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Registering a Romanian Micro Company

Updated on Thursday 30th January 2020

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by Vlad Cuc

Registering-a-Romanian-Micro-Company.jpgThe legislation pertaining Romanian micro companies has changed again few years ago, this time bringing excellent conditions for entrepreneurs. Our team of lawyers in Romania can assist local and foreign businessmen with in-depth legal advice regarding the registration of a Romanian micro business and can also advise on the set of the documents that have to be prepared during the incorporation of this type of company.

 

What are the main registration procedures for a Romanian micro company? 

 
The Romanian micro company (or microenterprise) is registered following the same legal procedures that are prescribed for other types of legal entities available in this country. The procedure on opening a company in Romania as a micro company is generally comprised of the following basic steps: 
 
  • establish a suitable company name, that needs to follow the criteria imposed by the Romanian commercial law;
  • draft and sign the company’s statutory documents (the articles of association);
  • open a corporate bank account at a local commercial bank (it is used for paying the company’s minimum share capital, as well as for other corporate transactions);
  • deposit the company’s minimum share capital (LEI 200) and register for tax purposes;
  • obtain an official business address, which is a compulsory requirement for all businesses operating in Romania; 
  • register with the National Trade Registry Office by submitting the required company documents. 

 

What is the tax system available for Romanian micro companies? 

Romanian micro companies benefit from advantageous taxes, applicable for companies with turnover below EUR 1 million, as follows: a corporate tax rate of 3% or even 1% in certain conditions and 5% dividend tax. The setup of a micro company might prove to be a very good idea for those investors looking to start their Romanian business at a smaller scale, at least at the beginning of their business activity.   

The previous conditions which had been related to the number of employees have been abolished and now any Romanian SRL company can be registered as a micro company through the same procedure. Basically the current conditions apply to the micro company and its taxation is of 3% on its income (when the company is registered without any employees), or 1% tax rate if the company has at least one employee. Our law firm in Romania can assist with more details on other tax regulations addressed to this business structure. To benefit from these, the following are applicable:

  • it obtains its sources of income from activities other than banking, insurance or gambling;
  • it has sources of income, other than in consulting and management in over 80% of total revenue (as a result a Romanian micro company can only have a maximum of 20% of its income originating from consultancy or management activities);
  • its income has not exceeded the amount of EUR 1 million;
  • the state, public authorities or local authorities cannot be shareholders in the company.
 
The Romanian micro company can be taxed with the 1% tax on income if the company’s employee(s) is/are hired on a full-time basis. Provided that the employment contract expires and the contractual relation with the respective employee is no longer continued, the company can still be taxed at the rate of 1% if it hires a new employee.  
 
Companies that do no have any employees, but which will create job openings can also benefit from the lower tax threshold, once the employment contract commences; however, the employee must be hired for a period of minimum one year based on a full time contract, in order for the company to benefit from the lower tax rate. 
 
If during a fiscal year the income belonging to a micro company exceeds EUR 1 million or share revenues from consulting and management in its total income is over than 20%, then it will start paying the Romanian profit tax, which is currently imposed at the rate of 16%.
 
The calculation and the payment of tax on profit is made on a quarterly basis to exceed any of the limits provided in this article, taking into account the revenues and expenditures from the beginning of the fiscal year. The tax due is the difference between the tax calculated at the beginning of the fiscal year to the end of the reporting period and enterprises' income tax payable in that year.
 
A novelty in the micro company law is that the tax base expands, ie any income from grants is taxable. In the old legal framework, only exploitation was mentioned. Also, income from exchange rate differences and subsequent billing of trade discounts received are taxable.

The corporate tax for Romanian Micro Companies is obligatory, thus those micro companies (per the conditions above) paying profit tax will have to pay 3% income tax, beginning with the next fiscal year. A newly-established Romanian legal entity is obliged to pay micro-company tax starting with the first fiscal year, if the conditions presented above are met at the moment of its registration with the Trade Register.

The Romanian micro companies will no longer apply this level of taxation starting with the fiscal year following the one during which they no longer fulfil one of the conditions foreseen and detailed above. The companies activating in sectors such as banking, insurance, capital market (with the exceptions of companies which activate as intermediaries in these areas), gambling, betting, casinos, cannot register as micro company, as per the Romanian law.

 

What are the advantages of a Romanian micro company? 

 
Businessmen who want to start the procedure of company formation in Romania for a micro company (or micro-enterprise) can benefit from a set of advantages when registering this business structure. Even though the legislation regulating the tax requirements available for a Romanian micro company has been constantly modified, this type of enterprise can be an ideal way to start a small business in this country. Our team of lawyers in Romania can assist with in-depth legal assistance on any of the characteristics of the Romanian micro-enterprise, some of which are presented below: 
 
  • the liability of the company’s shareholders is limited to their contribution to the company’s capital;
  • the required minimum share capital for a Romanian micro company is RON 200;
  • the company can enter the commercial activities prescribed by the Nomenclature of Economic Activities in Europe (NACE);
  • the Romanian micro company is the ideal vehicle for starting a small business;
  • in specific conditions, it can be used for starting a small and medium-sized business in Romania;
  • from a taxation point of view, the micro company provides one of the most attractive systems in Europe, offering some of the smallest tax thresholds.  

 

What are the reporting requirements for a Romanian micro-company? 

 
As a taxpayer in Romania, a micro company has the obligation of completing a set of accounting and tax documents, that have to be submitted with the local institutions. Thus, it needs to comply with specific reporting requirements. In this case, the micro company has to submit financial documents on a quarterly basis. This is necessary for the calculation of the profits tax. Our team of consultants in company registration in Romania may assist foreign investors with an in-depth presentation on the requirements addressed to this business structure. 
 
The tax returns for the tax on profits of a Romanian micro company have to be submitted by 25th of April, 25th of July, 25th of October and 27th of January (these are the dates for the current financial year which, in Romania, corresponds with the calendar year). Our lawyers can also offer information on the tax requirements available for VAT registration in Romania. 

Registering your company as a Romanian micro company could simply mean less taxes for small investors in Romania. These types of Romanian companies will pay 3% taxable income instead of the regular 16% profit tax. Romanian legal entities that have opted for this system of taxation until February 1, 2013 retain this tax regime for 2013. Our team of Romanian lawyers can present more information on the characteristics of a micro company in Romania, and investors are invited to contact our Romanian attorneys for an extended presentation.