are around 600e. That's 20% from 3k income.
My advice is to figure out how to scale or find better clients and make more.
6k income will have 850e in taxes ( 14.6%)
10k will be 12.3%
15k will be 11.2%
20k will be 10.6%.
And you need to make 41.7k/month to reach the top bracket.

Seems like a good deal considering you're in the white list country and under GDPR. I originally wanted to get Emirates residency to avoid dividend tax, but I'm glad I didn't considering all the recent news related to blocking accounts. I'd rather pay 12-15% tax ( and 10% capital gains tax ) and not raise any red flags or face possible criminal charges for tax evasion :)
Your numbers are correct but don’t forget about the minimum social contribution for dividends (CASS) of a maximum of 7200lei(1450euro) if you got dividends more then 24x600euro. To find more about the CASS treshold on dividends google “cass dividends 2023” and you will understand how its calculated.
 
Your numbers are correct but don’t forget about the minimum social contribution for dividends (CASS) of a maximum of 7200lei(1450euro) if you got dividends more then 24x600euro. To find more about the CASS treshold on dividends google “cass dividends 2023” and you will understand how its calculated.
Oh, thank you. That's news to me. So it's another 1.5k (maximum) euros worth of yearly taxes. Still ok considering you can take enough dividends to last for a few years and then take minimum dividends ( less than 18k lei per year ) for the next few years. Once out of money repeat the process :) Impozitarea dividendelor 2023. Cât e contribuția la sănătate

Do you know if it is possible to invest through SRL in stocks? So the money won't just be lying in the company account.
 
The thing is that for low incomes, tax optimization is rarely worth it. Just set up your business or self-employment where it's easy to do or wherever you are.
I agree, but everything above 200 - 300K euro in profits a year is worth to look into tax optimizing.
 
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