Are you planning to start a business in one of the EU countries? You should take a close look at Romania because it’s a great business environment not only for Romanian entrepreneurs but for non-residents, too. Reduced taxes, high-quality professionals, low-cost business operations, and the most important thing, diversity. Thanks to its favorable geographical location, Romania has a dynamic economy that makes it a great business hub. So, if I’ve caught your attention then you should read the whole article to find out how to register a company in Romania and what you need to know to build a successful business here.
- Why should you open a business in Romania?
- Who can register a company in Romania?
- How to set up a business in Romania?
Why should you open a business in Romania?
I’m sure that your first question is about the reasons to open and operate a business here. Even if the legislation is changing often, Romania is still an excellent option to start your entrepreneurial journey. So, let’s take a look at the benefits of starting a company in Romania:
- Favorable geographical location
- Diversity in business
- Extremely low tax rates from 1% up to 500.000 € in revenue
- Very low dividend tax rate of only 8%
- Limited Liability for the shareholders
- Progressive and politically stable EU jurisdiction
- Lightening fast and affordable communication technology
- A very business-friendly environment, including from a fiscal perspective
- No pre-payments of VAT or Income Tax
- Affordable accounting and fiscal representation
- Access to funds from Romania and the European Union
- Access to skilled professionals in all domains
Who can register a company in Romania?
As you can see, there are many reasons to start your business in Romania, so let’s see who can register a company here.
First of all, I need to clarify an important thing for all those who are interested in doing business in Romania. You can only register a company in Romania if you
- exceed the legal age of 18 years,
- can provide a clean criminal and tax record (you have not committed any deeds sanctioned by the financial, customs, and financial-fiscal discipline laws, such as those registered in the fiscal record) – for non-residents this takes the form of a „sworn statement” (affidavit)
Attention: The most important aspect is that foreigners with or without residence in Romania can also form a company in Romania, based on their Passports (National IDs are also accepted for citizens of EU member states) and proof of residence.
How to set up a business in Romania?
Starting a business in Romania means the first thing you need to do is to register your company. Having your business legally registered gives you the opportunity to acquire more financing for your activity: you can take bank credits, hire people, and of course, you can sell your products/services to customers.
How to register a company in Romania?
All Romanian companies have to be registered with the National Trade Register Office, an institution that operates under the Ministry of Justice.
The right legal form for your business
To register a company in Romania, first of all, it is necessary to decide what type of company you want to register: SRL, SA, PFA. The most common type is SRL (the equivalent of an LLC) because:
- provides limited libiality to the shareholders
- in most cases, you don’t need a certification, as is the case with a PFA
- you can hire an unlimited number of employees
- it can be set up both for Romanian citizens and expats
- you can extend your business as much as you want
- you will have reduced taxes, so you will pay only 1% income tax if you have at least one employee, or 16% profit tax if you don’t have any employees
- and most importantly, you have an unlimited choice of business activities that you can perform with your company (you can add as many CAEN codes as you need, whereas a PFA can only have 5 CAEN codes). You can read more about the differences between SRL and PFA in this article.
What are the main tax rates in Romania?
In the case of a SRL you can expect the following tax rates:
Corporate Income Tax
- 1% of revenue if your revenue is up to 500.000 € and you hire at least one employee
- or 16% of profit if:
- you don’t have any employees
- you exceed 500.000 € in revenue
- you generate more than 20% of your total revenue from management consultancy activities
- you have more than three companies in which your share exceeds 25%.
- The dividend tax rate is 8% on dividends paid to shareholders
Value Added Tax
- The standard VAT/TVA rate is currently 19%
- but we also have a reduced rate of 9% applied to
- the supply of dental prostheses and their accessories, except for tax-exempt dental prostheses
- the supply of orthopedic products
- supply of medicines for human and veterinary use
- the supply of the following goods: food, including beverages for human and animal consumption (except alcoholic beverages which are taxed at 19%), live domestic animals and poultry, seeds, plants, and ingredients used in the preparation of food, products used to supplement or replace food
- the supply of water for irrigation in agriculture;
- the supply of fertilizers and pesticides used in agriculture, seeds, and other agricultural products for sowing or planting, and the supply of services of a specific type used in agriculture
- water supply services
- sewerage services
- accommodation in the hotel sector or in sectors with a similar function, including land rental or land for camping purposes
- restaurant and catering services, except for alcoholic beverages, other than beer.
- and a reduced rate of 5% which applies to:
- school textbooks, books, newspapers and magazines, except those intended exclusively or principally for advertising
- admission fees to castles, museums, memorial houses, historical monuments, architectural and archaeological monuments, zoological and botanical gardens, amusement parks and recreational parks whose activities fall under CAEN codes 9321 and 9329, fairs, exhibitions and cultural events, sporting events, cinemas, other than those exempted from tax
- supplies of social housing under certain conditions, including the land on which it is built
- the right to use sports facilities whose activities fall under CAEN codes 9311 and 9313 for the purpose of practicing sports and physical education, other than those exempted
- delivery of eco food, traditional or mountain foods
- transportation of people for tourism or leisure purposes.
And if you will have employees you should know also about the minimum salary in Romania (3.000 RON) and the salary taxes and contributions:
If you plan on having employees, it is important to know what the minimum salary is.The minimum (gross) salary in Romania is 3.000 RON. From this, the employee pays income tax and social contributions.
Individual Income Tax
- The income tax for individuals in Romania is 10%
Social Security Contributions
- The Social Security Contributions amount to 35% (CAS and CASS, meaning health and social insurance)
So, if you decide in favor of a SRL, here’s a short to-do list for opening your business in Romania:
- start by choosing a name for your company
- then select your CAEN codes (these codes represent the activities that your company will generate revenue from)
- find a legal address for your company – you can lease a space or, if you’ll be working remotely you can purchase a „virtual legal address”. This is a physical address where you’ll have the right to establish your company’s legal address but which you won’t be able to use otherwise. A third option is to establish your legal address at a lawyer’s office. However, this option is available only for one year, after which you will need to change your address elsewhere.
- decide if you wanna start this business alone, or you will co-opt some other founders
- decide the amount of the share capital (the legal minimum is 1 RON per shareholder)
- and after that, you can apply for registration at the National Trade Register Office
Once you’ve established all these aspects you can proceed to the business registration procedure. Even though bureaucracy can make the registration process a bit difficult, luckily there are solutions that help you eliminate the stress and allow you to register a company in Romania digitally, from the comfort of your home (wherever that may be). StartCo can help with everything from:
- initial support regarding the choice of legal form, CAEN Codes, legal address, etc.
- preparation of the entire documentation needed to register the company
- virtual legal address in all major Romanian cities
- submitting the application with the Trade Register
- ongoing support for business setup in Romania
If you’re looking to start a business in a fiscal-friendly, low-tax EU country with a skilled, English-speaking workforce and plenty of opportunities, then Romania should be one of your top choices. What am I saying? It should be your number one choice. So, when you’re ready, start your company setup in Romania right here.