Microenterprise

The most efficient tax vehicle for deriving income in Romania, is incorporation of a Romanian Limited Liability Company that would qualify as "Microenterprise".

However, certain criteria should be met to qualify as a Microenterprise and certain risks should be carefully evaluated from both individual perspective and from the non-resident entity perspective (if implicated in such a transaction) before implementation of such structure.

The taxes that would be payable under such a scheme would be:

• 3% turnover tax to the income derived by the Microenterprise;
• 10% to the dividends paid at the end of the year to the individual shareholder (only if certain conditions are met);
• social contributions that could be due from the owner perspective, (however their cost in absolute figures could be minimised);

For such a structure it should be also considered bookkeeping costs and salaries cost for at least one employee.

Among the criteria that should be met by a Limited Liability Company (LLC) for qualifying as a Microenterprise are:

• should have as object of activity: production of material goods, provision of services and/or trading activities;
• should have between 1 to 9 (inclusive) employees;
• the income derived should not exceed 100,000 EURO/year;

It would not qualify as a Microenterprise, Romanian legal entities that:

• carry out banking activities;
• carry out activities in insurance, reinsurance, and securities market. An exception from this rule is for "intermediaries" in the previous mentioned fields;
• carry out activities in gambling, betting, and casinos;
• have as shareholder a legal entity that have more then 250 employees.

It is envisaged that this structure should exist until Romania would receive EU membership (at earliest in 2007).

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