Positive Outlook for the IT industry in Romania: Tax Exemption for IT Experts

As one of the fastest-growing Information Technology (IT) locations in Central and Eastern Europe; Romania has made considerable progress within the Information and Communications Technology (ITC) sector. Over the past 15 years, Romania’s ITC industry has become deregulated, modernized and expanded to make it an attractive location for IT recruitment and IT staffing.

Like many eastern European countries, Romania is no exception to having a high demand for IT experts. Small size and mid size U.S. firms don’t immediately look to Europe for IT staffing support, but they should take a tip from the bigger players in their industry who are already setting up offices in Romania and taking advantage of the financial benefits available.

To encourage and improve the level of technology in the country, Romania’s tax system has undergone a number of changes to make doing business in-country far more attractive. While the normal individual earning income in the country realizes a flat tax of 16 percent for income earned, foreigners can also be subject to the same tax level if the income was earned in Romania as well, regardless of the foreigner’s background or citizenship.

However, Romania also has a specific salary tax exemption for those who participate in software creation in Romania, the thinking being that such businesses help build jobs and boost the local economy, so the industry is heavily encouraged (read more here).

tax exemption for it experts

First created in 2004, the tax exemption for IT experts was amended again in 2013 to make the criteria easier to meet, allowing more IT ventures and projects to potentially consider Romania as a new base of operations.

The Romanian  software tax exemption is not quite a slam dunk however if one creates software in-country. There are specific criteria that have to be met by both an employee and employer, so that automatically cancels out most IT freelancers (see here). Instead, IT experts have to be on a traditional payroll.

The tax exemption is no hidden secret. Big IT players have already moved into the country to take advantage of the tax savings, both for the employee and employer. Intel, for example, has been probing software development and establishment of offices in-country among other names (read more). There are other benefits of hiring IT staffing in Romania besides the tax exemption as well. The cost of IT specialist jobs, IT recruitment and IT staffing in general in Romania is a lower than other countries because of how much catch-up the country needs to perform to be on par with the West. That’s a basic labor boon for many tech companies looking to lower their operational margins and still achieve the same software coding workload from skilled labor.

So for those businesses and companies looking for ways to reduce costs with off-shoring software creation activities, forget about India or Ireland. The play is now in Romania. With close proximity to the rest of Europe, it’s no surprise that Romania is marketing itself competitively to firms in the U.K. And given the flexibility and global reach of the Internet, there’s no reason why U.S. firms can’t take advantage of the labor pool resource available as well.

Leave a comment

Your email address will not be published. Required fields are marked *