By: Ana Horvat (Nova24tv)
The circumstances surrounding the opening of Robert Golob’s account in Romania remain shrouded in mystery. The Prime Minister continues to insist that he did not open the account at a Raiffeisen Bank branch in Bucharest himself. While Golob insists on identity theft, the employees of the bank in question have pointed out, and the Gen-I representative office in Bucharest stressed, that such a thing is practically impossible. Anyone who is familiar with the process of establishing a company in Romania, and who knows that for some companies, the tax rates in Romania can be reduced to as little as one percent, cannot help but wonder, in light of this, whether Golob might have decided to open an account in Romania for this exact reason.
Romania has become a bit more expensive nowadays, but it is still a good deal. “It is definitely a place to consider if you want to set up your own business. And for some companies, tax rates in Romania can be reduced to as little as one percent. That’s almost as good as paying zero tax, and your company is still located on the European continent and, moreover, in the European Union,” points out Nomad Capitalist, where they know how to make sure your business abroad is as profitable as possible.
When you ask yourself whether Romania is a good place to work or to start your own business, the first thing to point out is that, while Romania is far from a perfect example of a transparent country, as corruption remains a problem and the level of development is somewhat low, it offers a sense of freedom, a good and high-quality workforce, a low corporate tax rate, and on top of that it is a member of the EU. In addition, the country has lightning-fast Internet – perhaps the fastest in Europe – and access to the outside world is thus wide open.
“Romania is home to one of the best workforces in the world when it comes to business – for everything from virtual assistants to editors and web developers. The people here are knowledgeable, and their level of English is excellent,” they point out, adding that when Nomad Capitalist needed help with some web design problems, they ended up hiring a Romanian. The attitude, together with the level of language proficiency – not Filipino or Indian English, but Westernised English – made the choice a straightforward one, they say.
When it comes to the country’s EU membership, they point out that if one has a business in the EU, this can be a benefit, but of course, it is not a necessity. “For my particular situation, having a company in the EU would just mean more paperwork, more bureaucracy and higher taxes – even given the relatively moderate taxation in Romania. But there are many situations where having an EU company actually makes things easier,” they point out. For example, those taking advantage of Portugal’s tax exemption scheme are prohibited from receiving income from blacklisted companies. “So, is there really a better company structure to use than one within the same European Union? Being able to prove that you are actually paying taxes is a great way to avoid accusations of tax evasion. Countries like Romania use legal loopholes to charge extremely low tax rates while exploiting the system in a way that companies in tax havens like the Seychelles or Belize cannot,” they state.
Romania has a low corporate tax rate
Although it is considered extremely easy to set up a business in Estonia, Romania offers potentially much better tax incentives for companies to do so. Nomad Capitalist points out that once you have a new Romanian company, you will be eligible to benefit from almost zero corporate tax rates.
So, what qualifies as a “micro-business?” The criteria are quite simple: a turnover of €1,000,000 or less in the previous tax year. Until recently, this amount was capped at much less – €100,000, essentially reserving the low-tax regime for micro-enterprises, for genuinely small businesses, rather than for location-independent entrepreneurs running serious international businesses. However, this has changed, as Romania, they say, is trying to attract businesses and stimulate job growth. The end result for you is that if your gross sales – not profits – are less than €1,000,000, as a micro-business, you can enjoy a much lower tax rate, with tax rates ranging from 1 to 3 per cent (1 percent if you formally employ at least one Romanian worker, including the corresponding social contributions; 3 percent if you do not employ anyone (this requirement used to be stricter, but has been relaxed). You will also pay a mere 5 percent tax on dividends).
For this reason, Romania is much more attractive than Estonia, according to Nomad Capitalist, where companies pay no tax until they distribute the money and then pay 14-20 percent. As the Romanian tax scheme for micro-businesses is based on turnover, one tax return has to be filed each quarter to declare one’s own income, but that is about it. “You can either base it on turnover or include tax deductions. The laws have continually been evolving, largely in favour of the business owner, so please consult with us before trying to put this structure in place,” stresses the Nomad Capitalist. There are two major exceptions around the tax exemption limit that limit the possibility of low tax rates for a Romanian company. The first is that a maximum of 20 percent of annual turnover can come from management or consulting income. This means that you cannot do a bunch of service work for another company. And the second is that you cannot be involved in banking, reinsurance, capital markets, gambling, or oil and gas business. In their view, the best type of company to use this structure is a manufacturing company with healthy margins and a desire to employ someone in Romania.
The only frustrating part of doing business in Europe – including Romania – they say, is the value-added tax (VAT). This is because the European Union has worked hard to ensure that companies selling online, especially those selling digital products, collect and remit VAT. Romania’s VAT threshold – the level at which you have to collect VAT – is €49,000; it is not exceptionally low and is in line with countries such as Georgia.
Golob, who maintains that he did not open the bank account in Romania himself but rather had his identity stolen, has informed the public that he did not report the identity theft to the Romanian police but to the Romanian prosecutor’s office. Interestingly, when the Radio-Television Slovenia team went on the trail of the case on the day that a handful of political activists at RTV Slovenia went on strike, they found that Gen-I and bank employees in Romania said that it was virtually impossible to open a bank account with a stolen identity. In fact, a foreigner who wants to open an account with them needs two pieces of identification – a passport and an identity card – to prove this is his real identity. However, it is also possible to open an account remotely, which also requires both documents to be shown via webcam, in addition to a digital signature certificate.