It is possible to open a sole trader in Romania only as a natural person. It must be noted that not only Romanians can set up this structure – this right is granted to foreigners as well, provided that they meet the basic registration obligations. Our Romanian lawyers can present the basic incorporation requirements and can offer legal representation during the registration of a sole trader.
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What is a sole trader in Romania?
A sole trader, also known as a sole proprietorship, is the simplest business form available for registration in Romania. It is designed for the needs of natural persons who want to engage in a business in their own name and need a simple legal framework under which they can perform various economic activities.
The sole trader is recommended to those who plan to have limited business operations, therefore those who expect large volumes of activities should opt for other company types (for instance, it is ideally suited for digital nomads/freelancers).
An important characteristic of the sole trader is that, from a legal point of view, there isn’t any distinction between the company and the owner. Thus, the individual who will open a sole trader in Romania is personally liable for the debts of the company, given that the two (the owner and the business) are, legally speaking, the same entity.
In this sense, it is worth knowing that the sole trader does not have legal personality – this is why the company is taxed based on the personal income tax system, applicable to natural persons. The sole trader is known, in Romanian, as Persoana Fizica Autorizata (PFA).
The PFA is the standard type of sole trader, but individuals may also register the Intreprindere Individuala (II) or the Intreprindere Familiala (IF). Our lawyers in Romania can present more details on these types of PFA.
Registration of a PFA in Romania
The registration of this entity is completed through the National Trade Register Office, which handles the registration of any type of commercial company. Just like in the case of other business forms, the founders must register a unique trading name (the registration is done at a national level).
A suitable trading name for a PFA can be formed by adding the founder’s name (the one listed in the identity documents) plus the abbreviation PFA/IF/II. The application for a trading name can be made in person, at the Registry’s local offices, by post, e-mail or on the online platform of the institution.
Of course, other steps and documents are required and our law firm in Romania can offer the necessary information.
Taxation obligations
Individuals who will open a business in Romania as a PFA are required to register for taxation and pay accordingly, given that the purpose of the entity is a commercial one. While the PFA is not liable to corporate taxes, it must pay the personal income tax and taxes associated with employment. VAT payments may also apply. Below, our attorneys in Romania present the main tax obligations:
- 10% – personal income tax rate;
- 25% – social security contributions;
- 10% – health insurance contributions;
- 21% standard VAT rate (reduced rates are also available for some products/services), provided that the yearly turnover is above RON 395,000.
In order set up a company in Romania under this structure, it is necessary to be at least 18 years old, to be a Romanian citizen or to be a foreigner who has his/her residency in this country.
We can provide further details on the registration and functioning of this business form, so do not hesitate to contact our Romania lawyers. You can also rely on us if you want to buy a property in Romania for commercial purposes (some sole traders may need to have a traditional office, depending on their activities).