Recently Romania has been the rising star of the European Union, as it has been officially invited to join the Schengen zone, and introduce the euro as a currency. As Romania has started counting down the days to introduce itself to the Schengen Area and the Euro zone, it has ran into a two bladed sword. Like other post communist Eastern European states, Romania is known for it's oversized state administration and budget, and a significant state debt. Unfortunately, a Euro zone candidate state shall not have state debt beyond a certain threshold, and Romania was far beyond that threshold. To cut back on debt, Romania has changed it's once favourable tax system step by step, till it made no more sense for foreign entrepreneurs to incorporate in Romania.
- 3% total tax on corporate income up to 500.000 EUR annual turnover while Estonia offers 0% tax on company profit without any income limitation
- 8% total tax rate on dividends paid out to individual shareholders which remained pretty favourable after all, but only if someone is also a Romanian tax resident (non-residents shall pay further income taxes in their country of tax residence)
- once easy local bank account for non-residents has become more complicated for most clients, as banks have become rigid, and suspicious without any good reason, under the pretext and excuse of AML and KYC.
- VAT exemption up to 88.000 EUR, which is still pretty awsome for companies below that annual income
- Once low maintenance costs have risen as every company shall pay payroll taxes of at least one individual, thus adding to the basic maintenance fees of the company
Do you have more questions on romanian company formation? Book a consulting session with us!
Warning, your attention please! A company in a specific country is not a „one size fits all” solution. You definitely shall not purchase this specific service without guidance from a properly qualified professional. The benefits we’ve listed are true, but to profit from them, you need a personalized tax planning, and first off, you need to consult with a professional, wether your specific business is eligible for those benefits or not. According to statistics, one third of companies set up by foreigners in the countries where we’re active, don’t survive till the second year. The reason is, that people are deluded into believing, that a tax optimization plan can actually work without any personal planning and individualization. The benefits we have disclosed here, are only valid for the clients, that are guided through the whole process by our highly qualified and experienced professionals. Detre Varga & Partners LLP. assumes no liability, if internet users try to implement our know-how by hiring third persons instead of us.
Romania has a very peculiar tax system. It offers outstanding advantages and unexpected boobie traps as well, if your romanian company isn't designed by a seasoned expert. This is the reason why: originally Romania doesn't have the most attractive tax system in the EU. With a 16% tax on company profit, it ranks as an average. There are numerous more advantageous tax regimes in other EU countries, and the monthly maintenance is not favourable either. Having said that, Romania has also got a special taxation regime, for companies below 500.000 EUR annual income. These companies can tax their total income with a flat rate of 3%, and what puts Romania on the map is a 8% dividend tax, which is the lowest in Europe. If we look at total tax rate, this tax regime beats all other EU countries.
It’s important to note, that this special tax regime has various requirements. Before setting up a romanian company you need to consult a qualified tax expert to see, wether your business is eligible for this tax scheme or not. If you don't assess your situation well, you may end up paying a 16% tax rate instead of 3%.
There are some activities, which are most suitable to pursue with a U.S. company.
E-commerce (either goods or services)
Dropshipping
Pring on demand
E-learning, online courses
Digital products
International trade (triangle transactions)
It is not sufficient receive advice on romanian taxation, you need to talk with our expert about the international tax treaties between Romania and your country of tax residency (the state in which you’re counted as a tax resident).
This means that before setting up a romanian company you need to find out, in which state(s) you’re counted as a tax resident. This sometimes requires complex analysis by an expert.
There are no quick fixes, shortcuts or simple solutions. You need to understand the basic concepts of your businesses and your personal taxation. Anyone trying to sell you a standard, one size fits all solution, is not to be trusted. The company formation is only 10% of the solution, 90% is the individual tax planning and consultation, that’s inevitable to get a successful start.
Can I get an EU visa (residency, etc.) through my romanian company?
It is important to note, that currently a romanian residency is valid only for Romania. Once Romania enters the Schengen zone in 2025., romanian residency and visa will allow you to enter all Schengen (EU) countries. This may appear as a long shot, but every coin has two sides. It is significantly easier to get a romanian residency, than any other EU country, and once the country enters Schengen, your romanian residency is converted automatically to a Schengen residency. Therefore, many clients, who would have difficulties with a Schengen visa or residency for specific reasons, choose Romania to set up their legal status, and upgrade it to a Schengen visa when the country enters Schengen.
How much does a romanian company formation cost?
You’ll get specialized consulting with us, so we can get a better understanding what you’re actually dealing with, and your specific circumstances. Based on this, we’ll make you an offer.
Is it cheap to maintain a romanian company?
A romanian company is not the cheapest option out there. It is mandatory to pay social security for at least one employee. If you need social security in an EU country (and you choose Romania as your main base) this may not be so concerning. Maintaining a legal address for your company, and paying an accountant to navigate in the relatively complex romanian legal system will cost slightly more than in other european tax havens (like Estonia). Despite this, to many clients a romanian company offers unbeatable benefits.
What are the steps of a romanian company formation?
You need to book an appointment for a romanian company formation on our website (see below).
To complete the booking, you’ll need to answer a few questions. It’s not meant to bother you, but we’re extremely busy, so if we once sit down with you online, and spend almost an hour on you, we need to be as prepared as we can be, to give you well reasoned, substantial advice.
Once you’re done with the booking, we’ll consult with you online, and come to a conclusion, wether and how we can cooperate with you. Thanks to the screening questions mentioned above, and our experts preparation for our online consulting session, in just one go, we can reach a conclusion together, in which jurisdiction you should be incorporating, and we can jump to the incorporation process right away.
At the next step, we guide you through the incorporation process fully online. Depending on the state, your romanian company may get registered within 2-3 days. This allows you to purchase your company domain, open an online IBAN number, and start your activity. However if you need a local romanian bank account, it will take a bit longer. In this case, you’ll need a romanian tax number. A local bank may also prefer clients that have an address in Romania (which is available through our assistance).