Question Romanian company and effective place of management

[netizen]

Hi folks,

I have the following situation. I, UBO live in high tax country. I am planning to open micro company in Romania and benefit from 1-3% tax on revenue and hire a director.

Furthermore, I would prefer to make the company fully remote, so the director would be either digital nomad or someone from outside EU. Looks like Romania allows this.

The question is, would my home country accept this arrangement? The place of effective management would be outside my home country, so it should be alright?

 

[Sols]

That depends on local laws and you'd be wise to seek legal advice from a local attorney to make sure.

In general, I'd estimate that you do not meet most standards. If the director is not resident in Romania, your company might not be considered tax resident or tax resident enough in the eyes of your home country's tax authority.

Normally, to have a company be considered tax resident and sufficiently so to either appease a local tax authority entirely or qualify under some form of double taxation avoidance agreement, you need to have a Permanent Establishment in the jurisdiction where the company is incorporated. At the bare minimum, this is a director. But with nominee directors being so prominent, that doesn't always suffice and legal advisers will recommend having a dedicated office space and ideally some workers.

 

[netizen]

Thank you Sols for your input. I guess you are right about permanent establishment.

But with nominee directors being so prominent, that doesn't always suffice and legal advisers will recommend having a dedicated office space and ideally some workers.

I researched a bit and having a dedicated/real office is not an issue, I will rent a small real office with rental contract. I am also planning to hire an employee, I am just not sure if I will find a suitable person locally whom I can also promote to director role in the future.

If remote was possible, it would be quite easy I think.

 

[John M]

The local banks are now requiring tax ID/ tax residence certificate for the Administrator (Director) of the company and also you need to be phisically present in order to open the bank account.
You’ll also need to grant a PoA to the accountant (with Apostille if granted from abroad).

 

[EliasIT]

The local banks are now requiring tax ID/ tax residence certificate for the Administrator (Director) of the company and also you need to be phisically present in order to open the bank account.
You’ll also need to grant a PoA to the accountant (with Apostille if granted from abroad).

Didn't that is the same as it always has been ?

 

[micand]

Director being a "digital nomad" will have a very tough time just opening a bank account without proof of residence..

 

[accountantromania]

To the point, I couldn't agree more! Banks require proper proof of residence, not an utility bill, but a document that is issued by an official governmental institution.

 

[sabawolo]

I was also asked for official proof of residence. Once I had my certificate of Residence in Romania I could provide this and my data has been changed.

 

[netizen]

Thanks everyone for your inputs. I really appreciate it.

Looks like digital nomad is a bit narrow word, remote worker might be a better term. What I am actually looking for is someone who has registered address outside EU. As far as I understand, Romania allows director from other EU countries. Not sure if someone from outside EU is also allowed.

 

[Sols]

You need to solve two problems here.

One is to be compliant with Romanian law.

The other is to convince your local tax authority that the company is both tax resident in Romania and not tax resident where you live. This can be harder to prove if you are a majority shareholder and the director is at some beach in Bali.

 

[uplana]

Isn't there a provider that can make it all happen in some sort of package maybe?

 

[ShillGates]

The place of effective management means -“where are the actual decisions of the company made” - where is the decision maker.

I suspect this to be still you.


Ie if you hire 5 Romanian directors full time - but you still make decisions on behalf of these 5 - the effective management is where that last person resides.


So it comes very tricky and anally retentive especially if you
Life in a high tax country

 

[RealDude]

Would a permanent establishment instead of a company in Romania be a solution?