Romanian Company Taxation
Romanian company taxation is important if you are interested in setting up a business in Romania.
The standard tax rate for Romanian companies is 16% of the profits, both for Romanian companies and established foreign ones.
However, there are some alternatives to the standard 16% rate and. Depending on the activity of your company, they may be better suited.
Romanian Company Taxation for Micro-companies
A micro-company under the Romanian company taxation laws is a business whose total yearly revenue does not exceed 1 million euros. This means that most Romanian companies will start up as micro-companies when they are first set up.
Instead of being subjected to profit tax, micro-companies in Romania will pay a revenue tax.
The revenue tax is 3% for a micro-company without any employees. If the company employs at least one person, the revenue tax is 1%.
Although this option may sound tempting, a smaller revenue tax might prove to be, in fact, higher than a bigger profit tax. This depends on the company’s profit margins.
Alternatives to the Revenue Tax
If your company relies more on sales volume rather than high-profit margins, the revenue tax will not adequate for you.
In this case, you have the option to request being subject to profit tax instead, even if your total revenue is less than 1 million euros.
There are two requirements for being subject to profit tax instead of micro-company tax:
- The company has a share capital of at least 45.000 RON;
- The company has at least two employees.
Considering the fact that the company has to have at least 2 employees, its revenue tax would be 1%. Therefore, you have to determine if 16% of your company’s profit will be lower than 1% of its yearly revenue.
If you need more information about this subject, you can contact us at any time. We will be glad to answer any questions that you may have.