Business Case 2. If my business model has a small mark-up but a large income base, then the microenterprise might not be the best solution - and being a profit tax-payer might bring better tax advantages

As general background, any company in Romania starts as a microenterprise and, as soon as it reaches the EUR 1 000 000 revenue threshold, has its status changed to profit-paying company

GEC profit formula with no employees:

• let profit = revenue - expenses
• if profit > EUR 187 500 then select the revenue tax route (microenterprise)
• if profit < EUR 187 500 then select the profit tax-paying company route

GEC profit formula with one ore more full-time employees:

• let profit = revenue - expenses
• if profit > EUR 62 500 then select the revenue tax route (microenterprise)
• if profit < EUR 62 500 then select the profit tax-paying company route

Details:

• With no employees: 3% revenue tax of EUR 1 000 000 is EUR 30 000. If my business is a profit-paying business and I will be able to maintain the profit, i.e. the difference between revenue and expenses, to a maximum of EUR 187 500 (i.e. EUR 187 500 * 16% profit tax = EUR 30 000), then I will be better off with a profit tax-paying company than with a microenterprise
• With 1 or more full-time employees: 1% revenue tax of EUR 1 000 000 is EUR 10 000. If my business is a profit-paying business and I will be able to maintain the profit, i.e. the difference between revenue and expenses, to a maximum of EUR 62 500 (i.e. EUR 62 500 * 16% profit tax = EUR 10 000), then I will be better off with a profit tax-paying company than with a microenterprise

In order to become a profit tax-payer, I need to increase the social capital to a minimum of RON 45 000. I will be able to use this amount afterwards to further grow the company. A company which starts with a higher volume of cash benefits of higher credibility