Romanian SRL micro-enterprise dividends + Cyprus non-dom ?

[gnud]

Can anyone confirm that a Cyprus non-dom resident owning a Romanian SRL micro-company will be exempt from the 5% tax on dividends in Romania, so in total dividends will be totally tax free?

 

[Marzio]

In theory yes, there are no withholding taxes for non resident individuals so it should work. If you create enough substance in Romania it could work.

 

[Sols]

Ask a Cypriot tax adviser if you want to be sure. In the extremely unlikely event that the Cyprus tax authority looks into you, you'll want to be prepared.

 

[gnud]

Doesn't seem like a micro-enterprise is eligible for the dividend withholding tax exemption.

Pentru acordarea acestei scutiri, persoana juridica romana care plateste dividendul trebuie sa indeplineasca cumulativ urmatoarele conditii:

1. este o societate infiintata in baza legii romane si are una dintre urmatoarele forme de organizare: "societate pe actiuni", "societate in comandita pe actiuni", "societate cu raspundere limitata";
2. plateste impozit pe profit, potrivit prevederilor titlului II, fara posibilitatea unei optiuni sau exceptari.

Impozit dividende nerezident. Cum impozitam corect?

Analizam mai jos cazul unei societati care distribuie si plateste in anul 2012 dividende catre asociati: - asociat societate comerciala din Cipru care detine...

www.fiscalitatea.ro

"impozit pe profit" means profit tax, a micro-enterprise pays "impozit pe venit", revenue / sales tax. Therefore a micro-company doesn't seem to fulfill the 2nd condition to be eligible for the exemption.

Înființare SRL: Ce taxe vei plăti pe firmă în 2024?

Vrei să îți deschizi un SRL dar nu știi cât de profitabil este? Află ce taxe vei plăti pe firmă în 2023?

startco.ro

 

[Marzio]

Good find! A 6% total tax is not that bad either.

 

[gnud]

To get 6% you'd need to employ someone. So it will be 6% + the fixed expense of salary. Otherwise it's 8% in total.
To be completely compliant to be able to live wherever you want in the EU, you'd need to employ someone though, to create an economic substance in Romania. So there's pretty much only 1 choice.

Cyprus is pretty much useless in this case. It doesn't provide any benefit in regards to the company and dividends. But you can pay yourself those dividends at the low rate and use that capital to invest or trade, which is tax free for non-dom foreigners in Cyprus. As a bonus you'll actually own the money personally, not the company.

Or create a US LLC and hope Cyprus will ignore the IRS reporting to them, due to the form 5472, an LLC operating from within Cyprus. Since the Romanian tax is so low, I think it's not really worth it. Laws change, it's possible one day they'll start caring and then you'll have a hard time explaining where you taxed the entity all those years.

 

[aragon]

Regarding Romanian micro-enterprises, are there any requirements to file annual financial reports, eg. IFRS? Do the Romanian accounting firms just include that service into their monthly accounting fees?

 

[accountantromania]

You will not get around the 5% WHT and your SRL will either pay 3% or 1% depending on if there is at least one employee on your payroll. So it is either 6% or 8%. You have the legal obligation to submit balance sheets, tax returns. Some accountants might include that in their monthly fees but that is highly unusual. We charge for accounting, VAT/VIES submission on a monthly basis and balance sheets, tax statements on an annual basis.

 

[micand]

You will not get around the 5% WHT and your SRL will either pay 3% or 1% depending on if there is at least one employee on your payroll. So it is either 6% or 8%. You have the legal obligation to submit balance sheets, tax returns. Some accountants might include that in their monthly fees but that is highly unusual. We charge for accounting, VAT/VIES submission on a monthly basis and balance sheets, tax statements on an annual basis.

100% agree!

 

[gnud]

Thanks. I want to point out that it's 6% from the revenue, not profit. Since you need to employ someone, effectively it's more than that.
An attractive alternative is a company in Hungary that pays 9% on profit. With base erosion, it's possible to achieve and surpass Romanian levels.

 

[accountantromania]

Thanks. I want to point out that it's 6% from the revenue, not profit. Since you need to employ someone, effectively it's more than that.
An attractive alternative is a company in Hungary that pays 9% on profit. With base erosion, it's possible to achieve and surpass Romanian levels.

The employee can be paid the national minimum wage and yes, the taxation for micro-companies is based on the revenue up to approx. 1 million euro. IF you are not making distributions of dividends your tax rate can be as little as 1%. In case you relocate to Romania, he can pay the minimum wage salary to yourself and therefor have access to public health care and only have additional costs besides the 1% tax band in the amount of the social security contributions which are based on the minimum wage, basically nothing.

 

[gnud]

The employee can be paid the national minimum wage and yes, the taxation for micro-companies is based on the revenue up to approx. 1 million euro. IF you are not making distributions of dividends your tax rate can be as little as 1%. In case you relocate to Romania, he can pay the minimum wage salary to yourself and therefor have access to public health care and only have additional costs besides the 1% tax band in the amount of the social security contributions which are based on the minimum wage, basically nothing.

Yeah, so you'll pay yourself minimum wage, no dividends, all money will stay locked inside the company while you'll be struggling.

 

[orangekangaroo]

Thanks. I want to point out that it's 6% from the revenue, not profit. Since you need to employ someone, effectively it's more than that.
An attractive alternative is a company in Hungary that pays 9% on profit. With base erosion, it's possible to achieve and surpass Romanian levels.

You are wrong here. Dividend is not a turnover tax. It is an amount you pay after you have taken all costs out. You will see Romania tax to be 6.5 to 7.5% . It cheaper than Hungary. Plus Hungary has 9% corp tax plus local business tax of up to 2%.

 

[gnud]

You are wrong here. Dividend is not a turnover tax. It is an amount you pay after you have taken all costs out. You will see Romania tax to be 6.5 to 7.5% . It cheaper than Hungary. Plus Hungary has 9% corp tax plus local business tax of up to 2%.

Since you pay tax on revenue, i.e. can’t reduce tax base, it too is effectively a tax on turnover. So in total 6-8% no matter what. You can’t reduce it. In Hungary the ceiling is 9% but on profit so you can reduce it. If you register it in the right location you can pay 0% local tax. Therefore it’s possible to achieve better results than in Romania.

 

[Marzio]

What is that local business tax? Depending on the location you register your business the CIT could varies from 9% to 11%?

 

[gnud]

What is that local business tax? Depending on the location you register your business the CIT could varies from 9% to 11%?

You pay 9% CIT to the state, and then you pay 0-2% to the municipality too. If you domicile it in the right place, you can reduce it to 0%, so you'll pay only the 9% CIT.
It's the same in many other countries.

 

[Marzio]

If you domicile it in the right place, you can reduce it to 0%

Just out of curiosity, do you know any municipality that will not impose taxes?

 

[gnud]

Just out of curiosity, do you know any municipality that will not impose taxes?

No. But incorporation services will offer you this option. I don't really care about where it is domiciled, just that I won't pay the tax.

 

[orangekangaroo]

Since you pay tax on revenue, i.e. can’t reduce tax base, it too is effectively a tax on turnover. So in total 6-8% no matter what. You can’t reduce it. In Hungary the ceiling is 9% but on profit so you can reduce it. If you register it in the right location you can pay 0% local tax. Therefore it’s possible to achieve better results than in Romania.

The Romanian 1% tax is on turnover. The 5% Divi tax is on profits as you can offset costs. Depending on your business model and profit margins there is a point to be made for Hungary and its fixed 9%. In Hungary to get 0% withholding tax on Divi you need to pay it to a non resident.

 

[gnud]

The Romanian 1% tax is on turnover. The 5% Divi tax is on profits as you can offset costs. Depending on your business model and profit margins there is a point to be made for Hungary and its fixed 9%. In Hungary to get 0% withholding tax on Divi you need to pay it to a non resident.

WHT to individuals is always paid according to many DTTs. But if an EU parent company owns it, for example in Cyprus, it's 0% on both sides. If you reside in Malta and pay yourself dividends from the Cypriot holding company, it's 0% in total. With base erosion on the Hungarian side, it can be near 0% in total.

And you can do whatever with the company without the risk of paying more tax than profit, unlike with a Romanian company.