Romania

I. Romania: A Genuine Alternative for Entrepreneurs

Despite stricter regulations, Romania remains an attractive low-tax country for entrepreneurs and expatriates in 2025. A flat income tax of just 10%, low living costs, and EU membership speak for themselves. Micro-enterprises with a turnover up to €60,000 pay only 1% turnover tax; above that, it's 3% – as long as the turnover remains under €250,000 (from 2026: €100,000). Dividend tax has increased to 10% but remains suspended for reinvestment. Corporations typically pay 16% on profits. Crypto gains are also subject to the 10% income tax. For German and Austrian pensioners, taxation usually remains in their home country, while Swiss pensions are taxable at 10% in Romania. All in all: an attractive EU location with a low tax burden – under clear rules.

A new beginning abroad doesn't always have to be in Spain or Portugal. Those who look beyond the obvious will discover countries in Eastern Europe with just as much charm – and significantly lower living costs. Romania, for example, offers more than just Dracula myths and Carpathian romance: it is a country in transition, revealing itself as a surprisingly livable location with openness, nature, and great potential.

What might seem unusual at first glance – establishing a company in Romania or relocating one's life there – reveals an exciting alternative upon closer inspection. The capital, Bucharest, pulsates with energy, while the Danube Delta and traditional villages offer rural tranquility. Life moves at a slower pace, street cafés invite you to linger, and the mix of Southeast European serenity and growing economic opportunities makes the country attractive to newcomers.

Although the tax landscape changed in 2025 due to new laws – especially for entrepreneurs – Romania remains attractive for many. Key points include: Micro-enterprises can utilize the favorable micro-tax if their turnover remains under €250,000 (from 2026: €100,000). The rate is 1% or 3% of turnover depending on the activity. Above this, corporate tax automatically applies. Dividend taxation is now 10% since January 1, 2025. The general income tax rate remains a flat 10% – significantly below Western European levels.

II. What Others Say About Romania

Transylvania as a white fairytale landscape. On this day, the fog plays arm wrestling with the sun. If the sun gains the upper hand, it shovels peepholes through the clouds into the blue sky and clears the view to the Bucegi Mountains. Tiny ice crystals shimmer like glitter through the air. With every step, it whispers underfoot, sounding as if Mother Hulda is shaking out her beds. At this time of year, snowshoes are the best means of transport. Because in the Southern Carpathians in Transylvania, there are still real winters with hearty sub-zero temperatures and decent amounts of powder snow, which transforms meadows and forests into a white fairytale landscape.

Europe's most dynamic economy. Romania is currently not only by far Europe's most dynamic economy. The country surpasses even China and India in economic growth. Liam Carson, Eastern Europe expert at the London analysis firm Capital Economics, even says: 'Romania is possibly the fastest-growing economy in the world.'

IT scene in Bucharest. A flourishing IT scene has developed in Bucharest. Romanians are known for their top software specialists. Many industry giants like Microsoft have opened branches there, as salaries are still the third lowest in the EU. This also appeals to car manufacturers. Ford and Renault-Dacia, in particular, produce in the Carpathian state. The sector's turnover has tripled in ten years and now accounts for 14 percent of GDP. The textile industry also employs around 250,000 people. Romania is considered the 'tailor shop of Europe'. Leading brand manufacturers have their products made there. Besides favorable costs, the geographical proximity to Europe's sales markets is the big plus compared to countries in the Far East. With low corporate taxes of 16 percent, the country is attractive to investors. In addition, income tax was lowered in 2018, which stimulates consumption. This mix of various ingredients has fueled the economy. In 2017, GDP grew by 7, in 2018 by 4.2, and in 2019 by 4.1 percent.

III. The Micro-Enterprise Tax Regime in Romania

Romania is not considered a non-dom country. The non-dom status is granted in the UK, Ireland, and Malta. However, Romania has long been a popular choice for entrepreneurs seeking a European base with an extremely low tax burden. The Romanian micro-enterprise model still allows for flat-rate taxation of just 1% or 3% on turnover in 2025. However, the requirements have been significantly tightened since January 2024 and again on January 1, 2025.

Requirements for Micro-Enterprises (as of 2025):

• Maximum Turnover: In 2025, only companies with a turnover of up to €250,000 (calculated at the exchange rate on 31.12.2024) can use the micro-enterprise status. From 2026, this limit drops to just €100,000.
• Shareholder Rule: No shareholder may hold more than 25% in more than three micro-enterprises.
• Employee Obligation: Every company must employ at least one full-time employee at minimum wage (as of 2025: approx. €660 gross).
• Employment Interruption: Employment may be interrupted for a maximum of 30 days per year.
• Industry Limitation: Companies in IT, gastronomy, medicine, legal services, etc., can still participate but are subject to the higher flat tax of 3%.
• No Dissolution: The company must not be in liquidation or dissolution.
• No Special Sectors: Firms in banking, insurance, capital markets, natural gas, or oil extraction are excluded.

Turnover Tax Rates:

• 1% Turnover Tax: For annual turnovers under €60,000 and non-privileged activities.
• 3% Turnover Tax: For turnovers over €60,000 or for activities in privileged industries (e.g., IT, gastronomy, medical services).
• Exceeding Turnover Limit: If the turnover limit is exceeded in the current year, there is an automatic switch to the regular corporate tax of 16% from the quarter of the excess.

Dividend Taxation:

Since January 1, 2025, a tax rate of 10% applies to dividends for domestic and foreign shareholders (previously: 8%). Tax exemption within the EU is possible if: at least 10% participation in the distributing company exists; this participation has been held continuously for at least 1 year; and residency is in an EU state.

IV. Who is Romania For?

Romania is particularly well-suited for entrepreneurs, digital nomads, and individuals seeking a lower cost of living combined with a favorable tax environment within the European Union. Its dynamic economy, especially in the IT sector, offers significant opportunities for skilled professionals and business owners. Those who value a relaxed lifestyle, rich culture, and natural beauty will find Romania a compelling destination.

However, it might be less suitable for those who require highly developed infrastructure outside major cities or expect Western European salary levels without considering the significantly lower cost of living. It's an ideal choice for those willing to embrace a country in development with genuine growth potential.

V. Residency in Romania

As an EU member state, entry and settlement for EU citizens are straightforward, requiring no visa or complex residency permits. For non-EU citizens, general entry requirements apply. Establishing genuine residency involves more than just registering; it means making Romania your true center of life. This includes registering with local authorities, integrating socially, and shifting economic activities to the country.

The healthcare system offers solid care, especially for long-term residents. Registration with the National Health Insurance House (CNAS) allows for free doctor visits, provided 6.5% of domestic income is paid into the health fund.

VI. Overview of Tax Rates in Romania

Social Security Contributions:

• Employees: 25% pension insurance, 10% health insurance.
• Employers: 2.25% unemployment insurance.
• Self-employed: 25% pension insurance (on minimum wage), 10% health insurance (on minimum wage).

VII. Avoiding the "Boris Becker Trap" of Sham Relocation

A sham relocation occurs when an individual officially moves their residence abroad but maintains their center of vital interests in their country of origin. This can have serious tax and legal consequences. To avoid this, the following criteria must be met:

• Genuine Residence: The new residence must be the actual center of your life.
• Deregistration in Home Country: Official deregistration with authorities in your country of origin.
• Social Integration: Building a social environment in the new country.
• Economic Activities: Relocation of economic activities.
• Permanent Stay: A longer stay in the new country.

VIII. What Makes Romania an Attractive Place to Live?

• Low Taxes: 10% income tax, 1-3% corporate tax for micro-enterprises.
• Low Cost of Living: Significantly cheaper than in Western Europe.
• EU Membership: Freedom of movement and legal certainty.
• Dynamic Economy: Growing IT sector and open job market.
• Natural Beauty: Carpathians, Danube Delta, Black Sea.
• Cultural Diversity: Rich history and traditions.
• Hospitality: Open and friendly population.

IX. Cost of Living in Romania

The cost of living in Romania is significantly lower compared to Western Europe. Here's a detailed breakdown:

• Rent: A 1-bedroom apartment in Bucharest costs about €300-500, significantly less outside the capital.
• Groceries: Monthly costs for one person are about €150-250.
• Public Transport: A monthly pass in Bucharest is about €15-20.
• Internet: Monthly costs are about €10-15.
• Restaurant Meal: An inexpensive meal starts from €5.
• Gym Membership: Monthly membership is about €20-30.

X. Tax Considerations for Leaving Your Home Country

When moving from Germany to Romania, the following points should be considered:

• Exit Taxation (Wegzugsbesteuerung): This may apply if a person with significant holdings in corporations moves their residence abroad.
• Double Taxation Agreement: Germany and Romania have an agreement to avoid double taxation. This regulates which state has the right to tax certain types of income.
• Inheritance and Gift Tax: In Romania, there is no inheritance and gift tax for close relatives.

XI. Proper Preparation for Your Move to Romania

Careful planning is crucial for a successful move to Romania. This includes:

• Tax Consultation: Early consultation with a tax advisor with international expertise.
• Company Formation: Clarification of the requirements for micro-enterprise taxation.
• Health Insurance: Obtaining suitable health insurance.
• Bank Account: Opening a Romanian bank account.
• Residency Registration: Official registration of residence in Romania.

XII. Automatic Exchange of Information under OECD CRS

Romania participates in the OECD's Common Reporting Standard (CRS). This means that financial institutions in Romania report information about financial accounts of foreign taxpayers to the respective tax authorities in their home countries. This serves to combat tax evasion.

XIII. Further Relocation Formalities

• Visa/Residence Permit: As an EU citizen, no visa is required. For non-EU citizens, general entry requirements apply.
• Driving License: Conversion of the driving license for longer stays.
• Vehicle Registration: Re-registration of the vehicle in Romania.
• Language Skills: Romanian is the official language; English is widely spoken in larger cities.

XIV. How Our Firm Can Help You with Your Move to Romania

Our firm offers comprehensive support for your move to Romania, including:

• Comprehensive tax consulting for individuals and businesses
• Assistance with company formation and legal structures
• Guidance on residency and immigration procedures
• Real estate acquisition and rental support
• Bank account opening and financial planning
• Networking with local service providers
• Ongoing compliance and administrative support
• Tailored solutions for complex international cases