Open micro company
A micro company is a type of legal entity that complies with three cumulative conditions, as set forth by the legislation in force. The primary advantage of this business form is that, under certain circumstances, it can be subject to one of the lowest taxes for corporations in Romania.
Many investors find that the micro company regime is a convenient one and one that allows for a simplified accounting practice. However, investors are advised to pay attention to all of the current regulations in force for this business form and fully understand its taxation regime, and the conditions under which it can change, before incorporating the new company.
Micro companies are allowed to offer sponsorships, and this can result in a reduction of the due taxes for the quarter in which the said sponsorship is made. The regime under which these types of companies could offer sponsorships was changed to include more types of non-profit entities that may receive aid. However, a micro-company that wishes to make a sponsorship (and benefit from the tax reduction of approximately 20%) must first check if the NGO is included in the list approved by the National Agency for Fiscal Administration.
A micro-company is not subject to mandatory auditing in many cases, however, there are situations during which this type of company may fill two of the three conditions for audit obligations. Our team lists these general conditions below:
- total assets of 16,000,000 lei;
- net turnover of 32,000,000 lei;
- average number of employees during the tax year:50.
As noted, these are the general conditions which, fulfilled by companies of any type lead to mandatory auditing obligations. However, one should note that the obligations only arise when a said legal entity exceeds these limits for two consecutive tax tears. Given the fact that a micro-company has a turnover of no more than 1 million euros (this is below the aforementioned condition of 32,000,000 lei), it will only qualify for mandatory auditing if it exceeds the remaining two limits.
| Quick Facts | |
|---|---|
| Romanian micro company qualification | Turnover below EUR 500,000, owned by natural/legal persons other than the state and territorial administrative units, it is not subject to liquidation |
| Minimum share capital for those who open a Romanian micro company | No minimum share capital prescribed for the SRL |
| Minimum number of shareholders | 1 |
| Number of directors | Not mandatory for the SRL. It is managed by an administrator |
| Mandatory residency requirements | No |
| Local director required (Yes/No) to open a Romanian micro company | No |
| Time frame for the incorporation (approx.) | 5 – 7 days |
| Corporate tax rate in Romania | 16% standard corporate income tax rate or 1%/3% of the revenue under the special micro company regime |
| Dividend tax rate | 8% |
| VAT rates in Romania | 19% standard rate 5% and 9% reduced rates |
| Number of double taxation treaties (approx.) | 90 |
| Annual meeting required | Not applicable to the SRL, except as otherwise stipulated in the company’s constitutive documents |
| Accounting and filing requirements after you open a Romanian micro company | Quarterly corporate income tax payments. Annual financial statements |
| Foreign-ownership allowed | Yes |
| Reasons to maintain the micro company regime in Romania | The micro tax is lower compared to the profits tax in Romania. Taxpayers can switch from one regime to the other if advantageous in their case, however, they may not switch back |
| 1% rate conditions | Applicable to businesses with a turnover below EUR 60,000. |
| 3% rate conditions | For businesses with a turnover above EUR 60,000 or that engage in certain types of activities (as defined by their NACE codes). |
| NACE codes for the 3% micro company regime (non-exhaustive list) | 5821 – Computer game publishing activities; 6201 – Custom software development activities; 6209 – Other information technology service activities; 5510 – Hotels and similar accommodation facilities; 5610 – Restaurants, etc. |
| Switch from the 1% rate to the 3% rate | Starting with the quarter in which the company exceeds the EUR 60,000 threshold. |
| Switch from the 3% rate to the 1% rate | Possible if, during the fiscal year, the turnover does not exceed EUR 60,000 or ceases to engage in certain types of activities (according to the NACE codes). |
| Special regime for hospitality (HORECA) companies | Cannot qualify for the micro company regime starting with 2024 if they exceed the turnover threshold of EUR 500,000 (as was previously possible). |
| Conditions for the holding regime | Limited to only one micro company (a holding of over 25% in a company is only possible for one micro company). |
| Types of companies that can qualify as a micro company | Generally, the private limited company (SRL) |
| Micro-company regime when changing the business form | Possible, if the new business meets the specified conditions. |
| Micro regime if the company does not have at least one employee | Not permitted |
| When does the micro company regime cease | In the quarter in which the cumulative conditions are no longer met by the company. |
| Companies prohibited from adopting the micro company regime | Examples include primarily those companies in the insurance and reinsurance sector. |
| Assistance for micro company creation in Romania | Our team can provide assistance for investors looking to open an SRL company that will qualify as a micro company. |
| Services for micro companies offered by our team | Assistance and counsel for meeting the ongoing requirements and complying with the latest fiscal changes. |
| When to contact us | As soon as you decide to set up a company in Romania. |