Micro Enterpise in romania

---

 Foreign investors who want to open a company in Romania can choose between several business forms that suit their needs according to size, number of shareholders, number of employees and other criteria. As far as corporate taxation is concerned, Romania has a standard corporate income tax that is lower compared to other West European countries. The country also has one of the lowest income taxes for a legal entity compared to many other jurisdictions, when that legal entity is a Romania micro company.

Find out more about this type of company below and feel free to reach out to us as needed for incorporation assistance. 

A micro company is the most advantageous forms of organization of a juridical entity from a fiscal point of view, but it must comply with certain conditions and meet certain criteria. In order to become a micro company you must comply with the following:
-    The subscribed capital must be owned by persons who are not the state or territorial-administrative unities
-    In the precedent fiscal year did not exceed 1.000.000 euro in revenue
-    It is not in dissolution, followed by liquidation, registered in the trade registry or courts
A new entity cannot opt for a different registration regime than micro enterprises if at the registration date at the Trade Registry the condition regarding the subscribed capital is met. According to the Fiscal Code, in order for a new established company to opt for profit taxation it should have a subscribed capital of minimum 45.000 lei. starting with 2018 the provisions that restricted the type of activities and the measure of incomes from management and consultancy were also eliminated.

Microenterprises in Romania passed through several interpretations and the general conditions for establishing such a company were frequently changed as a consequence of the predominantly shifty economic environment which is a characteristic feature for intensively developing countries. First thing to understand about this concept concerns its definition within a familiar set of terms. In order to register micro company in Romania individuals must realize that this is a subgenre of the limited liability sector indicating several specific traits that we will explain below.

The main characteristics that are brought into attention when deciding to establish this type of company concern the origin of profits, annual income limits and the owners of the share capital. So micro companies in Romania are legal entities which have revenues of up to EUR 65,000, coming from activities performed in areas different from: banking area, insurance and reinsurance domain, capital markets field (excepting those performing intermediary activities between entities involved in this specific area), consultancy, gambling and management. Another important trait regards the owners of the share capital which should be persons other than the state or local authorities. Even if before an extra condition had to be fulfilled, nowadays there are no limitations regarding the number of employees.

In 2021, the Romanian authorities have brought a set of clarifications to the regime, namely the manner in which the vehicles owned by micro-companies may be used for personal gain by the employees. This is a distinct advantage for this business form and the law now clarifies the following: this particular advantage is not subject to the income tax or social contributions. Previously, this could have been interpreted otherwise and micro-company owners could have been subject to paying income tax and social contributions for this advantage. Our team of experts can provide you with more details and clarifications.

Two other aspects of interest have been clarified in the recent legal updates:
 

• a Romania micro company can deduct the cost of purchasing electronic journal cash registers starting with the fourth quarter 2020, for those devices that were purchased and put into operation in 2018, 2019 and until July 26, 2020, provided that , at the date of purchase of the devices, the taxpayers were micro-companies for taxation purposes. At the same time, starting with August 2020, micro-companies can permanently deduct the new devices purchased and put into operation from the tax costs. In both situations, the amounts not fully recovered can be carried forward to the following years (Law 153/2020);
• starting with the first quarter of 2021, micro-companies that sponsor the state also benefit from deductions of up to 20% of the micro tax, based on the sponsorship contract.

Furthermore, the recent 2021 updated to the micro-company laws concern the semestrial accounting reporting: starting with this year, the companies subject to the micro regime are exempt from these reports (once again, the semestrial accounting reporting exemption applies to companies with a maximum turnover of 1 million euros).

Temporary micro tax reductions apply to companies that increase their own capital during 2021-2025. Moreover, the law has temporarily changed the submission deadline for the filing and payment of the micro tax for the fourth quarter for 2021-2035 (the term is now June 25th).

Our team can provide those interested with more details about the Romania micro company regime and the changes introduced by the National Agency for Fiscal Administration (NAFA), the Ministry of Finance and other Romanian authorities of interest.