1%-3% Tax Companies in Europe - Here's How

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Today we are once again going to discuss another little know TAX Haven within the EU, which can be an amazing option for many people. We already talked about Slovenia, and how you can structure a certain way and pay only 4% tax there.
Today we are going to discuss how you can pay 1-3% tax!
Which country are we talking about? Romania!
This is a very particular regime, called the microbusiness regime in Romania. Normally Romania has corporate tax rate of 16%, which is not that attractive. Like we said under this program you could pay as low as 1% in taxes.
However, there are certain limitations to this program:
-You can't be making more than a million euros in revenue per year
-1-3% tax rates are to be paid on revenue, not profits. This means NO tax deductions
If your margins are high, this structure could work very well for you. If most of your revenue is your profit then this is an amazing tax deal.
When will you pay 3% in tax? In the case of your company is one man's show. If you have at least one employee then you'll be paying 1%. This is extremely useful because there's a good pool of people in Romania to hire from.
Have you heard that joke which says that the Romanian language is the second official language at Microsoft?
So, if you're the right type of business this structure can work like a charm and save you quite a bit of money in taxes.
Who are we and what do we do?
We are Offshore Citizen team. We help people become global: get a second passport, set up a second residency, pay less taxes, do banking abroad, etc.
We have lots of interesting articles on different topics, we have relevant information up to date.
Author: Michael Rosmer
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[@kookia213]

The idea of 2 companies, one for the expenses and one for sole profit - was genius :) thank you.

[@NxD3TH]

Another great video, thank you so much! This and the Slovenia video are my two favorites you have done. Love hearing about these little secrets, and who would have thought they exist within the EU? More videos like this please! In Macedonia you can choose whether your company gets taxed 10% on profit or 1% on revenue, but being outside the EU you can't get Paypal and other payment processing advantages that you can get in the EU. Also, for digital businesses, Romania has some of the fastest internet speeds in the world! I'd imagine that cost of living is also significantly lower than Slovenia as well.

[@MichaelRosmer]

Yeah 100% costs in Romania are much lower the country also offers a lot more. Not Schengen though.

[@caseybachmeyer]

@@MichaelRosmer but lifestyle?

[@MichaelRosmer]

@@caseybachmeyer lifestyle in Romania or?

[@caseybachmeyer]

@@MichaelRosmer yes :-) we are under the romania video..lifestyle in slovenia is good, they have unbeliveble landscapes and fantastic coffee shops and restaurants...if they ever open again i mean

[@MichaelRosmer]

@@caseybachmeyer yeah I guess it depends on your taste. I find Slovenia too boring and quiet for my tastes. Comparatively Romania offers much more variety be it tons of options in Bucharest or the forests and mountains. Generally, I wouldn't rank either amazing on the quality of life score but it's all about your parsonal values and the diversity between people is part of what makes life great and the world interesting.

[@20kevron]

Seeing these numbers makes me happy for others who have achieved this.

[@iwasthere01]

Thanks for the video Michael. Until now Romania it seems the best option about create a company in my case as i need banking and paypal linked to it. Need to figure it out Where in this planet to get a residence?? haha. If not there in Romania of course. We will be in touch soon!

[@MichaelRosmer]

Always a very good question! We can discuss but I'd consider your long term goals, where you want to live, your existing resources, short term goals...

[@Bri-wi8kq]

Wonderful insights into European countries to run a business and minimize the taxation burden. Many thanks.

[@tandtadwe78594]

Thank you for the info, this is exactly what I was looking for being a Romanian:)). I wanted to find some info about the tax % and the only thing I could understand on our easy to read laws was that the tax is 19%. Your example is exactly what I needed, a service business which does not make more than 1 million. I knew something about this low taxes but did not exactly know how and when they work, this is very useful. As for Romanian being cheap, compared to the western salaries its true, I know most of the people work for less than 1000 euro.

[@MichaelRosmer]

Thanks glad it was helpful!

[@luisfaggioni9384]

Great video, I really liked it. Thanks.

[@OffshoreCitizen]

A pleasure! Anything you'd like to see next?

[@harmonizinginjoy]

Thanks for sharing this :)

[@MichaelRosmer]

You're welcome!

[@Giovanni-it2sp]

Note, the % is on turnover- not profit, correct? So if you make a million in turnover, you pay 1-3% on 1 million. Even when your cost is $500,000.

[@MichaelRosmer]

Yeah that's loosely correct they use a term called "net sales", which is pretty much revenue, which is why I mentioned in the video this is especially effective for if you don't have much in the way of expenses, though note there are tricks and strategies to get around that. Also note there are restrictions on the application of these rules to certain types of income so it sometimes requires a little tweaking to make it work well.

[@tw9419]

Very interesting opportunity!

[@MichaelRosmer]

Yeah not bad!

[@nistreac]

Finally an tax advice video that talks about the benefits of company incorporation in Romania. Right not, I'm sure you can't find lower rates in the EU then the micro company in Romania. Would love more videos about benefits and the downsides of investing in Romania. If you need some intel about the situation here in Romania contact me and I would gladly provide (I am an entrepreneur for over 15 years of experience). Love your channel, keep up the good work!

[@OffshoreCitizen]

Thanks for the support, Vlad! We'll make sure to create more content on it! How's life in Romania?😄

[@thecontainerthecontents6889]

What does the dividend withholding tax mentioned at end mean exactly. Can someone elaborate on that and what it means fully?

[@DariaCallie]

I had the same question xD

[@susiegerrells5194]

Great videos!! Esp this one! We love Romania and am so enjoying your take! Would this work for a head Hunter or is that occupation excluded from this set up?

[@charlesxavier77]

It is very important that this is benefic ONLY for one guy runs all. If you have even 1 employee you would have to pay double the salary he receives. The employees pay a 43% tax, witch means that if u wanna pay your emploeee 1000usd the total amount of money that you would have to spend would be 2000usd. I rounded to 50% for ez of calc. but it still not far away form the truth as you will have to pay and extra tax for that specific employee, for each employee. If you pay your employee under 1000usd (him receiving around 550usd) the tax is quite low, something like 24usd per employee but if it's higher then that the tax would also be higher.

[@recyclermodels2904]

hey Michael, would you be able to help with a set up in Romania for someone who just moved to Cyprus? thanks

[@MichaelRosmer]

Yeah for sure just send us an email.

[@maverick5646]

@@MichaelRosmer As a Cyprus non-dom tax resident is it mandatory to establish a substance in Romania in order to receive tax-free dividends from romanian company to Cyprus? I assume that without substance your romanian company will be subject to corporate tax in Cyprus due to CFC rules. Correct?

[@MichaelRosmer]

@@maverick5646 the risk isn't so much CFC rules as management and control rules but yes that's a possible concern. On the other hand the Cyprus non-dom regime can be used in other ways to achieve zero tax. It's a pretty good program, I'll do a video on it soon.

[@sdreaver816]

Does a Romanian company work with Portugal DTT? I’m hoping to get dividends in Portugal and I’m not sure if establishing a fiscal unit in Malta is the best option. Given the costs and maintenance I’ve been quoted for 2 companies and local services is not so cheap and really cuts in to the tax savings.

[@MichaelRosmer]

Romania can be a good option for Portugal. Depends on your scale, margins, and remember to have substance.

[@dankerchum]

Does this mean that if you move to Romania and hire 1 person, you'll pay the 1% corporate tax on the revenue and then just the 5% personal income tax from dividend income?

[@MichaelRosmer]

Correct yes

[@facundoarceo1573]

Hey Michael, great video and just what I was looking for. I just moved to Spain a year ago and I'm already fed up with their tax system and I really want to find a way of not paying like 45% on even a low income, because here you start paying 45% as soon as you earn more than 5k a month, which is insane. I would love if you could tell me if I can set up a company there, run it as a one man show and be able to just live anywhere else, even full time and only pay that 3%. Would that be possible? Or would I need to be a resident of Romania? I assume that your company could also set all of this up for me, right? Anyway, great content!

[@MichaelRosmer]

Well it doesn't work quite that easy. If you're a one man show you're definitely at a disadvantage because your actions will likely be source income and you'll be a permanent establishment. Depending on where you want to be, willingness to set up trusts, etc though you can have a lot of flexibility.

[@MichaelRosmer]

Spanish tax is nuts though, great country, terrible tax

[@matiasmanzato1419]

Now you understand why so many Spanish people is trying to move outside, to Andorra for example.

[@shabsa2637]

million revenue per year, i think that excludes me! but thanks mike.

[@bollymix-pianist4867]

Have you considered the VAT costs and also the fixed 10% payable for health payments

[@Joel-if2bg]

Hi Michael, great, direct and honest video with straightforward information, thank you very much. Do you believe this would work for a company with a single director (1 employee/shareholder - myself) doing proprietary trading (ie. trading financial futures on own account, not for clients, not for hedging physical commodities and with no investment services offered)? As far as I can see this is not a regulated by the ASF (or by any Balkan area low tax jurisdiction). If you know of another place within GMT to GMT+2 time-zone please let me know - one that offers a residence permit through incorporation of LLC type with no employee/board requirements and has a corporate & personal income tax (dividends) not more than 15%. I can only seem to find Hungary as a sensible option (also N. Macedonia and Montenegro but not as desirable) but they require proof of a gainful economic activity and business plan, not sure if a prop trading firm would count for this even if it generates tax revenue?

[@MichaelRosmer]

From a corporate tax standpoint there are definitely ways you could make it work. The question is what about at the personal level? Do you live in Romania? Etc. So it's a question of the broader planning. Depending on your flexibility and scale there are a few options you might go with. The best is usually to book a call if you want to go over in detail what might apply to you.

[@Joel-if2bg]

@@MichaelRosmer thanks for the reply, will probably talk to you at some point. No rush here, our PM doesn't want us to leave until at least the next tax year it seems (how convenient).

[@eleniminadaki6781]

Your suggestions are very helpful, I will appreciated a lot if you could suggest me what company should I have for a travel directory website that has affiliate program!!!

[@MichaelRosmer]

Depends on many factors please book a call with me www.clarity.fm/michaelrosmer and we can discuss the best option for you

[@eleniminadaki6781]

@@MichaelRosmer Thanks a lot for your quick reply!

[@ryansmith9248]

If you open a SRL such as a recruitment agency can you invoice a UK Company?

[@OffshoreCitizen]

You can invoice any company but if you own the other company you need to watch for transfer pricing rules

[@user-vq7qb2pq3o]

But you can't do consulting and freelancing and get a micro business status, correct?

[@OffshoreCitizen]

There are definitely some activity restrictions though not as much as it might appear on the surface

[@grexlort]

how much taxable income is needed for that structure to be worth paying? Given that I've got Cyprus non-dom tax residence, some form of a CFC foreign/offshore company is needed to pay dividend tax free?

[@susiegerrells5194]

Also would hiring a spouse count for Romania? Do you have to live in Romania to do this? Or does this only work if you don't live in Romania?

[@caseybachmeyer]

you said that you need to earn 1 million a year? or is it also attractive with 100.000 a year? thanks a lot

[@MichaelRosmer]

No you don't need to earn €1 million per year, you max out this one at that level so it needs to be less than that. Biggest thing is having high margins.

[@caseybachmeyer]

@@MichaelRosmer thanks a lot..so reveniew and profit nearly the same...do you know how it is now in bucharest with political restrictions? same bad as germany and so on?

[@MichaelRosmer]

@@caseybachmeyer no not bad like Germany

[@maverickmansions8941]

hahha Hungarian - Romanian citizenship Bulgarian about to come. I think i have superpowers here :))

[@StarkovArtur]

5% on PROFIT in Leningrad region of Russia. Welcome)

[@r.radushev125]

Bulgaria is much better - with as just as 10 flat for everyone (big company, small company, micro company and even individuals... ) simple is better

[@StarkovArtur]

10% on company level + 10% on personal level

[@r.radushev125]

@@StarkovArtur 10% is 10 % :) it is OR between them not PLUS :) 7 % is the dividend taxation as personal income

[@StarkovArtur]

ОК: 10%+7%)

[@MichaelRosmer]

@@r.radushev125 5% actually is the dividend tax. But if you know what you're doing and structure properly you should never pay more than 7.5% tax total in Bulgaria

[@gripzilla]

ARMIN VAN BUUREN!

[@Alvaro1ization]

And if you earn more than 1 million would Romania be a good place or another is better? Greetings from the UK!

[@OffshoreCitizen]

Depends on many factors it's not just a question of how much you make. The best if you'd like to discuss for you would be to book a call and we can go over it calendly.com/michael-rosmer?month=2021-03

[@user-dz7oz9jn5y]

My god this guy talk so slow and go straight to the point please. That's why i only watch wealthy expat. Much easier to watch and understand