Small Business in Romania for

Micro-companies

In this video I would like to show you the advantages of having a micro-enterprise in Romania.

A micro or small business is a legitimate company without restrictions, but it is subject to an annual turnover limit that must not be exceeded.

In a Western European country such as Germany, for example, the threshold is EUR 22,000 per year. If your annual turnover remains below this amount, you are exempt from value-added tax (VAT) or sales tax. This means you cannot include it on an invoice—nor are you required to remit it.

For example, if I invoice a customer 119.00 EURO for a product or service, non-small businesses will be charged VAT at 19%, in this case 19 EUR.

In this example, it goes directly to the German tax office. Of course, you can offset this against invoices when purchasing and thus reduce the VAT burden to be paid - but very often only very slightly or not at all.

If there are no countervailing circumstances, the entrepreneur is left with EUR 100.00 in revenue.

The situation is different for a micro-company: The invoice of EUR 119.00 is the final amount – for which no 19% sales tax or EUR 19 has to be paid.

Now to our special case of Romania:

Depending on the exchange rate of the Romanian LEU to EUR, the turnover required to be exempt from VAT is currently around €60,000 per year.

Within the EU, this is one of the most liberal regulations for small businesses and thus creates a significant competitive advantage – especially for startups and small enterprises.

A small business owner can generate a monthly turnover of almost 5,000 EURO without having to worry about VAT. This means that an entrepreneur can make up to 19% more profit. In Romania, the standard sales tax rate is also 19%.

This can be a major advantage over competitors in highly competitive markets. Not only in the traditional sale of products or the provision of various services, but also on highly transparent platforms or markets such as:

Amazon, eBay, Dropshipping, with Shopify, etc.

The savings potential essentially applies to all areas.

As mentioned, this regulation applies ONLY to small businesses that do not generate more than EUR 5,000 in sales per month.

Whether for micro-enterprises or VAT-paying companies, the income tax burden in Romania is also one of the lowest in the EU.

Income tax for companies in Romania:

Option a) no employees or staff:

3% tax on turnover up to 250,000 Euros per year or 16% tax on profit if this was chosen voluntarily.

Option b) One or more employees:

1% tax on turnover up to 250,000 Euros per year or 16% tax on profit if this was chosen voluntarily.