Opening a Romanian PFA
Small businesses have become increasingly profitable in recent years as a large number of entrepreneurs have started setting up businesses on their own. Among the types of companies that allow the opening of a small business quickly and with a minimum number of documents is the Authorized Individual or the PFA.
The fastest way you can set up a PFA with the help of our online platform - LaRegistru.
Below, our agents specialized in setting up companies explain the necessary steps for creating a sole trader in Romania (PFA), as well as the advantages of such a company. Those who want to set up other types of companies can rely on the help offered by our team.
What is a PFA?
The Authorized Individual is the simplest type of company recognized by the legislation and the authorities in the field in Romania. This form of business is intended for individuals who want to start their own business and who want to benefit from certain tax advantages.
Among the advantages of PFA
- the simple way of setting up, which requires a minimum number of documents;
- reduced costs related to the company's registration with the Trade Register;
- the possibility to have a maximum number of 3 employees to carry out their activity;
- can be set up both by persons with Romanian citizenship, but also by citizens of EU member states.
Also, the types of activities that can be undertaken through a PFA is quite varied as long as it complies with the CANE Code under which the company was established. The most common type of PFA is the one that provides services in the IT field in Romania.
What to consider when opening a sole trader in Romania
The authorized natural person is suitable for the one who wants to work on his / her own in a field in which he / she is specialized, so that compared to an SRL, the authorized natural person will have to prove the training in the respective field. On the other hand, the PFA is the easiest to set up in terms of the registration procedure.
In order to set up a PFA
, a smaller number of documents is needed, it does not need to use the services of a certified accountant, accounting being simplified for this type of legal form. Also, the holder of the PFA is considered his own employee, but he can conclude an individual employment contract with other persons or companies.
Often, the PFA
is compared to the SRL in terms of advantages, and our agents can explain both the advantages and disadvantages of each type of company, so you can make an informed decision when you decide to set up a company. . We can help you with both the registration of a PFA and an SRL.
We are also at your disposal with accounting services for PFA, to make sure that you meet all the legal requirements from this point of view. Once the PFA is registered, a few more steps are needed to be able to start the activity. Among them, the PFA will have to get a stamp. This procedure is quite simple, the stamp can be purchased from any company that sells stamps based on documents issued by the Trade Register.
Then, the PFA will have to be registered with ANAF, including for VAT purposes. From here, the company will receive an invoice, a receipt, an entry-exit register and an inventory register.
You can count on our agents specialized in company establishment for more information related to the procedures to start the activity in the form of a PFA.
PFA taxation in 2023
Although it benefits from simplified accounting, the PFA must be subject to well-established rules. As far as accounting is concerned, single-entry or double-entry accounting is available to the PFA, provided that it complies with the current accounting laws.
The PFA can be subject to two types of taxation: the real system taxation and the income norm taxation. This regime is part of the most notable changes that will be imposed starting in January 2023.
The taxation regime for a PFA is subject to important changes starting with January 2023. Our team summarizes these fiscal updates below.
- The income norm: the threshold for the tax type (real system or income norm) changes starting with 2023, from EUR 100,000 to EUR 25,000. This means that a PFA with an income that exceeds EUR 25,000 will be taxed according to the real system starting with 2024 and it will have to pay taxes according to the net income.
What this means is that if during 2023, the PFA has a gross annual income above the threshold (25,000 euros), starting with 2024 it will determine its net annual income in the real system. The reduction of the threshold and the application of the calculation according to the real system will apply starting with 2024.
- The income tax: remains unchanged, at 10% of the net income.
- The social security contributions: the CAS and the CASS contributions are calculated according to a limit of 24 minimum gross salaries (please see below).
CAS (pension contribution):
A 24 minimum gross salaries limit applies starting with 2023 for those with a net income of more than 61,200 RON. The contribution is calculated according to the value of the net income:
- When the income is less than 12 minimum gross salaries: there is no mandatory need for pension contributions;
- When the income is between 12 and 24 gross minimum salaries: the contribution has a value of 673,5 lei/month and it is calculated relative to the 12 salaries limit (30,600 RON);
- When the income is over 24 gross minimum salaries: the contribution is 1,275 RON/month, calculated relative to the limit of 24 salaries (61,200 RON).
CASS (health contribution):
Starting with 2023 this contribution is reduced from 12 minimum salaries to 6 minimum gross salaries. Like in the case of the CAS, it has a cap of 24 minimum gross salaries. The calculations are the following:
- For income of less than 6 minimum gross salaries: not mandatory;
- For income between 6 and 12 salaries: it is calculated relative to the 6 salaries limit (15,300 RON), and it has a value of 127,5 RON/month;
- For income between 12 and 24 minimum salaries: the contribution amount is calculated according to the 12 salaries limit (30,600 RON) and it has an amount of 255 RON/month;
- For income over 24 minimum salaries: the contribution is 510 RON/month, calculated relative to the 24 salaries limit (61,200 RON)..
We remind investors that the calculations above were made for the 2022 minimum gross salary. The value of the minimum gross salary has increased to 3,000 RON starting with January 1st, 2023, therefore, the CAS and CASS contributions will also be higher.
How long does it take and how much does it cost to set up a PFA?
The time required to set up a sole proprietorship in Romania (PFA)
is relatively short, requiring:
- one day for the preparation of all the documents necessary for the establishment of the PFA, including the reservation of the name;
- obtaining the land book extract for the right of use on the registered office takes approximately 3 working days;
- the submission of the file to the Trade Register and the issuance of the registration certificate takes around 4 working days;
- the registration at ANAF will take another day, after which the company will be able to start operating.
Regarding the costs of setting up a PFA, they are lower compared to those of an SRL or SA. Also, it is not necessary to hire an accountant to keep accounting records.
One of the steps necessary to set up a company is to choose and reserve a trade name. This requirement also applies to the creation of a PFA, but in this case, the name consists of the family name of the person who registers the PFA or the name and initial of his first name to which the phrase PFA is added. From the moment the proof of the trade name is collected, it is valid for 3 months.
Our specialists in setting up companies can help you open a PFA in most major cities in the country, including Timisoara, Cluj-Napoca, Iasi and Oradea.
Headquarters for a PFA
Like any other type of company, those who want to open a PFA must meet certain conditions and follow some preparatory steps for establishment. Thus, in order to set up a PFA, the entrepreneur will have to find a registered office that corresponds in terms of health, PSI and environmental protection. It is good to know that starting with 2017, when choosing a registered office for a PFA, the consent of the owners' company and of the neighbors in the block where the registered office is located is no longer needed if the PFA will not carry out any activity there. The registered office can also be located in an office building. It must be taken into account that the person who establishes the PFA must submit the proof of the registered office in the form of a lease or loan agreement to the Trade Register. Also, you will need an application certifying the right to use the space for the registered office - this application is issued by the Trade Register.
It is good to know that a PFA cannot use headquarters hosting services, but our consultants provide you with such services if you want to set up an LLC.
Other requirements that must be taken into account when setting up a PFA include the preparation of the registration file that must be submitted to the National Office of the Trade Register within the county in which the company will operate. On this occasion we inform you that we provide services for setting up companies in cities such as Iasi, Timisoara, Cluj-Napoca and Bucharest.
Choosing the CAEN code when setting up a PFA
An important step in registering a PFA
is to choose a CAEN code corresponding to the activity that will be carried out by the person who establishes the company. The CANE code is similar to the object of the activity when setting up an LLC, but in the case of the PFA certain rules must be taken into account. So:
- a PFA cannot have more than 5 CANE codes for the object of activity;
- The PFA must ensure that it meets all the conditions related to each requested CANE code;
- The PFA must demonstrate that it has the necessary training for each CAEN code requested;
- The PFA cannot use some CAEN codes entered in the CANE Nomenclature.
- To use a larger number of CAEN codes, the person wishing to set up a company can opt for the registration of an Individual Enterprise (II) which can have a maximum number of 10 CAEN codes.
Regarding the restrictions of CANE codes when setting up a sole proprietorship in Romania (PFA)
, these include:
- 4932 - Transport by taxi;
- 2020 - Manufacture of pesticides and other agrochemicals;
- 6622 - Activities of insurance agents and brokers;
- 8010 - Protection and guard activities.
As I wrote above, for each CANE code the person who will set up the sole trader (PFA) will have to demonstrate training or experience in that field. In this sense, documents attesting its preparation will be submitted. These documents include study diplomas, diplomas obtained as a result of courses accredited by the Ministry of Labor and Social Protection or the Ministry of Education. Diplomas obtained abroad can also be used, but their translated and legalized form will be required. Also, previous experience in a certain field can be proven with the help of a workbook or a certificate issued by the former employer.
Our agents can provide you with more information related to choosing a CAEN Code when setting up a PFA. If you face a commercial litigation, we recommend that you contact the team of lawyers experienced in commercial litigation within the law firm Darie, Manea and Associates.
If you need help when setting up a sole trader in Romania (PFA), do not hesitate to contact us. We remind you that we are at your disposal with establishment services for other types of companies, such as SRL and SA, and hosting headquarters.