Romania Micro Enterprise Threshold to be lowered to 500,000.

[orangekangaroo]

From 1 July 2022 onwards the limit of micro enterprises will be 500,000 euros instead of the 1,000,000 that is currently the limit. My worry is that they proposed even a limit of 100,000 euros.

https://www.romania-insider.com/smes-threshold-income-tax-romania-change

 

[Marzio]

Bad news for Romania, the micro company status is losing appeal.

 

[gab1]

Due to strong criticism, this measure has been 'postponed' with no new implementation date given (link).

 

[orangekangaroo]

Due to strong criticism, this measure has been 'postponed' with no new implementation date given (link).

I got to love the community spirit here on this forum. Thanks for the quick update I had not found yet.

I think it is good to keep continuity in rules with regards to business and it is great that the proposed threshold changes have been ditched. I want to build substance in Romania but with changes to thresholds and even lower thresholds being put forward I would have thrown that plan out of the window.

 

[i888]

For the moment the change is on hold, but if I'm not mistaken in that Pnrr program there is something about changing the tax on micro.

Somebody pointed out that crypto is taxed at 10% but micro could be as low as 1% on revenue and using micro to evade that 10% opens a door of future problems like actually paying 10%!

Hope that you do your due diligence!

 

[erad128]

The bill is expected to be endorsed by the end of the week.

• Romania’s Govt. publishes fiscal changes bill
• proiecte-acte-normative - Acasa - MFP

The important bits, in English:

A micro-enterprise shall be a Romanian legal person which cumulatively meets the following conditions, as of December 31 of the previous fiscal year:

a) has earned income, other than consulting and / or management, in proportion to over 80% of total revenues.

b) has at least one employee.

c) realized incomes that did not exceed the equivalent in lei of 500,000 euros.

d) has associates / shareholders who hold over 25% of the value / number of participation titles or of the voting rights to at most three Romanian legal entities that fall to apply the system of taxation on the income of micro-enterprises.

Goodbye Romania.

Lithuania has micro-enterprises up to 300k EUR turnover, no employment requirement, no consulting/management restrictions.

Any other countries offer a similar micro-enterprise plans?

 

[gab1]

Lithuania has micro-enterprises up to 300k EUR turnover, no employment requirement, no consulting/management restrictions.

That's a 5% tax rate, what about tax on dividends (taking profits)? Googled that it's 15%? Still doesn't pay off comparing to Romania? Am I missing something?

 

[marioIT]

Goodbye Romania.

Lithuania has micro-enterprises up to 300k EUR turnover, no employment requirement, no consulting/management restrictions.

Any other countries offer a similar micro-enterprise plans?

I still have some papers from an accountant in Romania:
100k revenue:
- hiring yourself (gets you into the 1% tax regime) at low legal salary
- paying social and health for it (capped)
- taking out everything else as dividends (5% tax)

after all you take home about 92k.
So about 8% tax rate ALL INCLUSIVE (social and healthcare included).
Rents is cheap, cost of living too...
I still prefer moving out of EU these days, but there are people that are starting out or can't move and IMHO for them is still a decent option to make clean money inside EU, even at 500k.
Surely there could be business models where this kind of taxation doesn't work (many expenses, low margins). In that case you can opt out and use the 16% tax rate, but you need an accountant to know when it's worth to switch.

Sadly I heard they are pressured from EU for this regime and they will have to reduce the turnover limit even more the following years.

 

[RealDude]

- hiring yourself (gets you into the 1% tax regime) at low legal salary
- paying social and health for it (capped)

How much is it exactly for each point?

 

[erad128]

is still a decent option to make clean money inside EU, even at 500k.

The part that ruins it for many people is the new 20% cap on management/consulting cap. Businesses that can benefit from the Romanian micro-enterprise regime the most are the management/consulting type, since they tend to have low expenses. But now that's incompatible with the micro-enterprise regime. Or I'm missing something? What do they mean by management/consulting? I imagine somebody offering their professional skills through a Romanian company fits into the "consulting" category at least.

That's a 5% tax rate, what about tax on dividends (taking profits)? Googled that it's 15%? Still doesn't pay off comparing to Romania? Am I missing something?

You are right. Dividends are 15%. I thought it was possible to use the EU parent-subsidiary trick to avoid that, but unfortunately the Lithuanian micro-enterprise regime is only available for companies with individual shareholders, not corporate. In other words, there's no way to avoid that extra 15%. The Lithuania micro-enterprise regime is not good at all.

 

[boomy]

Romania Micro company is max 500,000 euro
Lithuania Micro company is max 300,000 euro

Would it be possible to split your business activity into two entities? also would it be possible to have more than one entity in each country? under the same name?

 

[erad128]

- taking out everything else as dividends (5% tax)

More bad news! According to the proposed bill, dividend income in Romania is now taxed 8%

 

[marioIT]

yeah you're right, I've just read it. Dividends will be raised to 8%, that would mean paying more than 10% all inclusive per year.
Supposing even only 100k of revenue, it would means 10k in taxes...
10k is pretty much dubai/cyprus yearly fees territory.
Maybe still useful for broke EU sole traders wanting to escape their high tax Eu countries, before going fully offshore.

I'd still prefer cyprus and dubai than risking my life on every drive... Romanians drive like sh*t really. I've seen some crazy stuff there. Really there were places you could literally buy a valid driving license without driving experience

These are just the fatalities, but if you would include the close calls it would be off the charts!

 

[Mr Magoo]

Dividends will be raised to 8%, that would mean paying more than 10% all inclusive per year.

where did you read this?

 

[marioIT]

https://www.romania-insider.com/ro-fiscal-changes-bill-published-jul-2022
https://mfinante.gov.ro/ro/acasa/tr...normative?mc_cid=fe60f64056&mc_eid=607bd7d763
also

The draft bill does not include changes to the flat income tax, which the leftist Social Democrats, parliament’s largest party, want to replace with progressive taxation which their Liberal Party coalition partners oppose.

 

[Mr Magoo]

seems like it will be effective qs of 2023 if approved

 

[AndyAresa]

it seems this arrangement would continue to work for e.g. those engaged in software development, online marketing, content writing etc. as long as there is no management or consulting service. and the overall overall burden of 10-12% for up to 500,000 Euro income looks ok. but of course one needs to factor in admin costs for accountants, living expenses. etc.