How to set up as an independent contractor in Romania

If you're tired of the 9-to-5 grind and you’re thinking of going it alone, there are few countries as well suited to self-employment as Romania.

With a famously low tax rate and the benefit of EU membership, this enchanting and mysterious country offers a lot for independent contractors.

Whether you’re looking to set up shop in the forward-looking, storied capital of Bucharest, the charming medieval old town of Sighişoara, or the rugged wilderness of the Carpathian mountains, it’s an ideal place to merge work and lifestyle — and come out on top financially, too.

Before you can fully embark on your self-employment journey, though, you must know how to:

• Register your business in Romania

• Understand the tax structure in Romania

• Avoid misclassification as an employee

• Create compliant contracts that protect you and your clients

• Invoice and collect payments from around the world

This article covers these topics, explains how to become an independent contractor, and helps you navigate your tax responsibilities as a self-employed worker. We also discuss some other risks and liabilities you should be aware of and ways to mitigate them.

First, let’s clarify how Romania defines independent contractors.

What is an independent contractor according to Romanian law?

The Labour Code of Romania has no specific section dedicated to independent contractors.

Based on several articles within the code, you are generally considered to be a contractor if you:

• Determine your own work schedule and working hours

• Perform work for other companies

• Set your own rates and scope of work

• Provide your own tools or equipment

• Are not integrated into the company and its operations (e.g., you don’t have an internal email address)

• Can delegate or subcontract work

• Work without direction or supervision

You’re not alone if you pursue this line of work, either. An estimated 23.2% of workers are self-employed in Romania.

When working with clients, it’s important to be correctly classified to avoid penalties and fines and to ensure that you are paying the right taxes.

How to set yourself up as an independent contractor

Independent contractors are workers who provide paid services or products to another party. Also known as freelancers, these individuals are self-employed and tend to work with other parties on a limited or contractual basis. Once their contract is fulfilled, their connection to the company is terminated.

Independent contractors are classified differently from employees and are usually not entitled to the same benefits, such as paid leave, sick days, and minimum wage. On the flip side, contractors have more freedom and flexibility in their work.

Independent contractors are responsible for paying income and payroll taxes and contributing to national programs, such as Medicare and Social Security in the US. They also fund their retirement and manage their leave (including vacation) independently.

See also: Why businesses hire contractors vs. international employees

You must follow several steps to get started as an independent contractor, whether you work solely in Romania or not:

1. Establish a formal business structure.

2. Register your business with the relevant authorities.

3. Obtain the appropriate license and permits to do business legally.

4. Research the taxes your business is liable for, and obtain a Tax Identification Number (TIN) if you start in the US.

5. Open a business bank account and determine the client invoicing and payment method.

Business structure selection in Romania

Before you can begin working as an independent contractor in Romania, you must choose a formal business structure.

These are some of the most popular models for sole owners:

Sole proprietorship (persoană fizică autorizată, or PFA)

A sole proprietorship is a simple structure ideal for independent, individual contractors. You have complete control of the enterprise, although there is no legal separation between you (the owner) and the business. You are personally responsible for all its debts and liabilities.

If you want to pursue a PFA in Romania, you must:

• Be at least 18 years of age

• Have the appropriate qualifications, documentation, and training for your work

• Have a clean record (e.g., you must not have prior convictions related to financial crimes or tax evasion to obtain a PFA)

• Have the appropriate registration or have established a legal entity in Romania

Establishing legal entities in each country is expensive and time-consuming. See how Remote’s Employer of Record platform can help.

Individual enterprise (intreprindere individuala)

The individual enterprise is another simple structure almost identical to the sole proprietorship model. The primary difference is the number of employees you can hire.

In a sole proprietorship, one individual owns and operates the business. However, with an individual enterprise, you can add employees. You own the business, but you can employ others to help with its operations.

If you want more legal protection, anticipate generating a large amount of revenue, or work with additional partners (natural or legal), you can also incorporate a formal company or enter into a partnership.

If you’re unsure which structure is most suitable for your business, it’s a good idea to speak with a registered solicitor or accountant.

Business registration in Romania

If you opt for the sole proprietor model, you need to register at the National Trade Register Office (Oficiul Național al Registrului Comerțului, or ONRC). Complete the ONRC application form and submit it to your nearest ONRC office. You will receive a unique registration code (Codul Unic de Înregistrare, or CUI).

If you practice a so-called liberal profession, such as medicine, law, or architecture, you don’t need to register with the ONRC. Instead, you will need to notify your profession’s relevant regulatory authority. You can see a complete list of exempted professions here.

You must also apply for a tax ID and a social security number if you don’t already possess them.

Licenses and permits in Romania

While you don’t need a work authorization, all independent contractors and freelancers must obtain a long-stay visa. If you want to work in Romania for more than 90 days, plan to obtain a temporary residence permit.

Depending on your business type, you may need to pursue additional permits and licenses in Romania, as well.

According to the International Trade Association (ITA), you need a special license if your business involves banking, insurance, transportation, or accounting, among others.

Licenses are managed by various sources, including ministries and agencies, so you must apply for each one separately. Check with the EU Regulated Professions Database to see which licenses apply to you.

Independent contractor taxes in Romania

As an independent contractor, you’re responsible for filing and paying taxes.

The good news? As a sole proprietor, you pay personal income tax on your business profits using your personal tax number. You don’t have to fill out a separate tax return or pay additional corporate taxes.

Unlike most countries, Romania has a flat tax rate of 10%, regardless of income earned. You must file your annual tax return and settle your tax bill by May 25 each year.

If you earn over RON36,000 annually, you also need to make social insurance contributions of 25% and health insurance contributions of 10%. These contributions are calculated based on a variety of income factors.

VAT information for independent contractors in Romania

If you make (or expect to make) more than RON300,000 in a year, you must register for — and start charging your clients — VAT.

VAT, or value-added tax, is a consumption tax applied to a good or service at each production stage.

The standard VAT rate in Romania is 19%, although some goods and services are charged at the lower rates of 9%, 5%, and 0%. For example, the 9% rate generally applies to the hospitality industry, including food suppliers, restaurants, and hotel accommodations.

How do I get paid as an independent contractor in Romania?

As an independent contractor, you handle all invoices and payment collection. Unfortunately, this means billing each client individually and collecting payment through their preferred payment method, which can be inefficient and time-consuming.

Some of the most common ways to collect payments include:

• Bank transfers

• Direct deposits

• Paper checks

• Money orders

• Virtual wallets

• Digital transfer services like PayPal and Wise

These methods all have their pros and cons. For instance, bank and digital transfers can be quick but often have hefty service fees. While paper checks are simple to complete, it takes extra time to get them sent to your client and receive the money in your account. The payment collection process can be even more complicated if you have clients in other countries besides Romania

Why not turn to a trusted solution like Remote? Our platform provides a simple, secure, and reliable way to get paid quickly in Romanian lei (or other currencies, such as euros) with no hidden fees.

Learn more about how Remote can help.

Liability considerations for independent contractors in Romania

As a sole proprietor, you are personally liable for finance and tax debts, which means your private assets can be forcibly used to settle your business debts. Many independent contractors purchase liability insurance to help mitigate this risk.

It’s also important to cover yourself when drafting and signing client agreements. Ensure your contracts establish the nature and terms of your business relationship, including definitions of the deliverables, the relevant timelines, and payment information.

Your contract should also outline how disputes will be resolved, the process for contract termination, and who ultimately retains the intellectual property rights.

Don’t take chances when drafting your contracts. The legal experts at Remote can provide fully compliant contract templates for Romanian and international clients.

Accounting requirements for independent contractors in Romania

You don’t need to publish financial statements or accounts as a sole proprietor.

However, you must keep organized, accurate records of all your income and expenditures, including client invoices, purchase orders, bank statements, and receipts. This helps you correctly file your taxes, gives you a stronger picture of your financial situation, and generally makes life easier if the tax authorities audit you.

You can manage these records using an accounting or bookkeeping tool or hire a professional bookkeeper or accountant.

The dangers of contractor misclassification in Romania

As we’ve mentioned, independent contractors are classified differently from employees in Romania.

Many protections and benefits that employees enjoy do not typically apply to contractors. Employees in Romania generally receive the following benefits from their employers:

• 20 days of paid annual leave (if they don’t use all of it, their employer must apply it to the first six months of the following year)

• Sick leave, which is allotted to those covered by the pension and social insurance system for up to 180 days

• 126 days of maternity leave, with about half of the time allotted before the delivery date and the remaining half after

• 17 public holidays

• Employer contributions to social insurance, health insurance, labor insurance, and pension plans

Romanian law doesn’t require employers to provide health insurance to employees.

Given these financial considerations, companies may deliberately misclassify you to circumvent their legal obligations. However, misclassification may also happen accidentally or inadvertently. Whether intentional or not, misclassification can result in penalties and fines for you and your client.

As an independent contractor, you can work with your clients to ensure this doesn’t happen.

• Discuss your role and responsibilities, including the agreement terms and deadlines.

• Review the working arrangement regularly, and update your contract when needed.

• Know the labor and employment laws governing the country you’re working in.

• Put the terms in writing, with copies accessible to both parties.

• Use your own equipment, tools, and materials.

• Establish your own working schedule, including your weekly hours, breaks, and time off.

If your working relationship changes over time and you become more integrated into a client’s company, you might want to consider asking your client whether you should be converted into an employee.

How do I ask the company I’m working with to convert me to an employee in Romania?

Open a dialogue with your client and carefully discuss the risks and benefits of moving to an employer-employee relationship.

In particular, be clear about how it benefits both parties, not just you.

Employees are typically more closely connected to the company culture and mission, which leads to work products that are better aligned with the company’s long-term goals. They also tend to connect more closely with their colleagues, resulting in improved collaboration, productivity, and efficiency. Your employer can also expect to save costs related to recruiting, hiring, and onboarding new workers more frequently.

You can even suggest using a third-party solution, such as Remote, to ease the transition. Our global employment services help both parties stay compliant by taking care of key HR functions (like payroll management and benefits administration) aligning with Romanian law.

4 ways Remote makes life easier for contractors and their clients

As you can see, there’s a lot involved when determining how to become a freelancer in Romania.

Remote can help you with many of these challenges, allowing you to focus on growing your business and delivering to your clients.

Here’s how:

1. International payments in countries around the world

Navigating each client’s different invoicing, approvals, and payment systems can be complicated and time-consuming. Manual methods of invoicing and collecting payments can increase the risk of fees, errors, and delays.

Remote gives you access to a highly secure, streamlined dashboard that makes invoice management and international payments cost-effective and efficient. Our platform allows you to get paid in Romanian lei (or other currencies) without hidden fees.

2. Localized in-app contracts and advice

Drafting agreements and contracts for your clients can result in non-compliance with local labor laws, especially when working with international clients.

Remote offers localized contracts tailored to Romanian laws, ensuring compliance. Our legal experts can also guide you on complex issues, such as local classification and intellectual property protections.

3. Invoicing automation

With Remote, you no longer need to rely on spreadsheets and other manual tools to invoice for payments; we remove many inaccuracies and delays caused by archaic processes and manual management.

Our platform lets you create invoices, submit them for approval, and get paid in your local currency without switching to any other tool or software.

4. Tax management

Tax management is notoriously complex work.

Remote helps you quickly and efficiently manage your taxes by compiling data about your income based on your invoices and payments received.

There are different types of taxes that independent contractors may be liable for. For example, you may need to remit a self-employment tax, which provides funding for social programs and services (e.g., Social Security and Medicare in the US). You may also need to pay income tax, which varies based on federal and local laws.

Setting up as an independent contractor in Romania

Having the freedom and flexibility to work on your own terms is liberating. But your administrative responsibilities can distract from what you really want to do: help your clients, deliver great work, and collect invoices.

Using a stable, trusted platform like Remote helps you manage these obligations efficiently so that you can focus on your business goals. Specifically, we can help you:

• Avoid intermediary fees and delays with international client payments

• Draft compliant contracts for Romanian and foreign clients

• Enhance your invoice management and avoid manual processes

• Comply with local labor laws regarding work practices

Our platform makes it quick, simple, and seamless to get started as an independent contractor.

Learn more about how our expertise can save you valuable time and resources today.