Romania micro company tax rules change announced today

[gab1]

See article here.

- Dividend tax increases from 5% to 8%.

- Income tax is 1% of turnover, but you MUST have at least one employee. If you have no employees you are not considered micro and therefore will have to pay 16% tax.

- Turnover must be 500k or less.

- Only 20% of the revenue can be from consulting and management

- Must not be banking, insurance, capital markets, gambling, oil and gas

Personally I am more concerned about the 'must employ at least 1 person' thing. Can I employ myself? How much extra is that going to cost me?

 

[Marzio]

Just use this salary calculator tool and keep in mind that the minimum salary in RO is 2550 RON (around $520).

 

[Suzy Emerald]

Ok so when i have 1 employee vs. no employee now my lower income tax (1) is somewhat offset against the higher dividend tax (8).

 

[callicea22]

What is considered consultant or management activity?

 

[Larin]

Maybe I am missing something, but why would one spend effort on these less established jurisdictions when rules can be changed so quickly? Oh, look now its 500k not 1m. And now its at least one employee, etc.?
Get established in a stable jurisdiction like the UK, Ireland, or the Netherlands and not worry about the potential rule changes?

 

[Mr Magoo]

Hi

I got information that the changes come into effect as of August 1st.

 

[Marzio]

why would one spend effort on these less established jurisdictions when rules can be changed so quickly?

Because of the shiny object syndrome.

1% tax is more appealing than 12.5% or more ina more established jurisdiction.

 

[gab1]

I got information that the changes come into effect as of August 1st.

According to the article these changes come into force at the beginning of next year.

 

[Mr Magoo]

According to the article these changes come into force at the beginning of next year.

ok, hope it is true. A friend of mine accountant there is 100% sure it is per August 1

 

[RealDude]

Dead for all freelancers?

 

[CoffeeCherryTea]

Summary of changes a/o 2023

 

[Mel]

Because of the shiny object syndrome.

1% tax is more appealing than 12.5% or more ina more established jurisdiction.

Which jurisdiction would you suggest / combination of company - residence for less than 1 o o o k yearlly? So far I've been established in Romania, now it won't make sense anymore. Any suggestion would be appreciated.
Thanks!

 

[boogieboogie]

Well that sucks. There were a couple of people in this forum that wanted to create substance in Romania and moved there relatively recently. I myself seriously considered moving earlier this year and ended up postponing it. IMO the worst part is not the tax raise itself, which isn't that high (RO is probably still the best country for small businesses tax-wise apart from UAE), but the precedent that this sets and the unstability of the jurisdiction. Today it's 500k, tomorrow might be 100.

Dead for all freelancers?

I don't think so, it's still the lowest tax for businesses in the EU (and Europe). But it's like Larin said: Is it worth it to deal with Romanian accountants and law firms, create substance, etc etc... only to have this potentially change from one day to the other? Plus we know that the EU is after that 1% on turnover... I'd be surprised if we don't see another legislation change by 2024 (at the latest).

 

[no1d]

Its not the Romanian gov who wanted to reduce the threshold of micro companies, Brussels pushed them to do so because its tax heaven rates, but you can own many micro companies and that's still good.
Of course it won't last many years even with 500k but I won't worry about that, there's no place in EU with these conditions anyway.

 

[gab1]

What about the condition of employing a person though, can I employ myself or do I literally need to employ someone else? Anyone knows? If it's the latter then that's a serious hurdle.

 

[benbao]

What about the condition of employing a person though, can I employ myself or do I literally need to employ someone else? Anyone knows? If it's the latter then that's a serious hurdle.

Yes, you may employ yourself with the condition that you have a Romanian tax number/NIF.

Well that sucks. There were a couple of people in this forum that wanted to create substance in Romania and moved there relatively recently. I myself seriously considered moving earlier this year and ended up postponing it. IMO the worst part is not the tax raise itself, which isn't that high (RO is probably still the best country for small businesses tax-wise apart from UAE), but the precedent that this sets and the unstability of the jurisdiction. Today it's 500k, tomorrow might be 100.

I don't think so, it's still the lowest tax for businesses in the EU (and Europe). But it's like Larin said: Is it worth it to deal with Romanian accountants and law firms, create substance, etc etc... only to have this potentially change from one day to the other? Plus we know that the EU is after that 1% on turnover... I'd be surprised if we don't see another legislation change by 2024 (at the latest).

While changes always suck its important to keep in mind Romania is still a beautiful country, extremely cheap to live at, has good infrastructure and talent and even 16% tax rate on profit is not a bad deal should the micro scheme end at some point. There are many businesses that need the EU and entrepreneurs that wish to move only within EU so Romania has its place.

The EU has its agenda and it will continue to annoy many of us no matter if incorporating in EU or outside until this beast implodes at some point.

 

[EliasIT]

- Income tax is 1% of turnover, but you MUST have at least one employee. If you have no employees you are not considered micro and therefore will have to pay 16% tax.

the question may be, what is the cost of such an employee compared to what will the consequences be if you have to pay 16% !

I believe you can find a cheap guy sitting in your office for roughly 400 euro a month.

 

[CoffeeCherryTea]

"The legislation introduces a new restriction on partners or shareholders of a micro-enterprise from holding more than 25 percent of the value, shares, or voting rights of more than three Romanian micro-enterprises."

Source

 

[ilpablo]

Hi there, I'm one of the luckyes that recently moved here and made the effort to just see everything being screwed up so quickly.

So now I've got my company in Romania and a residency permit. But I still have my UK company active. I was planning to shut it down and move everything to the Romanian company but just a month before this news came out and now I don't know anymore what to do.

I'm not looking for zero tax rates just the best option to live in a nice place without being harassed by the government and sleep well at night being 100% legal. A Croatian tax advisor told me that I can keep running my LTD without worrying about Croatia. The romanian tax advisor told me the same tbh. But I'm not sure that these local tax advisors know the CFC / POEM etc rules.

My best destinations would be probably Croatia or Portugal, maybe Malta, or Slovenia.

Any suggestions, please?

 

[Marzio]

Any suggestions, please?

If you already setup the Romanian SRL and 500K turnover is acceptable because your business have low costs and it allows you to hire an employee with minum salary you could pair that with Portual NHR paying 1% total taxes because Romania levies no withholding taxes on dividends to non resident individuls.

The employee also would allow you to protect you from potential PoEM issues even though that Romanian micro company could be seen as a CFC because of the low taxation but probably the fact that the company has an office and an employee would be exempted.