Several things have changed in the Romanian tax code this year. We focus on solutions for entrepreneurs in the new framework.
Profit taxation threshold for micro companies has been lowered to 500.000 EUR
Before the change micro companies paid as little as 1% tax on the turnover of up to 1.000.000 EUR. This should not constitute a major problem for most businesses though, as the 500.000 EUR profit taxation threshold continues to be generous. Additionally every person can own as many as three micro companies under the turnover taxation regime. If you own more than three companies, you will have to choose from the fourth onwards which one will be subject to the profit taxation regime. The latter will have to pay a corporate tax of 16%.
Micro companies are now required to have at least one employee
Before the change micro companies could exist without having a single employee and pay 3% tax on the turnover of up to 1.000.000 EUR. This option has been retired effective 01.01.2023. In order to benefit from the micro company regime and to pay only 1% tax on the turnover of up to 500.000 EUR, micro companies are now required to have at least one full time employee. Company owners can employ themselves as an employee of their company to fulfil this requirement.
Dividend tax is now 8%
Before the change company owners could distribute profits of their company at a dividend tax rate of just 5%. This rate has now increased to 8%. Even after this change Romania still has one of the lowest all-in tax loads in Europe. There are international setups that reduce the dividend tax down to zero at the personal level.
Norma de venit taxation in the PFA regime is a bygone
Before the change freelancers had an attractive alternative to setting up their own micro company. They were able to pay 10% tax as a PFA on the so called norma de venit – an average income determined by the government for several types of professions – instead of their actual income up to a maximum of 100.000 EUR. Once they made more than 100.000 EUR per year they would have to pay 10% tax on their actual income. This threshold has been reduced from 100.000 EUR to just 25.000 EUR effective 01.01.2023. This change has made the PFA construct unattractive for most people who earn significantly more than the 25.000 EUR threshold. The micro company can be an attractive alternative, especially when the entrepreneur plans to retain part of the profits for investment purposes.
Minimum salary has been increased to 3000 RON per month
Before the change the minimum salary was 2550 RON gross per month. The increase of more than 17% reflects the increase in cost of living and an overall rise in salaries in Romania. Entrepreneurs can employ themselves as an employee of their company to benefit from social security. At a gross salary of 3000 RON per month, 1226 RON in income tax, social security and healthcare contributions go to the government, while 1774 RON remain as a net salary.
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