What taxes you have to pay for a PFA

10% income tax

25% CAS contributions

10% CASS contributions

‍

1. Income tax

‍

One of the PFA's taxes is income tax. The amount payable by a PFA is fixed at 10%, but is calculated differently depending on the tax method chosen by the legal entity.

‍

If the PFA has chosen real taxation, then the 10% applies to the net income from the specific economic activity. The net income is the difference between the gross taxable income and the deductible expenses. These values are found in the Tax Register, one of the documents required by the PFA that keeps its accounts on a sole proprietorship basis. Find out more about the rest of the documents a PFA needs to run its business legally here.

‍

On the other hand, if the PFA has chosen to be taxed at the standard rate of income, then the 10% applies to a pre-determined amount by law. The amounts are specific to each field of activity, but also according to the location of the PFA. You also need to make sure beforehand that the activity you carry out is indeed eligible for taxation at the standard rate of income by checking the CAEN codes in the county where you are located. If you are eligible for standard income tax, all you need to do is estimate the amount of net income you will have at the end of the year.

‍

If you have a choice between taxation under the real system and taxation at the norm of income, but you don't know which is more beneficial for your PFA, use the amount set by law for the norm of income as a guide.

‍

For example, we can say that your PFA sells car parts and accessories and you have registered your legal entity in the city of Brasov. The income norm for this activity and this location is 35,000 lei.

‍

If your estimated real net income per year is less than the income norm, for example 30,000 lei, then it is better to choose the real system of taxation, so you can pay less tax.

‍

10% of 30,000 lei (your income) = 3,000 lei ✓

10% of 35,000 lei (income norm) = 3,500 lei

‍

If your estimated real net income per year is higher than the income norm, for example 40,000 lei, then it is advisable to choose taxation at the income norm, as it will reduce the taxes you have to pay.

‍

10% of 40,000 lei (your income) = 4,000 lei

10% of 35,000 lei (income norm) = 3,500 lei ✓

‍

2. CAS contributions

‍

The second type of tax your PFA has to pay is pension and health tax. Regardless of the taxation you choose, if your total annual income is more than 12 times the minimum wage, then you have to pay CAS and CASS contributions.

‍

From January 2022, the minimum wage became 2,550 lei, so if your PFA had an annual income of more than 30,600 lei in 2021, you have to pay these contributions.

‍

The CAS contribution is 25% of the amount of 30,600 lei (12 minimum wages), i.e. 7,650 lei. If your PFA did not earn more than the 30,600 lei ceiling, but you want to pay pension contributions, the same amount of 7,650 lei remains. If your annual income is over 30,600 lei and you wish to contribute more to your pension contribution, you can contribute 25% of an amount set by you.

‍

3. CASS contributions

‍

The health contribution is 10% of the same threshold of 12 minimum wages (10% of 30,600 lei i.e. 3,060 lei). For CASS you cannot contribute more than 3,060 lei, but if your PFA does not exceed the 30,600 threshold and you still want to pay CASS contributions, you can pay an amount of 1,530 lei (10% of 6 minimum wages).

‍

Simplify your PFA's administrative operations and use Banqup's digital platform that makes your work easier and gives you an overview of your financial status at any time. Keep all your firm's financial and non-financial documents in order and get rid of endless paperwork for much greater clarity on your next work tasks.

‍