Due to enhanced measures against money laundering, the introduction of CFC rules, and other regulatory instruments, the so-called “offshore” business registration zones have lost their relevance. Many countries still retain the status of “offshore,” thus discouraging potential investors. Therefore, if you are interested in a jurisdiction with a “clean” image and a favorable tax system, it is worth paying attention to the country of Eastern Europe — Romania.
Advantages of Romania for business
Thus, its main advantages are the fast company incorporation process, the ease of compliance when opening an account and making payments, the lack of currency control for transactions in euros and dollars, the affordability of creating a substance (economic presence).
Romania’s tax system provides for a corporate tax (profit tax) of 16%. Obligated subjects of its payment are Romanian companies and foreign companies operating on the country’s territory through a permanent establishment. It should be taken into account that the object of taxation for resident companies is the profit received from all over the world (unless otherwise provided by the treaties on avoidance of double taxation), and for non-resident companies, only that which was received in the territory of Romania.
Taxes and legal forms in Romania
The institution of micro-enterprise, a type of limited liability company that can use preferential corporate tax rates, was introduced at the legislative level to attract foreign investors. This type of company underwent many transformations before acquiring its present form. Now, a new company must register as a micro-enterprise and apply the simplified taxation system if its annual turnover does not exceed 1,000,000 euros, and if it does not carry out activities subject to licensing in Romania (e.g. banking, insurance).
The preferential income tax rate is 3% if the company has no employees or 1% if it has at least one (the tax amount collected must be at least 1,000 Romanian lei — 200 Euro). The company is also obliged to pay social contributions and be a so-called tax agent with respect to its employees (to withhold their personal income tax).
As for other levies, Romania levies a dividend tax of 9% and VAT of 19% (or a preferential 9% for some activities).
The most popular legal forms in Romania are the Limited Liability Company (SRL) as well as the Joint Stock Company (SA):
- For an LTD, the minimum share capital of 60 euros must be contributed; both Romanian citizens and foreigners from 1 to 50 can be participants; this form of business structuring has low administrative requirements and reporting requirements.
- It is a little bit more complicated with the SA, as the minimum registered capital is 25,000 Euro, of which at least 30% has to be paid into the account. You have to register exactly SA if the company is to engage in specialized activities, such as banking, insurance, etc. Other requirements include a minimum of 5 shareholders and 1 director, as well as 3 independent auditors to control the financial statements.
Romania and it’s business nuances
Currently, the Romanian state structures have not introduced electronic programs for the company incorporation remotely. Thus, this process takes place by power of attorney from the client. The result is a company registration certificate, upon obtaining which you can apply to the state authorities to obtain the status of VAT payer (if necessary). If your company will be engaged in trade, export, import, it is also necessary to get an international customs number.
The final step. Opening a bank account
It is worth noting that there are no problems with this process in Romania.
Firstly, the procedure is somewhat simplified compared to other European banks because Romanian financial institutions have not yet had the necessary experience opening accounts to non-residents. The bottom line is that when opening accounts for local companies, Romanian banks consider them as full-fledged residents. Even though the compliance procedure is carried out on generally accepted European standards, the Romanian banks will not refuse to open a corporate account.
The only nuance is the physical presence of the founder of the legal entity, which, as a general rule, takes a few days.
Thus, the jurisdiction of Romania offers your business a lot of advantages and comfortable conditions for development, and Finevolution company will help accompany its opening, will provide financial, legal, and accounting support.