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Starting a Business in Romania

Setting up a Sole Proprietorship in Romania: A Complete Guide

Over the years, business domains and investments in Romania have been growing steadily year-on-year. Currently, the GDP of Romania is around 225 billion Euros, while the FDI figure stands at 5.2 billion Euros.

According to the FTSE Russell Association assessment, the Romanian economy was reclassified as a secondary-emerging market instead of a frontier market in 2020. The country also enjoys a steady growth rate in IT, wine-making, and agriculture sectors. Due to several advantages of doing business in Romania, establishing businesses in any form, including sole proprietorship, can be an appealing prospect for companies. 

The tax rates for businesses are well below the EU average of 20.71%. Romania has a record-low tax rate of around 16% for corporations. Moreover, the country has entered into several agreements with other countries that ensure companies do not have to pay double taxes. 

The Romanian government has introduced a slew of special tax exemptions for IT employees engaged in R&D and for micro-enterprise companies with a turnover of less than 1 million Euros annually. Settling down as a business owner in Romania can be an exciting idea due to the availability of a skilled workforce for lesser wages.

Setting up a sole proprietorship in Romania is a viable choice for business expansion. Read further to register a sole proprietorship in Romania.

Who can be a Sole Proprietor in Romania? 

Anyone is eligible to start a sole proprietorship in Romania. Self-employed professionals, freelancers, small or micro-business owners, and entrepreneurs can register a company as a sole proprietorship. The easier registration norms around setting up a sole proprietorship in Romania make it a preferred form of company for business owners.

Nationality is not an issue when you start a sole proprietorship in Romania. No additional capital or stock base liability exists for forming a sole proprietorship company. 

Benefits of Sole Proprietorship in Romania

When you decide to register a business in Romania in the form of a  sole proprietorship, you get to enjoy several benefits of doing so-

  • Establishing a sole proprietorship in Romania is an easy process that requires simpler documentation, and lesser time compared to other company types.
  • Proprietors must register for social security, but they get assistance from the government too.
  • Several schemes from the government and easy-on-terms financing options are available for micro or small businesses. 
  • Proprietors have complete control over every aspect of this establishment.
  • There is no distinction between business income and personal income for the sole proprietor. The owner enjoys all profit since there is no legal separation between the proprietorship and the owner.  
  • All personal tax rates apply to sole proprietorships in Romania.

Documents Required for Registering Your Business in Romania

The documents you need to register a sole proprietorship in Romania are mentioned below:

  • Identity proof, mainly a valid passport
  • Valid work permit or visa
  • Lease agreement for office address
  • Completed form to register as a sole proprietorship with the National Trade Register
  • Registration with income tax and VAT authorities
  • Social security registration
  • Articles of Association 
  • Valid company name with details of sole proprietorship
  • Document mentioning annual turnover estimate concerning all taxable transactions 
  • A business license might be needed to announce the commencement of operations

Special note 

  • All documents need to be notarized.
  • You must create a Power of Attorney with a Romanian financial representative.
  • A sole proprietorship can employ up to three employees. 
  • Ensure compliance with relevant business laws in your niche industry.

Other Criteria for Registering a Sole Proprietorship in Romania

To set up a sole proprietorship in Romania, you must ensure the following are in place-

  • A bank account for all transactions
  • Tax ID number
  • Social security registration
  • Annual record of transactions
  • VAT registration when annual revenue exceeds 300,000 RON

Post-registration compliances

When the sole proprietorship in Romania is registered, check if the following are completed-

  • Obtaining a tax number
  • Lease agreement with a clear statement of terms
  • Compliance with laws related to data protection and copyrights

Taxation

A sole proprietorship in Romania must pay the following taxes-

Tax

Tax rate

Corporate tax 16%

16%

VAT

16%

Personal income tax

10%

How to Register a Sole Proprietorship in Romania?

As a foreign investor, apply for a residence permit by leasing premises for business, besides having a valid passport. If you are part of the EU, a TIN number and ID proof suffice. Here is a guide on how to register a sole proprietorship in Romania.

Step 1: Company name registration

  • Initiate the registration procedure with the National Trade Register under the Chamber of Commerce and Industry.
  • Search for a valid legal name on the Register to see what is available.
  • The company’s name should include the first and last name of the owner followed by persoană fizică autorizată (Sole Proprietorship).

Step 2: Visa requirements

  • Apply for a visa relevant to the business. 
  • A startup visa could be relevant and give you a residence permit to move on with the sole proprietorship establishment in Romania.

Step 3: Company registration

  • Register the sole proprietorship in Romania with the Trade Register. 
  • Provide the Trade Register in Romania with the type of activity the business follows.

Step 4: Tax Registration

  • Obtain a local taxation ID or number by declaring the company and its line of business to ANAF, the local taxation authority. The tax ID is a mandatory part of valid company registration.
  • Fill in the VAT form by submitting-
  • Articles of Association
  • Copy of the company registration with the Trade Register
  • Tax registration documents
  • The above norms apply for EU-based proprietorships, but a few more documents are needed for non-EU-based business owners-
  • Statement for commencement of business activities
  • Power of attorney 
  • Acknowledgement to act as a financial representative by a local for 
  • VAT purposes
  • Articles of association
  • National trade register copy
  • VAT certificate
  • Rough annual turnover of taxable transactions in the country

Step 5: Social Security registration

  • Go ahead to submit the forms. You may apply online and sign off with your electronic signature. The processing might occur between a day to two weeks.
  • Once done, register with the Social Security node and Labour Authorities if the proprietorship will need to hire employees.

How Can Multiplier Help

Before setting up a sole proprietorship in Romania, thoroughly understand the compliances and specific rules here. You can hire a PEO firm, like Multiplier, to help with the finalization of any company formation. 

Multiplier is a global employment solution for any business in cases such as forming a sole proprietorship. It assists in managing all aspects of business management, formation, and even payroll.

Frequently Asked Questions

Yes, a foreigner can establish a business in Romania after fulfilling residence permit-linked norms and having a valid passport.

Romania offers attractive tax incentives and flat yet, low taxation rates while setting up a sole proprietorship in Romania.

No such requirements exist for setting up a sole proprietorship in Romania.

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