The package for setting up a company with foreign shareholders in Romania will include the following elements.
Company establishment services, amounting to 800 EUR, payable before we are performing the service(it includes notary taxes, translation fees, introduction at the bank and expenses with the opening of a bank account, share capital of 200 lei (approximately 42-43 eur), all the state taxes payable to the Romanian Trade Register necessary for opening the company).
The monthly rent paid for the company’s registered office in the amount of 300 EUR / month(3600 EUR / year invoiced annually and payable in advance).
Accounting services, starting with 220 EUR / month plus VAT, depending on complexity of the activity.
Registration services for VAT purposes amounting to 150 EUR plus VAT, payable before we are performing the service.
Preparation of documentation, submission and obtaining of the fiscal identification number for non-residents(NIF) – 150 EUR+VAT, payable before we are performing the service.
Preparation and submission of the form 207 „Informative declaration regarding withholding tax / exempt income, on non-resident income beneficiaries”, which is submitted once a year, until January 31 of the following year to the year to which the income refers – 90 EUR +VAT, payable before we are performing the service.
The value of the company establishment services includes all the fees paid to the Romanian state for setting up the company, all the fees with the authorized translators, expenses with the opening of a bank account, expenses with the notary and apostille. The only amount that does not fall into this value is the share capital of 200 lei (approximately 42-43 eur) which is deposited at the bank once the account is opened and which remains in the bank, which is not an effective expense for the established company.
VAT for services invoiced by the accounting company can be recovered by the established company, when it reaches the value of 5000 lei, approximately 1100 eur, these amounts being paid back to the company by the Romanian state, if the company established in Romania will not invoice to companies or individuals established in Romania(in this case the VAT(deductible VAT will be compensated with the collected one and you will not receive back anymore).
Corporate tax in Romania is 16%, income tax is 3% on a maximum turnover of 1 million euro, or 1% if the company has one employee. If you exceed this, you will pay 16% on the net profit (the difference between taxable income and incurred expenses). VAT in Romania is 19%. You will be also registered as a VAT payer when you reach a turnover of 88.500 euro.
Dividend Tax is 5% on the dividend payable.
When the turnover exceeds the amount of 100,000 euro, the company will become a monthly VAT payer, until that turnover the company is a quarterly payer.
Information for confirming the income tax for micro companies applicable in Romania can also be found at the links below:
LINK2 - page 4-5
LINK3 - Article 47, paragraph (1), letter (c), and Article 51, paragraph 1, letters a and c(Romanian Fiscal Code for 2021).
*You can translate the pages in any language you want by right-clicking-> translate-> choose language-> translate.
Up to the turnover of 100,000 euros, there is no reason to hire a person(the shareholder himself) so that the tax percentage drops from 3% to 1%, the justification is as the calculations shown below:
a ) 3% income tax
b) 1% income tax, in this case it is necessary to have 1 employee
That means 1.000 eur income tax + 2052 social contribution = 3052 Euro/year, this value exceed tha value of 3% income tax with 52 Eur.
In this case we sholdn’t take in consideration the net salary, because the shareholder is also the employee.
In addition to the above calculation, we should also take into consideration the net salary which is 2230-831 = 1399 lei/month, 288 eur/month, meaning 288 x 12 = 3456 eur. This salary also raises the threshold between the difference of 3% and 1% to the income tax.
In this case, the firm must pay a net salary for someone else, not the shareholder, an employee from Romania. The calculation will be:
We presented above the 2 variants (employed the shareholder and employed a different person external to the company), from Romania, because the procedure for hiring foreigners by employers, individuals or legal entities in Romania, it is more complicated and requires the following steps:
Usually, after paying income taxes followed by paying dividend taxes, the shareholder can transfer all his income to personal accounts and do whatever he wants with that money. Theoretically, these amounts should no longer be taxed in the country of residence of the shareholder, as there are agreements between states to avoid double taxation.
But just in case, the shareholder should check in his country of residence if the income taxed in Romania will also be taxed in his country of residence. The link below provides the list of the countries with which Romania has double taxation agreements.
LIST OF THE COUNTRIES>> CLICK HERE
Double taxation treaties set out the rules according to which taxes on income and capital gains are applied and how double taxation will be avoided. Double taxation conventions contain other special provisions regarding information exchange, non-discrimination and amicable procedures.
The income tax rules are classified into income and capital gains, which will be taxed without limitation in the source state, and income and capital gains which will not be taxed in the taxpayer’s state of residence.
The source state has the right to tax income such as dividends, interest or commissions, while the state of residence must give a reduction to this tax, or not to tax these incomes at all. The state of residence may tax income from international transportation and capital gains, while the source state will not tax them.
If a taxpayer is a resident of a country with which Romania has concluded an agreement for the avoidance of double taxation and also presents the tax residence certificate at the date of payment, then the tax rate that applies to taxable income obtained by that non-resident taxpayer in Romania may not exceed the amount of tax provided for in the agreement that applies to that income. In the situation where there are different tax rates in the Romanian legislation and in the double taxation avoidance conventions, the most favorable rates are applied to the taxpayer. This is also the reason why the taxpayer may not pay other taxes in his country of residence.
Currently, Romania has concluded 87 treaties to avoid double taxation. Among the countries with which treaties are signed are: Germany, Austria, Belgium, Canada, Finland, the Netherlands, Malta, Australia, Canada, China, the United Arab Emirates, India, United States, Russia, Spain, Portugal, Saudi Arabia and others.
The payment of dividends is made by withholding tax, ie the tax due by non-residents for income obtained from Romania in the form of dividends is calculated, withheld, declared and paid to the state budget by the income payer, ie the company. The tax is calculated, respectively withheld at the time of dividend payment, is declared and paid to the Romanian state budget until the 25th of the month following the month in which this income was paid.
According to the Fiscal Procedure Code, any non-resident entity that enters a fiscal legal relationship has the obligation to obtain a fiscal identification number from Romania (“NIF”).
Following registration, the taxpayer receives from ANAF a tax identification number – NIF – or tax identification code.
A tax identification number (NIF) is a numeric code that is used by individuals or legal entities for tax purposes. It is usually used for the purpose of declaring any tax obligations to the Romanian tax authorities (ANAF). Most EU Member States use tax identification numbers. The main purpose is to manage the obligations of taxpayers. Such systems are based on identifying taxpayers based on these numerical codes.
From the category of individuals, only foreign nationals who have certain tax obligations need to be assigned a tax identification number, as:
Documents required to obtain the NIF:
The documentation for the NIF application is submitted to the Public Finance Administration in whose territorial area the income is made or the transferred property is located (for example, in case of purchase / sale of a building, to the Public Finance Administration in whose territorial area the purchased / sold building is located ).
For individuals who make income subject to the withholding tax (eg dividends, interest), the request to assign the NIF can be made directly by the income payer, ie in this case, by the company opened in Romania, whose shareholder is a non-resident natural person.
The issuance of the certificate by which the fiscal identification number is assigned is made by the fiscal body within approximately 30 working days from the moment of submitting the complete file.
It is very important that failure to obtain the NIF can prevent taxpayers from claiming a refund of withholding tax or obtaining a certificate of payment of the withholding tax (required for the non-resident partner for tax credit purposes in his or her state of residence).
At the same time, the reason why the Romanian taxpayer (company established in Romania by the non-resident shareholder) requests the registration of non-residents is related to the obligation to submit form 207 „Informative declaration regarding withholding tax / exempt income, on non-resident income beneficiaries„, declaration to be submitted each year by the non-resident taxpayer, until January 31 of the following year, for the last year.
Ziberline Consulting uses the experience it has for the benefit of its clients, in order to offer specialized assistance in the management of the entire fiscal registration process, regarding the non-resident, namely:
This is a complete package that will suit the needs of most businesses and entrepreneurs. However, those who require different or additional services will be able to work together with our team to find suitable solutions that will meet their needs according to the chosen business field in which they wish to invest. Our packages are designed to fit the needs of foreign investors who open a company in Romania.