Question: How can I be a self employed person in Romania, from a legal point of view?
Answer: A self employed in Romania is registered as a PFA which stands for ”Persoana Fizica Autorizata”, phrase also commonly translated as a Romanian authorized physical person. This is actually a highly preferred alternative for perfectly qualified individuals who choose to set up their own business. This proved quite a convenient option for Romanians and it is still perfectly functioning for all natural persons seeking for a more approachable way to turn their experience and qualifications into real profit. From the legal point of view, there are certain conditions to be fulfilled in order to qualify for the status of PFA Romania.
If you are interested in this opportunity and feel confident in the knowledge and experience you have acquired up until the present moment, then you can start a sole trader in Romania (PFA). Our lawyers in Romania can assist you from the very beginning.
Question: What conditions do I need to meet if I want to register as an Authorized Physical Person, in Romania?
Answer: The first thing that should be handled in this respect is the registration procedure which means that you will be listed by the Trade Register Office as an authorised natural person. Here are some essential features which briefly illustrate the most important stages in the PFA Romania registration process and that have to be understood as essential conditions:
- you have to be over 18 years old;
- you either have to be qualified or trained, or you need the professional experience required to conduct the economic activity for which the authorization is requested (depending on specific circumstances);
- as any other legal entity, you must have a registered office;
- last, but not least, you must never have been convicted by a final court decision for committing the offenses punished by financial or customs laws, or for those involving financial and fiscal discipline as those that are enrolled in the tax record certificate.
Feel free to reach out to our Romanian lawyers for more information about these conditions for operating as a sole trader in Romania.
Are you looking to purchase property in Romania? Whether it is for residential or commercial purposes, if you plan on starting and running a business in a Romanian city, our team is also able to assist you if you want to purchase a property. We provide services to EU and non-EU citizens, and we can give you details on the current requirements that apply in your case, according to nationality and status (resident/non-resident).
Question: How and when do I register for VAT registration when having a PFA in Romania? Can your Romanian lawyers assist me?
Answer: The Romanian Authorized Physical Person can register for VAT in two situations: either when incomes exceed certain limits or when the individual voluntarily applies for VAT registration.
On the national level, self-employed persons with incomes of up to to 300,000 lei/approximately 60,271 EUR/year are exempted from VAT. But, even if this limit is not surpassed, a self employed in Romania should register for VAT since certain instances may require this registration.
In order to register for the intra-Community VAT, a Romanian self-employed must be previously registered for Romanian VAT. We are referring here to the situation when a Romanian authorized physical person provides intra-Community services. In this case, the individual must register for VAT in order to report the operations performed. This particular registration would not turn the person in question into a regular VAT payer.
The VAT registration code received for intra-Community services cannot be used to issue invoices for economic operation carried out on the Romanian territory and intended for recipients established in this very same country. If you have questions on this procedure, please reach out to our attorneys in Romania.
A highly important aspect of the Romanian VAT regime concerns the legal possibility to regain the non-taxable privileges. Individuals have the chance to return to VAT-exempt status for the following year, on condition that the annual turnover does not exceed the provided limits. So, at the beginning of the calendar year, a self-employed may request to be removed from the VAT registered person’s record.
Our lawyers in Romania can provide complete details on the taxation regime and the VAT registration process.
Question: What kind of activities can I perform as a Romanian PFA?
Answer: If you want to be registered as a Romanian authorized physical person, you should know that this legal entity can obtain approval to perform all kinds of economic activities that are mentioned in the CAEN Code, of course excepting those that are governed by special laws and that are reserved for a certain category of entrepreneurs. Assistance for obtaining special permits and licenses is provided by our Romanian law firm.
As you can see, under certain circumstances, the PFA Romania regime can become a little bit confusing. That is why our skilled experts are prepared to assist you concerning a wide range of issues regarding this topic. We come to your aid and we offer you permanent guidance throughout the entire process, representing you before the Romanian authorities. We can help you start your own business by authorising you as a natural person able to carry out independent economic activities.
Question: What is the PFA taxation system in Romania, at the moment?
Due to the big differences between social contributions paid by employees and those who are authorized self-employed persons (PFA), the Ministry of Finances suggested a change in the tax system for PFA.
An employee pays social contributions based on their income, while sole traders (PFA) who usually make a lot more money, can pay them according to the minimum gross salary of 3,700 RON/month, starting with 1 July 2024.
According to the law in place, at the moment, for an employee that earns 5.000 RON per month gross salary, the employee will pay monthly state contributions of 2,049 RON per month, and the employer will pay 113 RON per month for the 5,000 RON gross monthly salary (which has a net value of 2,951 RON). At the same time, a PFA with the same earnings can pay less per month.
Our Romanian lawyers can give you more updated information and assist you with this calculation.
Despite the fact that the Romanian state wants to encourage entrepreneurship, applying this system of taxes can lead to significant differences between the income of a PFA that opted for the minimum limit of contributions payment and an employee.
Working with our Romanian law firm is reccomended for those professionals who are just starting out as well as those who wish to be up to date with these changes.
2024 PFA taxes
There are two types of taxation for a PFA in Romania: as per the real system or according to the income norm.
An important difference between the two regimes is observed in the case of fees and taxes. Starting with 2024, both CAS and CASS are deductible expenses for PFA taxation in the real system.
For the payment of the Social Health Insurance Contribution (CASS) for the PFA in 2024, it is advisable to consider the following:
- the share for CASS payment is 10%;
- the calculation base is between 6 and 60 minimum wages;
- this means that the minimum value is 6 x 3,700 lei = 22,200 lei, of which CASS = 2,220 lei.
If the sole trader derives income from other sources, it will pay CASS separately for this income.
For the Social Security Contribution (CAS), which is the contribution to the pension fund, a rate of 25% of the net annual income applies, capped at 12 and 24 minimum wages:
- for incomes lower than 12 minimum wages, CAS payment is not mandatory;
- for incomes between 12 and 24 minimum wages, the contribution is calculated relative to the ceiling of 12 wages;
- for incomes greater than 24 salaries, CAS is calculated relative to the ceiling of 24 salaries;
- the calculation for an entrepreneur who exceeds 12 minimum gross salaries is 3,700 x 12 = 44,400 lei x 25% = 11,100, the minimum amount for the social contribution due.
Starting with 2023, the ceiling for the income norm was reduced to EUR 25,000, and sole traders with income this limit will have to be taxed in the real system from 2024 and will pay taxes based on net income.
For example, if your sole trader you recorded a gross annual income greater than the €25,000 limit in 2023, starting with 2024 you will need to calculate your net annual income according to the real system.
A PFA subject to taxation in the real system will record the income and expenses for carrying out the activity in the accounting. Since they are deductible, they are subtracted from gross income.
Once chosen, the real tax system cannot be changed for two years. The income tax for the sole trader remains 10% of net income.
You can contact our tax lawyers in Romania for more information about these changes and how they will influence your sole trader in Romania.
Question: Are there any advantages to opening a Sole Trader (PFA) instead of a SRL in Romania?
Based on these modifications, taking into account the taxes paid by a PFA and those paid by an SRL, most small entrepreneurs are wondering which is the most suitable option.
When it comes to income taxes, microenterprises pay 1% to 3% of their incomes, based on the number of their employees, while a PFA pays 10% x income + CASS + CAS.
Still, after we draw the line, a PFA is the one with more fiscal advantages compared to the SRL:
- The money they earn can be spent any time
- The fiscal debt is smaller than in the case of the owner being employed at his own microenterprise
The experts at our Romanian law firm can provide more details as needed.
Our team of lawyers can answer additional questions depending on the activity you will undertake using the sole proprietorship in Romania (PFA).
The team of experts at our law firm in Romania can give you more details on the taxation and reporting requirements for the PFA. Contact us for more details.
When starting any type of business, one might need a team of professionals who can lead him or her through the intricate legal provisions. This is where our team of lawyers in Romania makes the difference. We are at your service anytime and ready to help you open a sole trader in Romania (PFA) or just to offer you the necessary legal information for your business. Call our law firm anytime for a free consultation.