I am negotiating a contractor job with a Canadian company (project management, people ops), and need to understand what salary range I should quote - depending on how much in social tax and other contribution I will have to set aside. So far I have been working as an employee, so it’s my first contractor gig.
I am trying to wrap my head around where to register my company. I have a EU citizenship, but don’t live in my country of origin, and have been traveling quite intensely the whole of 2020 (I know, what a timing, right?). I am mostly concerned with which country is best in terms of tax and bureaucracy.
I am pretty new to the topic and would appreciate any guidance. If there is anyone here who recently did the same research and is eager to share their findings - I’d love to hear from you!
Kudos for the online bits, that’s a major plus.
Everything else seems to be more entrepreneur-friendly in Romania.
Corporate tax 3%, or if you have at least one full-time employee it’s 1%.
Dividend tax is 8% (dividends can be paid out quarterly or yearly).
As an EU member-state you also have access to the rest of the EU-market and so on.
For those living or looking to live in Romania
You can become employed in your own company (no more working part-time though, microcompanies are required to have at least one full-time employee), that gives you access to the universal health-care,
If you’re working in IT, your income tax (10%) can be waived.
You do need to find an accountant or a lawyer to help you register the company, which should cost between 150 and 200 EUR (that cost also includes the company’s registering capital).
And accountant costs 100 EUR/mo, but they can charge you only when they actually do something for you, which can be once per quarter (if you have between 0 and 3 employees, they can do taxes quarterly, not monthly), so that costs realistically comes down to ~30 EUR/mo.
Post updated in July 2022 to include tax law and employment law changes.
Hi Mario, yes on an overview level Romania looks a good option to explore. Correct me if I am wrong, but your input sounds more like you have researched the options there, rather than been through the process. In my experience, in former USSR countries there are typically other complications about the way they do things. So based only on my experience in another former USSR country, I expect Romania will also not on every aspect be as easy and as good as it sounds :). What ever is, eh?
Anyway, I think we would all find it very helpful if someone who has walked the process and lived it for a couple of years in Romania would be willing to post a candid summary of their experiences… to help take our shared knowledge to a deeper level. Or maybe someone already has shared that, and I have just not seen it yet. From my side, anyone can contact me for info on Georgia .
Actually, I went through the process, so it’s the first-hand experience
There is bureaucracy, that’s for sure, but many things are easier or more uniform since Romania joined EU.
Things that should still improve is to have once centralized e-government website where once could finish all this without having to have an accountant by their side (a great example is the Serbian euprava.gov.rs where you can get information on residency registrations, various personal and travel documents, schedule vaccination, get info on kindergarten, and all the information is available in English as well. In Romania the information is scattered across various websites, often some of which would miss the content in English.
Funnily enough, with a registration agent by my side, the hardest part was finding a free company name (even the company registrar website was hit and miss, so I ended up using the European E-Justice website to look for a free company name. Even that was not enough, as the company laws changed (I believe two years ago), and now the company name has to be unique on the level of the whole country, not only on county-level, and when a free name is found (more likely a combination of words), the agent needs to book it, so that might be a bit of a hassle.
If you register the company at the address you live at, you can pay all the utility bills using your company account. If you’re using your private car for company needs you can use the company card to fill up the tank, and there’s no need to have any additional paperwork done for every ride. In that case, you’re entitled to only 50% tax refund on the gas paid (if your RO company invoices other RO companies, otherwise you will not have any tax to recuperate).
Romania will be the base for now, but as I have several citizenships, EU and non-EU, I’m free to move and live in most of Europe. Having a family is what makes things more complicated
I understand. Having an IT company with exciting technologies opens many doors as well, so in the end it takes quite some effort to determine not only business suitable locations but also the best options for location taking into account all the important family value questions. In our case for example, we were looking for a location with an expansive natural environment, with very friendly and welcoming local people, and for us overall quality of life takes precedence over things like purely tax and business effectiveness. I wish you best of luck to you and your family with all current and your choices :).
@voyager I’ve heard that programmers have PIT exemption (0%) in Romania. Do you know anything more about it? Is it true?
Is it only for employee-programmers (hired) or I can just run a sole-proprietorship (self-employment) and enjoy this tax rule?
Are there any income limits that apply to this rule?
Feel free to check out also this topic:
That is correct, some IT-related jobs can be exempt from the income tax.
Both conditions you posted in the other thread are still valid, the company needs to be registered to do activities within those codes (IT stuff), and the programmers or IT personnel need to hold an IT-related higher degree education diploma.
What you can do, is open a limited company within the company codes mentioned (CAEN code 5821, 5829, 6201, 6202, 6209) and employ yourself part-time within your own company.
Now, you’re the company’s sole owner and a sole employee.
As the owner, you will be paying 8% dividend tax on all the money you withdraw from the company account, and that is the cheapest way to get the money out.
You will need an accountant that can do all this for you because you’ll go bonkers if you try doing it on your own
Edit: The company will be paying 1% corporate income tax and as mentioned, when withdrawing the money you will be paying 8% dividend tax as the company owner. Dividends can be withdrawn quarterly or yearly (even though you can withdraw money more often, and the accountant will sum it all up in a quarterly report).
UPDATE:
There are new laws that will require microcompanies to have one full-time employee (that means no more 2h employment), but it also means that your corporate income tax goes down from 3% to 1%.
Also, starting 2023 dividend tax goes from 5% to 8%.
I suggest you separate corporation tax from dividend tax. Register the company in a jurisdiction with zero corporation tax. The Isle of Man is a UK banking hub with UK law and unless you are in property or finance it is zero corporation tax.
Then base yourself in a country with low income tax or dividend tax. Take your choice. Or simply be a world nomad and pay no tax
I sometimes think some people on this site are making everything too complex…
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