If you are looking to incorporate a Romanian company, most probably you are interested in the Romanian tax system. The taxation system has significantly changed because of the Government Emergency Ordinance no. 16/2022, which will enter into force from January 1st, 2023.
Therefore, the Romanian tax system, which was considered quite attractive by foreign investors, will suffer some changes. Let’s take them one by one and explain the main points:
How can I do business in Romania?
Romania offers 2 main systems to conduct your business: one is the registered sole trader or individual authorized person (PFA – Persoană Fizică Autorizată) and the other one is by incorporating a limited liability company (SRL – Societate cu Răspundere Limitată), which can be a microenterprise (microîntreprindere) at its most advantageous tax system.
What taxes will a PFA pay from 2023?
Until 2023, the PFA had a very attractive special tax system for certain professions, like IT consultants, taxing them with a capped sum of around 2.500 euro if they had an income up to 100.000 euro per year (norma de venit). Practically, it was a 2.5 % rate on their income applied until they reached the limit of their tax bracket.
Unfortunately, from 2023 the bracket will go down to 25.000 euro from 100.000 euro. So if you make over 25.000 euro per year, you will not pay a capped amount, even if you have a activity fit for norma de venit, but instead you will pay 10% from the entire yearly income (sistem real), plus social security and health insurance.
What taxes will a SRL pay from 2023?
The SRL taxes will suffer 3 main changes: tax level, tax bracket and company activity for microenterprise.
As regards the tax level, we must distinguish between 2 situations: whether or not you have at least one employee with full time employment contract on your company. Until 2023, if your company had zero employees, it was taxed 3% on its total yearly revenue. But from 2023 it will instead be taxed 16% on profits.
But if your company has at least one full time employee (Romanian or of any nationality working legally for you), the tax will remain the same, 1% on revenue. Basically, you will need to do some calculations to see which type of tax is better for you. More specifically, if 16% tax on profits will be higher than 1% on revenue plus taxes and wages you will pay for your employee.
As regards the tax bracket, the 1% tax on yearly revenue will be applied only for company with under 500.000 euro yearly income. Before 2023, the limit was 1 million euro yearly income.
And lastly, about company activity, if you have consultancy as your scope of work (principal CAEN code), it will no longer be recognized as a microenterprise, so cannot qualify for 1% tax on yearly revenue even if it complies with all conditions above. Before 2023, you could also have 1% or 3% tax for companies who offered consultancy services.
How does your tax on dividends change?
Once your Romanian company starts making profit, you can take out money from the corporation as dividends. Dividends can be paid once per year or once every 3 months.
From 2023, the dividend tax will increase to 8% from 5% for all business owners.
How does health insurance tax change?
Until 2023, if you were a resident of Romania and your yearly dividends was over 6.000 euro, you should have paid health insurance tax of 600 euro. Starting from 2023, this tax will have 3 brackets, instead of just one: at 3.000, 6.000 and 12.000 euro.
If you pass a certain bracket, you will pay 10% from that bracket value as health insurance. For example, if you make 6.100 euro in dividends you will pay 600 euro for health insurance. And if you make 13.000 euro you will pay 1.200 euro instead.
If you would like to address more questions or if you need a legal consultation, you can contact us at office@rrpb.ro or by accessing our site www.rrpb.ro for more information.
Don’t forget to subscribe to our YouTube Channel where new and updated content is posted monthly on various current topics!
Keep up to date with our latest articles!
- 5 things to do in Romania this summer
- How to obtain Romanian citizenship by naturalization
- 5 advantages of a Romanian passport
- How to register a Romanian Trademark?
