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PFA Taxes in Romania

PFA Taxes in Romania --> Updated on Sunday 08th November 2020

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Do you wish to register as a self-employed individual? Our lawyers in Romania answer some of the popular questions about the taxation regime for this business form.

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 incomes, while PFA that usually make a lot more money, can pay them according to the limit of the minimum gross salary of 1.900 RON, starting with 2018.

So, the differences can be overwhelming.

According to the law in place, at the moment, an employee that earns 5.000 RON per month gross salary, will pay contributions of about 2.000 RON per month, while a PFA with the same earnings will pay only 1.185 RON per month. Our Romanian lawyers can give you more updated information and assist you with this calculation.

Despite the fact that the Romanian state want to encourage entrepreneurship, applying this system of taxes can lead to differences up to 43% between the income of a PFA that opted for the minimal limit of contributions payment and an employee.

After only 2 months from modifying this laws, the authorities say that it is a priority to change the law again, in order to remove the discrepancies. 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.

Taxare PFA

Are there any advantages for opening a PFA instead of a SRL in Romania? Can your lawyers in Romania explain?

Based on this modifications, taking into account the taxes paid by a PFA and those paid by a SRL, most small entrepreneurs are wondering for which of  the two to it is better to opt.

When it comes to the 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 190 RON + CAS 475 RON.

Still, after we draw the line, a PFA results to have more fiscal advantages that a 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

Therefore, the law needs a fast modification regarding the minimal limit that gives PFA’s an advantage regarding the fiscal contributions, but it severely disadvantages employees.

It is expected that the new changes will appear in the near future in the Official Monitor. The experts at our Romanian law firm can provide more details as needed.

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 incomes, while PFA, that usually make a lot more money, can pay them according to the limit of the minimum gross salary of 2.230 RON, starting with 2020. So, the differences can be overwhelming.

According to the law in place, at the moment, an employee that earns 5.000 RON per month gross salary, will pay contributions of about 2.000 RON per month, while a PFA with the same earnings will pay only 1.185 RON per month. Despite the fact that the Romanian state want to encourage entrepreneurship, applying this system of taxes can lead to differences up to 43% between the income of a PFA that opted for the minimal limit of contributions payment and an employee. After only 2 months from modifying this laws, the authorities say that it is a priority to change the law again, in order to remove the discrepancies.

Based on this modifications, taking into account the taxes paid by a PFA and those paid by a SRL, most small entrepreneurs are wondering for which of  the two to it is better to opt. When it comes to the 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 190 RON + CAS 475 RON at the end of 2018. Still, after we draw the line, a PFA results to have more fiscal advantages that a SRL, namely the following presented by our Romanian lawyers:

  • 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

 

Therefore, the law needs a fast modification regarding the minimal limit that gives PFA’s an advantage regarding the fiscal contributions, but it severely disadvantages employees. It is expected that the new changes will appear in the near future in the Official Monitor.

Since the beginning of 2020, along side the increase of the minimum wage, the taxes for PFA increase as well. So, according to the new law, if a PFA exceeds 26.760 RON per year, they must pay CAS and CASS. The CAS taxes have increased to 25% meaning at least 557.5 RON per month (in 2019, this was 520 RON), while the CASS increased to 2.676 RON per year from 2.496 RON per year in 2019.

The team of experts at our law firm in Romania can give you more details on the taxation and the reporting requirements for the PFA. Contact us for more details.


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