Income tax in Romania
Income tax applies only to micro-enterprises and the applied rate differs according to the number of employees. Thus, an SRL can pay only 1% or 3% tax on the turnover – if you meet all the criteria for classification as a micro-enterprise.
It is very important to remember that any newly established company can have the status of micro-enterprise only if it has at least one full-time employee within 30 days of its establishment! Starting this year, microenterprise enrollment becomes optional and only with the cumulative fulfillment of the conditions provided by OG 16/2022.
• If the turnover exceeds 500,000 euros or you no longer meet any of the criteria, then you will be obliged to change the taxation system, paying a profit tax rate of 16%.
• In order to determine the amount in lei at which the transition from micro-enterprise to SRL paying profit tax is made, the exchange rate from the end of the previous financial year is taken into account.
Value Added Tax (VAT) in Romania
VAT rates
In Romania, a standard VAT rate of 19% is applied, but you must remember that there are also exemptions from this rate, as follows:
9% for: water supply services, food, beverages, medical services
5% for: catering services, accommodation, school textbooks, books, magazines, access to museums, cultural/sporting events.
What do you need to know about VAT in Romania?
Any newly established SRL will be VAT exempt. It is not possible to opt for registration as a VAT payer from the time of establishment. You can opt to become a VAT payer later, by registering this option with ANAF.
It is important to know that after the establishment of the company you can remain VAT exempt as long as the annual turnover remains below the ceiling of 300,000 lei (approx. 60,000 euros).
When does SRL become a VAT payer in Romania?
If during a fiscal year the company’s revenues exceed the threshold of 300,000 lei, then you have the obligation to register as a VAT payer within ten days from the end of the month in which you reached/exceeded the legal ceiling.
How is VAT paid in Romania?
You must remember that VAT is declared and paid quarterly, as long as the turnover is below 100,000 euros. For 2023, the ceiling for switching from quarterly VAT to monthly VAT is made when the ceiling of 494,740 lei is exceeded.
Social contributions in Romania
Social contributions are levied for each salary, as follows:
1. 2.25% of the gross salary represents the social contributions owed by the employer and is called the labor insurance contribution (CAM)
2. 45% are social contributions owed by the employee, consisting of:
• social insurance (CAS) – 25%
• social health insurance (CASS) – 10%
• income tax – 10%
All contributions are withheld, declared and paid by the employer!
Tax on dividends in Romania
The legal way to get out the money generated by the firm (profit) is to distribute dividends to the partners. Dividends can be distributed quarterly or annually, but only with withholding, declaration and payment of a dividend tax amounting to 8% of the gross dividend value.
Important: If you receive money from dividends whose cumulative value is at least equal to 6 gross minimum wages, you are obliged to pay the health contribution (CASS), according to the Fiscal Code. Pay attention to the three tax caps detailed in this article.
CASS represents 10% of the ceiling you fall under (6, 12 or 24 gross salaries).
The payment of the social health insurance contribution (CASS) falls to you as an individual, as a company you only pay the tax on dividends.
How are taxes paid for an LLC (SRL) in Romania?
All taxes are declared through the specific declarations and are paid at the deadlines provided by law through OP/FV as follows: by bank transfer or cash, at ANAF cashiers.
What else do you need to know?
As of January 1, the way micro-enterprises are taxed changes by returning to the two tax rates of 1% and 3%, but not according to the number of employees.
Contact us for accountancy problems, company creation or questions via frjacobs@telenet.be
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