Romania is developing at an amazing pace. The country's low tax rates - both personal and corporate - have contributed to its global competitiveness.
Corporate tax 1% - if the company has at least one employee; if not, the tax rate is 16%.
Dividend tax 8% - the lowest dividend tax rate in the European Union is paid by owners of Romanian companies.
VAT 19% - although not the lowest in the EU, it is significantly lower than the 27% in Hungary.
CORPORATE TAX - Impozit de venit
The condition for a limited liability company paying 1% tax is to have one full-time employee. If the company has no employees, it is subject to a 16% profit tax as corporation tax.
If the conditions for the 1% form are met, the 1% tax is payable on the total turnover.
The 1% LLC is also called a micro-enterprise, which requires that the Romanian company has an annual turnover of less than €500,000. Above this, the 16% profit tax rate automatically applies.
When an entrepreneur has few costs, it is worth considering the 1% tax form, which requires the employment of a full-time person.
The minimum wage in Romania is around €600, of which contributions amount to around €220.
With an income of €40,000 per year, it is already worth keeping one employee, since the wage cost per employee assumes a monthly cost of €220, i.e. an annual contribution expenditure of €2,640 per employee.
If you want to set up a commercial business in Romania, it is better to use the 16% taxable form without employees, which applies to the net profit: i.e. after accounting for expenses, you will have to pay 16% of the net profit to the state treasury.
DIVIDEND TAX - Impozit pe dividende
The dividend has been increased to 8% from 2023. Dividends can be paid four times a year: quarterly in the form of an advance dividend and the year-end dividend in May.
VALUE ADDED TAX - Taxa pe valoarea adăugată
VAT exemption: the VAT threshold in Romania is €65,000, up to which amount a Romanian LLC can remain VAT-exempt.
It is important to note that VAT-exempt companies can also have a Community VAT number, which will appear in the VIES system, and thus be able to do business with EU companies. For purchases of goods, this form of VAT number, also known as a 'small tax number', can be used up to a maximum of €10,000.
Above €65,000, the tax authorities will automatically register the company for VAT under the VAT circuit. However, this will still not adversely affect those invoicing to foreign partners, as a Romanian company with an EU VAT number can invoice other EU companies VAT-free if they also have a valid VAT number.
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