Becoming self-employed in Romania can be an exciting and rewarding career choice, offering you more freedom, flexibility, and control over your professional life. But like any entrepreneurial journey, it comes with its own set of challenges, especially when navigating the legal and administrative landscape.
So, if you’re considering working for yourself, here’s a comprehensive guide on how to be self-employed in Romania—covering everything from registering your business, understanding taxes, and figuring out what kind of legal structure suits you best.
1. What Does It Mean to Be Self-Employed in Romania?
In Romania, self-employment typically falls under two main legal categories:
- PFA (Persoana Fizica Autorizata): This is the Romanian equivalent of a sole trader or freelancer. It’s the most common way for individuals to start working for themselves and is often the preferred choice for professionals like consultants, freelancers, and service providers.
- SRL (Societate cu Raspundere Limitata): This is a limited liability company (LLC), which offers more protection as your personal assets are not at risk if the business encounters financial difficulties. While it requires more paperwork and slightly higher fees, it’s ideal for those who want to limit personal risk and build a larger enterprise.
The choice between these two options will impact how you’re taxed, how you manage your business, and how much flexibility you have in managing your income.
2. Steps to Register as Self-Employed in Romania
Step 1: Choose Your Business Structure
The first step is deciding whether you want to register as a PFA or an SRL. For most freelancers and independent professionals, the PFA is the easiest and most cost-effective option. However, if you’re planning on scaling your business, hiring employees, or working on large contracts, you might want to consider an SRL for added legal protection.
Step 2: Register at the Romanian Trade Registry
Once you’ve chosen your structure, you’ll need to register your business with the Romanian Trade Registry (Oficiul National al Registrului Comertului). For a PFA, the registration process is quite simple. You’ll need to provide:
- A completed application form
- Proof of your professional qualifications (if applicable)
- Proof of a registered business address (this can be your home address)
- Copy of your ID
- Fees for registration (usually between 50-100 EUR)
If you’re setting up an SRL, the process is a bit more complicated and requires:
- A minimum share capital of 1 RON
- A company name and registered address
- Articles of incorporation (you may want a lawyer to help with this)
- Identification documents of the shareholders and administrators
- Fees for registration (typically between 200-500 EUR)
For both structures, the process is quite efficient and can usually be completed within a few days to a week.
Step 3: Open a Business Bank Account
Once your business is registered, you’ll need to open a business bank account in Romania. This is required for both PFA and SRL entities. Most banks in Romania offer business banking services, and you’ll need the following documents:
- Your business registration certificate
- Proof of ID
- A copy of the articles of incorporation (for an SRL)
Business bank accounts are necessary for receiving payments, paying suppliers, and managing taxes. Choose a bank that offers good customer service and competitive fees.
Step 4: Register for Tax and Social Contributions
Self-employed individuals in Romania are subject to various taxes and social contributions. Once you’re registered, you’ll need to sign up for:
- Income tax: This applies to the profits you generate as a self-employed individual.
- Health insurance contributions (CASS): This covers your healthcare needs.
- Pension contributions (CAS): These contributions go toward your pension when you retire.
For a PFA, the income tax is calculated at 10% of your profit (revenue minus allowable expenses). Health and pension contributions are also mandatory, but only if your earnings exceed a certain threshold (currently 6 times the gross minimum salary per year).
For an SRL, you will pay a corporate tax of 1% on revenue if you have employees or 3% if you don’t. Additionally, you’ll have to pay dividends tax when you distribute profits to shareholders.
3. Taxes and Deductions for the Self-Employed
Navigating taxes as a self-employed individual in Romania can feel overwhelming, but once you understand the basics, it becomes more manageable.
As a PFA, you’re allowed to deduct various business expenses from your taxable income. These can include:
- Office supplies and equipment
- Rent or mortgage payments if you work from home
- Internet and phone bills
- Travel expenses related to your work
Keeping detailed records of these expenses is crucial, as the Romanian tax authorities may ask for proof of your deductions in case of an audit.
For SRLs, the tax structure is different. You’ll pay corporate tax on your profits, and you can also deduct operational expenses such as salaries, office rent, and other business-related costs. However, when you distribute profits as dividends, you will be subject to an additional dividend tax of 5%.
4. Benefits of Being Self-Employed in Romania
There are several benefits to being self-employed in Romania, including:
- Flexibility: As your own boss, you can decide your working hours, which projects to take on, and how to manage your time. This is especially appealing for freelancers and consultants who value work-life balance.
- Lower Operational Costs: If you register as a PFA, your operational costs can be quite low compared to running a larger company. You can even work from home to save on office expenses.
- Tax Deductions: As mentioned earlier, you can deduct a variety of expenses, from equipment to travel, which can reduce your overall tax liability.
- Access to European Markets: Romania is part of the EU, which means you have access to the entire European market without additional trade barriers. This is a major advantage for businesses involved in e-commerce, consultancy, or digital services.
5. Challenges of Being Self-Employed in Romania
While there are many advantages, self-employment in Romania also comes with some challenges:
- Bureaucracy: Dealing with Romania’s bureaucratic processes can be frustrating, especially when registering a business or filing taxes. Having a lawyer or accountant can help alleviate some of these challenges.
- Tax Compliance: As a self-employed individual, you’ll be responsible for calculating and paying your taxes on time. Mistakes or delays can result in fines, so it’s essential to stay on top of your obligations.
- No Employee Benefits: Being self-employed means you won’t have access to employee benefits such as paid vacation days, health insurance, or retirement plans (unless you contribute voluntarily). You’ll need to set these up for yourself, which can be costly.
6. Should You Hire a Lawyer or Accountant?
While it’s possible to handle everything on your own, many self-employed individuals in Romania opt to hire a lawyer or accountant to help with the administrative and legal aspects of running a business.
- Lawyers: A lawyer can assist with business registration, drafting contracts, and handling any disputes or legal issues that arise. If you’re unsure about the legal requirements of self-employment, seeking professional advice can save you time and prevent costly mistakes.
- Accountants: An accountant can help you keep track of your income, expenses, and tax obligations. They can also assist with filing your tax returns and ensure that you’re making the right deductions. For a small monthly fee, having an accountant manage your finances can provide peace of mind and prevent penalties from the tax authorities.
At Buju, Stanciu & Asociatii, their experienced legal team can guide you through the process of setting up your self-employed business, ensuring you comply with all Romanian regulations. Whether you’re a local entrepreneur or a foreign investor looking to start a business in Romania, their expertise can help make the process smoother and more efficient.
Conclusion
Becoming self-employed in Romania can be a highly rewarding path, offering freedom and the chance to pursue your passion. Whether you choose to register as a PFA or SRL, understanding the legal and financial requirements is key to ensuring long-term success.
If you’re ready to take the plunge and start your self-employment journey, consider reaching out to Buju, Stanciu & Asociatii. Their team of professionals is ready to help you navigate the legal complexities of self-employment in Romania, giving you the best start possible. Contact them today for expert advice on how to build a successful self-employed career!
