Through this article, Localit Consulting and its partners aim to help you understand the differences between the two countries regarding company formation for your business activities and their growth.
It is clear that in recent years, many entrepreneurs—especially Greeks—have been using these two countries to start or expand their business activities due to the advantages they offer for business. Naturally, low taxation is not always the sole criterion for choosing a country; proper overall tax planning is also crucial.
The purpose of this article is to highlight which country is more attractive for business and to delve into the key aspects of the company formation process as well as the operation of a business.
Corporate Taxation
In Cyprus, companies are taxed at a 12.5% corporate tax rate on the net profit of each fiscal year.
In contrast, in Romania, companies are taxed differently, not based on profit but on turnover/revenue.
Romanian Company Taxation from 01.01.2024
Revenue / Turnover 1 to 60,000 EUR:
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A small company with at least one employee is taxed 1% on revenue. This applies to revenues from 1 to 60,000 EUR.
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If the company has no employees, it is taxed 16% on profits.
Revenue / Turnover 60,001 to 500,000 EUR:
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For revenue from 60,001 to 500,000 EUR, a company with employees is taxed 3% on revenue.
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If the company has no employees, it is taxed 16% on profits.
IT Companies / Software Developers:
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Companies with IT or software development as their core activity pay 3% tax on revenue from 1 to 500,000 EUR.
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If there are no employees or revenue exceeds 500,000 EUR, the company is taxed 16% on profits.
Conclusion: What Really Happens
Which company is taxed lower—Cypriot or Romanian?
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Tax % as an Absolute Rate
Cyprus taxes profits each year at a fixed rate, while Romania taxes turnover (gross revenue). Therefore, as turnover increases, taxes increase. For a business with high turnover but low profits, Romania may not be optimal, since many corporate expenses cannot be fully justified for tax purposes. In such cases, Cyprus is generally more advantageous. Of course, every entrepreneur’s situation is unique and should be analyzed individually. -
Employee Costs – Payroll
Romania requires at least one employee to avoid 16% profit tax, unlike Cyprus. This means a Romanian company must pay social contributions, have a more complex accounting system for payroll, and the employee must declare income in their tax residence. In cases where shareholders are also employees to benefit from favorable tax rates, this further complicates taxation. Hence, Cyprus offers simpler and cheaper solutions. -
Dividend Taxation – Shareholder Tax
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In Romania, dividend tax is 8%, while in Cyprus, it is 0%.
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Moreover, under the double taxation avoidance treaty, a Greek tax resident shareholder receiving dividends from a Cypriot company pays 0% dividend tax, reporting the amount normally in their tax return.
Thus, Cyprus is more advantageous in terms of dividends.
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Other Considerations
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Cypriot companies are generally more internationally recognized than Romanian companies. They have longer experience in international business and greater flexibility under their legal system.
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Cypriot companies do not require document translation or interpreters, saving additional costs.
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Cyprus abolished the business license tax in 2024.
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Cyprus has a stable banking system with strong capital adequacy.
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The main languages for communication in Cyprus are Greek and English, while in Romania it is Romanian.
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Cyprus uses the Euro, while Romania uses the Leu.
So far, we have described some of the key elements that potential business owners should know when starting a company in Cyprus or Romania. Naturally, there are many other factors depending on the type of business and activity.
In our opinion, the advantages of Cypriot companies, combined with the security and flexibility they offer to owners and shareholders, give Cyprus a clear edge over Romania for company formation.
You can schedule a meeting with Localit Consulting today to discuss your specific needs for setting up a company in Cyprus.
