After joining the European Union in January 2007, Romania went through a series of government reforms in order to satisfy the conditions of EU membership. Romania is now a market with excellent potential, a strategic location, and an increasingly solid business climate.
Romanian economy is among the EU’s fastest growing members, with a 2.8% growth in real Gross domestic product (GDP) in 2014, 3.8% growth for 2015, a near 4% GDP growth in 2016 and an impressive 8.6% for 2017, primarily driven by consumption and investment.
Romania continue to be attractive on fiscal side, with one of Europe’s friendliest tax regimes: corporate income and personal income tax are one of the lowest in Europe.
For example, the standard profit tax rate is 16% for Romanian companies and foreign companies operating through a permanent establishment in Romania. Resident companies are taxed on their worldwide income, unless a double tax treaty stipulates otherwise. Non-resident companies are taxed on all income derived from Romanian taxpayers, regardless of whether the services are rendered in Romania or abroad.
Also, micro-entreprises with at least one employee apply 1 per cent tax rate, which attracts small and medium foreign investors. The condition for a company to be considered a micro-company is to have a maximum revenue at the end of the previous year of 1 million euros. Also, since 1 of January 2018, all the previous exceptions under which certain companies were not considered micro-companies (i.e. the capital limit, the industry etc.) have been repealed.
In this moment, micro-entreprises can opt once for applying profit tax if they fulfil both of the following conditions:
Key tax advantages in 2018:
· State aid schemes and EU Funds continue to be some of the most advantageous sources for financing strategic investments;
· Ten percent flat tax rate (10%) for residents and non-residents;
· Many areas of income are exempt from taxation in Romania;
· Generally, interest is subject to a 10 percent tax rate and dividends are taxed at 5%;
· Income from sale of real estate properties is non-taxable if the property is valued at less than 450.000 lei (aprox. 100.000 Euros);
· Labour costs are still competitive in Romania, despite the highest increase in the EU;
· The profit tax due for nightclubs and gambling operations is either 5% of the revenue obtained from such activities or 16% of the taxable profit, whichever is higher;
· The double taxation treaties signed by Romania with various countries, delivering fiscal benefits by tax reductions, labour related incentives and other incentives for the purpose of attracting investments;
· An important potential for accelerated growth in the following years;·
· The fast growing of IT sector – good quality and size of the IT workforce, with thousand and thousands of specialists.
Our team, formed by VP Connections founding partners, is very close to local and international companies, and can work based on your needs to cover areas such as: