BUSINESS TAXATION IN ROMANIA

According to the statistics of the State Border Guard Service of Ukraine, Romania is one of the three countries that our compatriots went to in search of temporary protection on the territory of the European Union countries through a full-scale invasion of the Russian Federation. Thus, a significant number of Ukrainians began to talk about the possibility of doing business in Romania and, accordingly, registering a company or individual entrepreneurship there.

As a result, a logical question arises: how is business activity taxed by the Romanian authorities? Let's try to figure it out.

First of all, we note that the most popular organizational and legal form of companies in Romania is an analogue of the Ukrainian LLC - Sociedade cu Raspundere Limitata (SRL). Other forms of registration - an analogue of the Ukrainian FLP - are not popular.

It should also be noted that Romanian companies pay income tax on their worldwide income, while foreign companies pay income tax on income from sources in Romania.

The main taxes paid by legal entities and persons in Romania are as follows::

1. Corporate income tax (corporate tax) – 16%. For micro-enterprises, such profits are taxed at a rate of 1-3% (depending on the availability of employees);
2. Value Added Tax (VAT) - 19%. For some goods, a reduced rate of 9% or 5% is applied (restaurant, medical, tourism business);
3. Tax on dividends - 5%;
4. Real estate tax - 0.2% for residential property, non-residential - up to 1.3%. Also, local authorities can increase the established rate by 50%;
5. Social contributions - employers pay contributions at a rate of 4 or 8%, as well as an unemployment insurance contribution at a rate of 2.25% of the employee's remuneration. and a health insurance contribution at a rate of 10%.

Separately, it is worth paying attention to the taxation of micro-enterprises, since such changes will come into force on January 1, 2023.

The criteria for obtaining this status will be as follows:

• at least 1 full-time employee (now there is an option not to hire);
• turnover not more than 500,000 EUR (currently 1,000,000 EUR)
• shareholders holding 25% of the authorized capital are shareholders in no more than 3 companies.

Therefore, the income tax for such companies will be exclusively 1%, since micro-enterprises will be required to have at least one employee.

Thus, incomes of both residents and non-residents are subject to taxation in Romania. If we talk about the general tax for legal entities, which today is 16%, then among the member states of the European Union it is considered one of the most profitable.

The position of the state leadership regarding the creation of optimal conditions under which any person or company could not violate the country's tax laws without losing a significant part of the assets is traced.

The above contributes to a fairly significant growth in Romanian GDP (compared to other EU member states), which is also confirmed by the forecast of the European Bank for Reconstruction and Development (EBRD) and the assessment mission of the International Monetary Fund (IMF), according to which, according to the results of 2022, this indicator should increase by ~5%.

In order to obtain information about the nuances of the Romanian business taxation, please contact the specialists of Prikhodko and Partners Law Firm who will answer all your questions.