Why would anyone want to create a micro-company in Romania? Well, it’s one of the least-known tax optimization strategies to be used for commerce within the European Union.
Here is a list of 7 reasons why you should potentially create a micro-company in Romania
1. Possibly the lowest tax structure in the European Union
The tax rate is 3% of turnover, which is fantastic for high margin businesses such as consulting. If you run a tight ship with thin margins, then this is not an appropriate structure.
You can even lower the turnover tax to 1% IF you hire an employee. You can either take advantage of the high quality human capital in Romania, or even hire yourself. After you reach a certain level of turnover, it starts to make financial sense to hire yourself and pay the extra social security charges and income tax.
I can’t think of any other EU structure offering such headline tax rates.
2. Low dividend tax rate
Romania taxes dividends at a rate of 5%. You may, or may not, have to top up in your own country of fiscal residence.
3. It offers Limited Liability
It’s possible to find cheap, low tax structures in other EU countries, typically for independents or private entrepreneurs. But in many cases, they do not offer limited liability. If you create a micro-company in Romania, your personal assets are protected.
4. You can bill customers with an EU invoice
Many EU companies have issues with their suppliers invoicing them using non-EU companies, or with any of the other creative structures out there. If you create a micro-company in Romania, you get to bill your customers with a solid EU structure and you shouldn’t face any issues with accounts payable departments.
5. Full access to EU banking facilities for those who create a micro-company in Romania
Romanian micro-companies have access to Transferwise, Paypal, and Stripe. If you want an actual Romanian bank account, you will need to travel there, but you can open fintech accounts online all over Europe with such a structure.
If you reside outside of the EU, opening online accounts with fintechs is a bit more limited, but there are still many options. In any case, you can always fly to Romania at any point (in a normal world) to get a real bank account if you ever feel the need for one.
And objectively, going to Bucharest for a few days is not a punishment. It is a beautiful, fun, and affordable city.
6. Romania offers a great workforce
Romania is a great value country to hire talent. Wages are relatively low (though they have been growing fast); you can expect to pay 800 euros a month for an assistant who is computer literate and speaks a few languages, to 1800 euros per month for an IT person with reasonable skills.
Importantly, Romanian is not an intimidating Slavic language – it is a Romance language. On top of English, which is widely spoken amongst the younger generation, French and Italian are very common too.
7. You can create a micro-company in Romania REMOTELY
Yes. My lawyer, Dan, can take care of the whole process through power of attorney, and host your business address in his office in order to minimize costs. Dan is actually quite well-known in Romania for his political activism, feel free to check out his fee structure and profile here.
What most incorporators will not tell you about the micro enterprise structure in Romania
- Once the turnover of the micro-company reaches 300,000 Lei per year (about 60,000 euros) then you must register for VAT. At that point, you must sign a lease agreement for a real, physical office, as the lawyer’s address is only valid for micro-enterprises with a turnover of less than 300,000 Lei. Dan can help you find a cheap office somewhere.
- If your turnover is more than 12 minimum legal salaries (22,800 Romanian Lei = +- 5,000 euros ) then you must pay a fixed 10% healthcare contribution of that amount (2,280 Romanian Lei = +- 500 euros) on a yearly basis.
- It does not entitle you in any way to Romanian residency. But it doesn’t matter, as you can run such a business entirely remotely.
- Make sure that having a Romanian micro-company does not break CFC rules in your country of tax residency.
Feel free to get in touch with my lawyer Dan.
If you want to discuss your internationalization and diversification plans, book a consulting session* or send me an email.
*a consulting session is a discussion about your portfolio and objectives. It does not constitute legal, financial, tax or investment advice.