The IT services market in Romania continues to grow. According to Statista forecasts, the IT services market will reach $1.377 billion in 2025. The largest segment will be IT Outsourcing, with a projected value of $506.70 million. The market is expected to grow at a compound annual growth rate (CAGR) of 6.78% from 2025 to 2029, reaching $1.79 billion by 2029.
Romania’s highly skilled workforce in the IT sector and competitive pricing attracts foreign companies looking to capitalize on these advantages to grow their businesses.
The country officially participates in the FATCA agreement (the U.S. Foreign Account Tax Compliance Act) and the CRS (Common Reporting Standard for the automatic exchange of information). Keep this in mind if you are considering Romania for your business operations. In this material, we will provide a comprehensive overview of the tax conditions in Romania for businesses.
Tax Residency in Romania
Before diving into the nuances of Romanian company registration and taxation, let’s clarify the terms “resident” and “tax resident.” These two terms play a critical role in conducting business in Romania. Residency criteria include:
- The individual resides in Romania.
- The individual has their center of vital interests in Romania.
- The individual spends a period or periods exceeding 183 days in Romania (within any 12 consecutive months ending in the relevant calendar year).
When Does a Company Qualify as a Tax Resident in Romania?
For a newly established company to qualify as a tax resident in Romania, the following key conditions must be met under the law:
- A resident company is one that is established, managed, and controlled within the country. From the moment of registration, all businesses pay local corporate taxes.
- A company can also be recognized as a tax resident if a foreign legal entity conducts operations in the country that align with its economic, real, and substantial purposes. Additionally, at least 50% of the foreign legal entity’s executive directors/board members must be Romanian residents, or strategic economic decisions must be made by directors in Romania.
It is important to remember that in Romania, a place of business with a certain degree of permanence through which business is conducted may be recognized as a Permanent Establishment. The country defines this according to the typical tax convention of the Organisation for Economic Co-operation and Development (OECD).
Limited liability companies (SRL), microenterprises, and joint-stock companies (SA) are the most common forms. The registration and taxation conditions for each vary depending on the chosen structure.
The choice depends on the scale of the business, available capital, the number of partners, and long-term plans. For SMBs, SRL or microenterprise are the best options, while SA is optimal for large investment projects.
Taxation in Romania in 2025
In 2025, the Romanian government implemented significant changes to tax legislation, affecting the taxation of microenterprises.
Microenterprises:
- As of January 1, 2025, the annual income threshold for classifying a company as a microenterprise has been reduced from €500,000 to €250,000. In 2026, this threshold is expected to be reduced further to €100,000. This means more small companies will fall under the general taxation regime.
- Abolition of tax benefits: As of January 1, 2025, the government eliminated tax benefits for IT sector employees previously exempt from personal income tax. This decision is part of a broader strategy to reduce the budget deficit.
