One of the major questions to be considered when registering a new company in Romania is the taxation of the Company and ancillary to that VAT.
Initially all companies are incorporated as micro companies whereby they are taxed on income rather than profit. This can be altered quickly depending on the development of the company. For a micro company as there is no profit calculation then a number of expenses can be paid by the company which in other circumstances could not be done. By doing this it reduces the cash in the company and therefore reduces the funds available for the payment of a dividends.
One of the issues for the owners of a micro company is how to receive monies from the company without it being taxed as a dividend. There are many legitimate schemes devised for this, but each arrangement needs to examine in the light of the business of the company and its ownership. One method as mentioned above is to put as many legitimate expenses against the company as possible.
When a company is incorporated another question that is raised is that of VAT. Companies with a turnover of less than 65,000 Euro are not automatically registerable for VAT. On incorporation it is possible to voluntarily register for VAT. The registration process is not difficult and provided the correct documentation is supplied is approved by return. The VAT registration may benefit the company but depending on its business there maybe cash flow issues. Recent changes have occurred that VAT registration is not possible if the company does not have a registered headquarters other than at a lawyers office. Also, the administrators and shareholders need to be registered with the Romanian tax authorities.
Whilst not immediately apparent the question of VAT becomes important on the registration of a company especially if the company is intended to purchase property. After Brexit (yes that word) UK investors will still wish to invest in Romania. As non-EU citizens they will not be able to own land and will need to use a Romanian company to do so. The rules are not yet clear as Brexit has not happened, and they will become clearer shortly.
An important aspect concerning VAT is in respect of the sale/purchase of property. Normally if the seller is developer/property company then it will charge vat. However, the Romania tax code provides that when there is a sale/purchase between two Romanian VAT registered companies then the seller does not have to charge VAT and conversely the buyer does not have to pass this over to the Revenue. This can be a saving in cash flow which a buyer should consider. If this is the case, then when a company is incorporated for the purpose of owning property then it is important to ensure that both companies are registered for VAT purposes.
These are the current rules but as with everything in Romania it is necessary before embarking on investing in Romania it is important to obtain up to date current legal advice before finalizing any investment plans.