1% Tax Rates for companies in Europe. 6 advantages to set-up micro-enterprise in Romania.

Natural persons and legal entities are allowed to register a business in Romania. The minimum share capital  must be deposited in the company’s bank account for the business form to be incorporated. Only 0.5 Euro for Limited Liability Company, while for a joint stock company, the capital is established at EUR 25, 000.

It is also allowed for local businesses to establish their own management structures, according to the provisions of Romanian law.

It’s important to have a Romanian registered office so that companies can legally file their incorporation documents. Lawyers can help you host your company’s head office at your own office address for a minimal cost (around 300-500 euros per year).

What are the advantages of setting-up a micro-enterprise in Romania?

  • There is no limitation in the choice of CAEN codes (commercial activity profile code)
  • The applicant does not have to prove his qualification/training
  • Associations are liable up to the limit of paid-up share capital
  • If there is at least one full-time employee, a microenterprise income tax of only 1% will be paid. Otherwise the 16% rate applies
  • There can be an unlimited number of employees unlike PFA where the number of employees is limited to 3
  • Partners can also withdraw profits from dividends during the current year on a quarterly basis by filing interim financial statements.

How can an investor register a Limited Liability Company?

In order to set up a limited liability company, the following steps must be followed:

  • Choosing and reserving the name of the entity Checking the availability of the company and reserving it can be done online. This registration step is completed with the Trade Registry, where the investors will complete a reservation form in which they will mention their 3 main options for the desired company name.
  • Allocation of a space as registered office
  • Drawing up the articles of association
  • Opening a bank account for share capital
  • Preparation of the documents concerning the registration of the company with the ONRC

Non-residents may also open a business, but they need to declare on their own responsibility that they do not have any fiscal debts in the country where they reside.

What documents must be submitted to the Trade Register?

In order to set up a limited liability company, the following documents must be completed and submitted:

  • Application for registration (ONRC form)
  • Annex 1 on tax registration (ONRC form)
  • Annex 2 on foreign investment (ONRC form) if applicable
  • Standard declaration on own responsibility signed by the partners or administrators showing: 1. PJ does not carry out the declared activities at the registered office, at the secondary offices or outside them, for a maximum period of 3 years or 2. PJ fulfills the conditions of operation in the sanitary, sanitary-veterinary, environmental protection and labor protection fields as appropriate
  • Proof of verification of availability and reservation of the company name
  • Agreement to use the name as appropriate
  • Declaration that the person is the sole partner in a single SRL or that the SRL with sole partner is not the sole partner in another SRL
  • The constitutive act
  • Document certifying the right of use of the space chosen as registered office
  • Application to ANAF in order to obtain the certificate issued by the competent tax administration, which indicates that for the building used as a registered office no other document has been registered for the right of use
  • The declaration on own responsibility if, from the certificate issued, it appears that there are already registered at ANAF other documents attesting the right of use on the same building intended as a registered office
  • Proof of the payment of contributions to the share capital
  • The ownership documents for contributions in kind
  • Declarations of the founders/directors/custodians that they meet the legal requirements for this capacity
  • Identity documents of the founders/directors/creditors
  • Specimen signatures
  • Declaration on own responsibility of the foreign citizen FP in his/her own name or as representative of the foreign PJ that is not registered for tax purposes in Romania if applicable
  • Declaration on the beneficial owner of the legal entity
  • Proof of payment of the legal tariff

After the Trade Register Office verifies all the required documents, the company wil be given a unique registration code (CUI).

What type of Romanian company can I create?

The following types of companies can be opened by foreign investors: the SRL (limited liability company), the subsidiary, the branch, and the liaison office. The representative office can only be set up for certain types of activities (you should ask a lawyer).

 

How long does it take to form a company?

Usually a registration process takes up to 10 working days. The process starts with a client’s application and ends with an up and running company.

If you hold a personal residence certificate in Romania, you are entitled to pay only 5% dividend tax (if you withdraw a profit from your LLC). With appropriate precautions your global income can be taxed in Romania on beneficial terms, e.g. as a deductible expense.

The IRS considers dividends and capital gains as taxable income. If you are a Romanian resident, you will have to pay taxes on your personal income. The tax rate for personal income is 15%.

Do I need a personal residence?

If you hold a personal residence certificate in Romania, you are entitled to pay only 5% dividend tax (if you withdraw a profit from your LLC). With appropriate precautions your global income can be taxed in Romania on beneficial terms, e.g. as a deductible expense.

The IRS considers dividends and capital gains as taxable income. If you are a Romanian resident, you will have to pay taxes on your personal income. The tax rate for personal income is 15%.