Romania and Estonia both appear on every list of the cheapest EU countries to start a business, and both deserve to. Romania’s microenterprises pay 1% of turnover instead of corporate tax on profit; Estonia’s companies pay no corporate tax at all until profit is paid out to the owner. Both numbers are real. What the lists leave out is what each number is attached to: in Romania, a ceiling on sales, a compulsory employee and a 16% charge on dividends; in Estonia, a single 22% charge when the money leaves the company and nothing before.
This Estonia vs Romania guide is written for the three kinds of people who search for the two countries together: Romanian founders whose SRL is outgrowing the micro regime, teams that hire in Romania and wonder where the company itself should live, and non-resident owners weighing a Romanian SRL against an Estonian OÜ from a third country. It runs one small business through both systems and is candid about the case where registering a company in Estonia does not help at all: when you live in Romania and nothing else changes.
The whole page in one paragraph
Romania taxes what your company sells; Estonia taxes what you take out. A Romanian micro-company pays 1% of every invoice, must keep someone on the payroll, loses the regime the moment turnover passes €100,000, and hands over 16% of each dividend on top. An Estonian OÜ pays 0% for as long as the profit stays in and 22% of the gross when it becomes a dividend, with no payroll, no ceiling and no local office. Romania is the better home for a company that will hire in Romania, sell to Romanians or be run by someone living there. For everyone else the Estonian setup is simpler and, in most years, cheaper.
Skip to the part written for you: I live in Romania and am considering an Estonian company · I am hiring a team in Romania · I live elsewhere and am comparing the two.
What Romania’s 1% Microenterprise Tax Actually Means
The “1% tax in Romania” that every low-tax ranking quotes belongs to a special regime for microenterprises, or micro-companies. Four features of it change the arithmetic, and each deserves a paragraph.
It is a turnover tax, not a profit tax
A Romanian micro-company pays 1% of its revenue. Costs do not matter: a company that invoices €90,000 and spends €80,000 pays the same €900 as one that spends nothing. For a consultant with almost no expenses this is a gift. For a reseller, an agency that subcontracts, or any business with thin margins, a tax on turnover quietly becomes a large share of what is actually earned.
Someone must be on the payroll
To use the 1% rate at all, the company must employ at least one person under a Romanian employment contract. Without staff it pays the ordinary 16% corporate tax on profit instead. Most owner-operators solve this by putting themselves on the payroll at the minimum wage: the company spends roughly €10,000 a year with contributions, and about €6,000 of that comes back to the owner as net pay. That is fine if you live in Romania. If you live elsewhere it becomes awkward: a non-EU citizen needs a work permit to be employed by a Romanian company, and even an EU citizen who does the work from another country normally owes social contributions in that country, not in Romania. Remote owners therefore either hire a real local person or give up the micro regime.
There is a ceiling, and it has been moving down
The regime is only available while annual revenue stays under the lei equivalent of €100,000. Cross it and the company pays 16% on profit from that quarter on, with no way back. The ceiling used to be several times higher and has been cut repeatedly, so treat the 1% as a starting condition rather than a permanent one. A shareholder holding more than a quarter of one micro-company also cannot own a second, which closes the obvious workaround.
Dividends are taxed again
Whatever survives the 1% and the salary is company profit, and taking it out costs another 16% in dividend tax, withheld by the company. Owners resident in Romania also pay a health contribution on dividends above a modest threshold, capped at around €2,000 a year. So the true cost of getting money from a Romanian micro-company into your pocket is 1% of sales, plus the payroll, plus 16% of what is left.
Estonia’s 0% Corporate Tax: Nothing Owed Until Profit Leaves the Company
An Estonian OÜ has no turnover tax, no micro regime to qualify for and no ceiling to watch: the 0% corporate tax on retained profit applies to every company, whatever its size or sector, and whether the profit sits in the bank for years or is spent on salaries, software, advertising or hiring. The only corporate tax event is a dividend: at that point the company pays 22/78 of the net amount, which is 22% of the gross, and an individual shareholder owes nothing further in Estonia. There is no separate dividend withholding on top, no employee requirement and no minimum salary the owner must draw. The rules on Estonian dividends cover the timing and the paperwork in more detail.
The consequence is that Estonia does not care how much you sell or what your margins are. It cares about one thing: whether you distributed profit this year. That makes it indifferent to the reseller with thin margins and generous to the founder who reinvests, which are exactly the two cases where Romania’s regime is weakest.
One Freelancer, €90,000 of Sales, Three Ways to Be Taxed
The cleanest way to see OÜ vs SRL is to follow one business through both. Take a solo consultant who invoices €90,000 a year, spends €30,000 on tools, travel and subcontractors, and is left with €60,000 before tax. The owner lives outside both countries. The Romanian micro column assumes the owner is the required employee at minimum wage; the standard column is what applies once the company has no employee or has outgrown the ceiling.
| What happens to €60,000 of profit | Estonian OÜ | Romanian SRL, micro regime | Romanian SRL, standard regime |
|---|---|---|---|
| Tax and levies due even if nothing is paid out | €0 | €900 turnover tax plus about €4,000 in payroll contributions on the compulsory salary | €9,600 corporate tax at 16% |
| Cash still inside the company | €60,000 | About €49,100 (after tax and a €10,000 salary) | €50,400 |
| Owner pays everything out | €13,200 tax; owner receives €46,800 | 16% dividend tax of about €7,900; owner receives about €41,200 in dividends plus about €6,000 in net salary, about €47,200 in all | 16% dividend tax of about €8,100; owner receives about €42,300 |
| Then, in the owner’s home country | Dividend may be taxed there | Dividend and salary may be taxed there | Dividend may be taxed there |
In the year the owner takes everything out, the two land within a few hundred euros of each other, and Romania is a shade ahead once the salary is counted. In every other year Estonia is ahead by the full amount Romania collects regardless: around €5,000 here, and much more for a company that has outgrown the micro regime and pays 16% on profit it never touches. Lower the margin and Romania’s side gets worse: €90,000 of sales with only €20,000 of profit still owes the €900 and the salary, now a quarter of its earnings.
SRL vs OÜ: What the Owner of Each Company Deals With
Before the situations, the facts. The Romanian limited liability company is called an SRL; the Estonian one an OÜ. Both give limited liability, both can be wholly owned by a foreigner, both are EU companies. The list below is where they part company. Thresholds shift now and then, but the structure of each system does not.
| Point of comparison | Estonian OÜ | Romanian SRL |
|---|---|---|
| How company income is taxed | 0% on retained profit; 22/78 of the net dividend on distribution | Micro-company: 1% of turnover up to €100,000 of sales, with at least one employee; otherwise 16% of profit |
| Tax when profit is paid to the owner | None beyond the company-level charge | 16% dividend tax withheld by the company; plus a capped health contribution if the owner lives in Romania |
| Minimum share capital | €0.01 per share | About €100 (500 lei); must be raised to about €1,000 once turnover passes roughly €80,000 |
| Who must be in the country | Nobody; a registered address is a paid service, a contact person is needed only when that address is abroad, and the bank account can be anywhere in the EEA | A registered office in Romania with a lease filed at the tax office, an account at a Romanian bank, and an employee on a Romanian contract for the micro regime; the director may live abroad |
| How the owner runs it | Online, in English, with an e-Residency card: signing, filings, tax returns, register changes | Through a Romanian accountant; filings are in Romanian, and every business invoice must go through the state e-invoicing system within five working days |
| Yearly filings | One annual report, filed online | Annual financial statements, monthly or quarterly tax returns, payroll declarations, e-invoicing and standard audit-file reporting |
| VAT | 24%; registration once Estonian sales pass €40,000 | 21%; registration once Romanian sales pass 395,000 lei, about €78,000 |
| Running cost of a small, simple company | Commonly €1,000–2,000 a year for a legal address and bookkeeping | Commonly €1,500–3,000 a year for an accountant, office and payroll administration, before the €10,000 or so of compulsory salary |
Living in Romania and Tempted by an Estonian Company: Read This First
Most of the people comparing these two countries are not foreigners at all. They are Romanian freelancers and founders who have watched the micro ceiling fall, the dividend tax rise and the IT salary exemption disappear, and who have read that an Estonian company pays 0%. The honest answer for most of them is uncomfortable: an Estonian OÜ does not fix a Romanian tax position on its own.
A company is taxed where it is managed, not where it is incorporated
If you live in Bucharest, take every decision there and simply register the company in Tallinn, the Romanian tax office is entitled to treat the OÜ as a Romanian company, tax its profit at 16% and expect Romanian filings. The Estonian register does not change where the business is managed from. This is not an Estonian quirk; it is how every EU country, Romania included, protects its tax base. An Estonian company run entirely from a Romanian flat is a Romanian company with foreign paperwork and two sets of accountants, whichever country it was incorporated in.
The three situations where Estonia genuinely helps
- You are leaving, or never arrived. A Romanian who moves to Spain, Germany, Dubai or the road can keep the client base and swap the SRL for an OÜ that is run from wherever they now live; the same logic applies to Moldovan founders holding a Romanian passport who live and work outside Romania. The 1% would have been lost anyway, because the employee condition rarely survives emigration.
- You have outgrown the micro regime and reinvest. A business past €100,000 of sales pays 16% on profit in Romania. If the owner can put real management outside Romania, meaning a director abroad and decisions taken and documented there, the OÜ pays 0% on the profit that stays in. This only works with genuine substance, not a mailbox.
- You are building something international from day one. Investors, foreign partners and payment providers are used to Estonian companies. That is a reason to found in Estonia and to accept the discipline of managing it from outside Romania, or to keep a Romanian company beneath it, as the next section explains.
For a Romanian resident who is staying put, the realistic comparison is not SRL versus OÜ but SRL versus sole trader. A registered sole trader (PFA) pays 10% income tax plus pension and health contributions on capped bases, roughly €15,500 on €60,000 of net income: somewhat more than the micro route, but with no company to maintain. All three sit close together when everything is paid out, and diverge as soon as you keep money in the business or grow past the ceiling.
Hire Developers in Romania, Hold the Company in Estonia: When the Answer Is Both
The second big group of searchers are founders who are not choosing between the two countries at all. They are nearshoring: they have found engineers, designers or support staff in Cluj, Timișoara or Iași, and want to know where the company that pays them should be registered. For them the sensible structure is usually two companies with clear roles.
The Estonian OÜ is the holding company and the operating company in one: it owns the product, signs customer contracts, holds the intellectual property and takes in the revenue. A Romanian subsidiary, an SRL underneath it, employs the developers, rents the office and bills the parent for the work at a fair price. The Romanian company runs on the ordinary 16% profit regime with a modest margin, so its tax bill is small; the Estonian parent pays nothing on what it keeps and 22% only on what the founder eventually draws. Once the OÜ has held the SRL for a year, dividends from Romania flow up without Romanian withholding, and Estonia generally does not tax them a second time when they are passed on.
For one or two hires, an employer-of-record service can carry the Romanian employment without a subsidiary at all. One thing surprises most founders: Romania is cheap to hire in because salaries are lower, not because payroll tax is. It puts almost the whole burden on the employee, so once you fix the net pay a developer receives, the total cost to the company lands close to Estonia’s. That is a reason to keep the Romanian company as a cost centre under the Estonian parent rather than the other way round.
Running a Romanian or Estonian Company From Abroad: Accountants, Lei and Banks
Company registration takes days in either place, whether you incorporate in Tallinn or in Bucharest. The difference is in the years that follow, spread across several small things that never appear on a rate table. With an e-Residency card, the owner of an Estonian company signs contracts, files the annual report, submits tax returns and updates the register from a laptop, in English; a bookkeeper handles the monthly figures and everything else is a login. The only things bought in are a registered address and, where the company is registered at a foreign address, a licensed contact person for official mail.
A Romanian SRL cannot practically be run without a local accountant. Tax returns, payroll declarations and financial statements go to the tax authority in Romanian, business-to-business invoices must be uploaded to the national e-invoicing system within five working days, and a standard audit file of the accounts goes to the tax office as well. The accountant’s fee, the registered office and the salary that keeps the company a micro-company are the real running cost. Registering a company in Romania as a foreigner is itself easy, with a power of attorney instead of a trip; the apostilled and translated documents that precede it are the slow part.
Romania is not in the euro
A Romanian company keeps its books and pays its taxes in lei. It can invoice foreign customers in euros and hold a euro account, but every euro received is converted for the accounts at the official rate, and the difference between that rate and the rate on the day the money is exchanged shows up as a gain or loss. Thresholds set in euros, including the €100,000 micro ceiling, are tested at a lei rate fixed once a year. An Estonian company works in euros end to end, which for a business earning euros removes one moving part.
Opening a business bank account is the slow part in both countries
Neither country makes it easy for a non-resident owner to open a traditional bank account, and this is the step that most often delays a launch. The two differ in how much it matters. A Romanian company is legally required to hold at least one payment account at a Romanian bank or the state treasury; a company without one can be declared inactive by the tax office. Romanian banks generally want the director in a branch and take a hard look at foreign-owned companies, so this account is usually the founder’s one unavoidable trip. An Estonian company has no such rule: it can bank anywhere in the EEA, and most remote founders run an OÜ on a licensed e-money account such as Wise, Revolut Business or Paysera without ever approaching an Estonian bank. The major card processors, Stripe included, onboard companies from both countries.
The rules move, in Romania faster
Romania has revised the ceiling, the rate bands, the employee condition and the dividend tax within a short span, each time against the small company. Estonia has raised rates too, VAT most recently, but the shape of its system has held for more than two decades: no tax until profit is distributed. A Romanian plan needs a margin for change that an Estonian plan does not.
VAT in Romania vs Estonia: The Real Advantage, and Who It Applies To
On VAT Romania wins cleanly on paper: 21% against Estonia’s 24%, and a registration threshold of roughly €78,000 against €40,000. A company selling to Romanian consumers can stay outside VAT for longer and charges less when it is in. For a remote founder the advantage is mostly theoretical: business customers elsewhere in the EU are invoiced without VAT from either country, consumers in other member states pay their own country’s rate through the one-stop-shop, and customers outside the EU pay none. The rate on the poster only touches what you sell to people at home, and the founders this page is written for rarely sell much at home.
When Opening a Company in Romania Is the Better Answer
Romania competes for the same founders as Bulgaria’s 10% and Hungary’s 9% corporate tax, and holds up well against both. It also comes out ahead of an Estonian company more often than the rest of this page might suggest, and an honest comparison has to say where. The list is not short.
- You live in Romania and are staying. Then the employee is you, the office is your desk and the accountant is local. The micro regime works as designed and an Estonian company would only add a second country’s rules and a management-place risk.
- You will hire in Romania anyway. A development team, a support desk or a warehouse satisfies the employee condition as a by-product. Romania has one of the largest pools of engineers in the region at wages well below Western Europe, and a Romanian company, alone or under an Estonian parent, is the normal way to employ them.
- Your customers are Romanian. Nineteen million consumers, the lower VAT rate and the higher VAT threshold are all arguments for a local company. Estonia has 1.4 million people.
- You take all the profit out every year and stay under the ceiling. As the worked example shows, in that specific case the micro route edges Estonia, provided the salary condition is easy for you to meet.
- You want grant money. Romania channels sizeable EU and national grant programmes to locally registered companies, usually with a resident owner or manager attached; an Estonian company does not qualify for them.
If your business is one of these, open your company in Romania and do not let the rest of this page talk you out of it. If your business is a remote service, software or e-commerce company owned by someone with no plans to live or hire in Romania, the advantages above do not reach you, and what is left is the turnover tax, the payroll and the ceiling.
Romania vs Estonia for Different Kinds of Founder
| Type of founder | Estonia or Romania? | Why |
|---|---|---|
| Romanian freelancer moving abroad or living on the road | Estonia | The SRL’s employee condition rarely survives emigration; the OÜ is run from wherever the founder lands |
| Romanian founder past €100,000 of sales who reinvests and can manage from outside Romania | Estonia, with real substance | 0% on retained profit against 16%; only if management genuinely sits abroad |
| Romanian resident freelancer under the ceiling who pays everything out | Romania | SRL micro or PFA; an OÜ managed from Romania is a Romanian tax problem |
| Foreign startup nearshoring a development team to Cluj or Timișoara | Both | Estonian OÜ owns product and revenue; Romanian SRL employs the team |
| Remote consultant, SaaS founder or developer with clients across the EU, living in a third country | Estonia | No salary to pay, no office to lease, no ceiling; the company is run from one login |
| Agency, e-commerce store or reseller with thin margins | Estonia | A tax on turnover punishes low margins; a tax on distribution ignores them |
| Business selling mainly to Romanian consumers | Romania | Lower VAT rate, higher VAT threshold, and a local company that customers and partners expect |
Three claims to treat with care
- “Romania has 1% corporate tax.” It has a 1% tax on turnover for companies under €100,000 of sales with at least one employee. Everyone else pays 16% of profit, and every dividend loses another 16%.
- “A Romanian can open an Estonian company and pay 0%.” A Romanian can open one from the sofa. Running it from that sofa makes it taxable in Romania. The 0% belongs to the company that is managed from outside Romania.
- “An Estonian company pays no tax.” It pays none while profit stays in. Pay a dividend and the company owes 22% of the gross, and your home country may want a share as well.
Estonia or Romania: Where a Non-Resident Founder Ends Up
Romania offers one of the cheapest corporate tax regimes in the EU for a genuinely small company, but the low rate is conditional: on turnover, on headcount, on staying under a line that has moved, and on a second tax when the money comes out. Estonia made the opposite bet, taxing one event at one rate and leaving the owner alone until then. For a non-resident founder who sells across borders and reinvests before drawing dividends, that is cheaper and simpler, and it stays cheaper as the company grows past the point where Romania’s regime falls away. The one thing Estonia cannot do is override where you live: a Romanian resident gets the Estonian result only by moving, by moving the management, or by pairing the Estonian company with a Romanian subsidiary. Founders weighing more than these two countries can read our wider guides on where to set up a company and which country to start a business in.
Our Place in This Comparison
Eesti Firma registers and administers Estonian companies for owners abroad, so we are not neutral, and we would rather say so than pretend otherwise. When a founder tells us they live in Bucharest and plan to stay, we tell them to keep the SRL. For most of our clients, non-resident founders selling services or products online from wherever they happen to be, the Estonian OÜ is the better fit, and we can set up your European company in Estonia, provide the registered address, and take care of bookkeeping and the yearly report so that the company stays as easy to own as it was on day one.
Frequently Asked Questions
You can open one, but if you manage it from Romania the Romanian tax office can tax it as a Romanian company at 16% and expect Romanian filings. Estonia’s 0% applies to profit kept in a company that is genuinely run from outside Romania. If you are staying in Romania, an SRL or a sole-trader registration is the realistic choice; an OÜ makes sense once you move, move the management, or add a Romanian subsidiary for the local side.
Only if you can put real management outside Romania. Above the ceiling a Romanian company pays 16% on profit; an Estonian company pays 0% on what it keeps, but that result belongs to a company directed from abroad, with a director and documented decisions there. A founder who stays in Romania and simply re-registers gets the Romanian result with extra paperwork.
Not directly, in practice. The usual structure is an Estonian OÜ that owns the product and revenue, with a Romanian SRL underneath that employs the team and bills the parent for its work. For one or two people an employer-of-record service can carry the Romanian employment without a subsidiary.
A small OÜ with no staff typically costs €1,000–2,000 a year for a registered address and bookkeeping. A Romanian SRL needs an accountant, a registered office and a Romanian bank account, commonly €1,500–3,000 a year, and a micro-company carries the compulsory salary of about €10,000 a year on top. Both must file annual accounts even when dormant.
Yes. At least one person must be on a Romanian payroll. Many owners hire themselves at the minimum wage, an outlay of roughly €10,000 a year for the company once contributions are added. Owners living outside Romania often cannot do this cleanly, because employment in Romania requires work authorisation for non-EU citizens, and an EU citizen doing the work from another country usually pays social contributions there instead.
