BrexitToRemainia newsletter #39By CC / In Newsletters / 0 Comments
Whoever took prime minister’s words “they are forgotten” ad literam was wrong (including ourselves). We of course talk about fiscal changes for 2018 which we were reassured they are “forgotten” and they just came back. But let’s be positive: if Government collects more taxes, maybe some will go to the entrepreneurial ecosystem: EU asks for it in its Horizon 2020 policy paper. And if they don`t change their minds about not taxing software engineers’ income, more techies from diaspora will return home. Meet some of them (who already are back) in November’s business events across the country.
Be savvy: know what`s happening right now in Romania. News from politics, economy, business, various industries and social life.
With new year, old changes
2018 is coming fast and our darling Government (plus Parliament, plus PSD-ALDE alliance) are busy finding extra sources of revenue. No need to reiterate how precarious public revenue collection is, despite times of growth. None of the announced 2018 fiscal changes come as surprise. They were brough to the attention of the public several times since middle of this year, but they always faced resistance and raised concerns. So let’s get used to them, we propose:
- Tax on revenue: companies with turnover of less than 1 million EUR will pay 1% of their revenue, instead of 16% on their profit. 80% of companies registered in Romania will become “eligible”
- Minimum salary increase: there will be a 31% increase of national minimum salary, from 1.450 RON now to 1.900 RON in 2018 (roughly 400 Eur)
- Social contributions: will be fully paid by employees starting 2018. The issue is: legislation does not clearly state requirement for employers to increase the gross amount to match the difference. Especially given point #2 above, some worry employers will not fully absorb the transition cost (estimated at 120 RON / employee)
- Solidarity tax: is back, under a new name and bearer. Employers (now freed up of employee contributions) will pay 2.25% for something called “labour insurance contribution” (which will cover risks such as unemployment, accidents, medical conditions, salary payment debts etc.)
Given these have changed several times in the year, allow us to keep a door open for further updates.
EU’s view on Romanian startup ecosystem
In order to support its development plans for Romania within Horizon 2020, European Commission issued in November 2016 the report called “The Romanian Entrepreneurial Ecosystem“. You can access it’s 51 pages here, but we wanted to spare you the effort and so came up with these highlights:
- In 2014 there were almost 700.000 Romanian companies registered. Half of them had zero employees (suspecting these are the freelancers), while only 52.000 had more than 10 employees
- Slightly more than half of the companies survive after 3 years. This seems to be aligned with statistics from other countries / globally
- We scored low in the European Innnovation Scoreboard (the worst in EU to be more precise). However evolution post 2015 looks much more encouraging, with a lot of IT&C and R&D activities ramping up in the country
- In the Global Competitiveness Index (created by World Economic Forum) we score well in education & macroeconomic environment. In Innovation, Institutions and Infrastructure (the doomed “triple I”) we are far away from ideal
- Best about doing business in Romania is ease of cross-border trade and getting credit. But if you want to open up a large facility in a rural area, think twice: construction work and getting electricity will be killer jobs
- 11.35% of the adult population in Romania was involved in early-stage entrepreneurial activity in 2014 (these are startups between 3 months and 3.5 years of activity). Most of them hired between 1 and 5 employees
- More than half of Romanian startups are registered in Bucharest, but Cluj is picking up
- Digital economy is doing well in Romania (see DESI index at page 24). It just needs to be better integrated and leveraged in the public administration, to serve everyone
- Romanian expenditure on education at all levels is at 3.2% of GDP, putting it in last place in the EU. This is a source of many troubles
What should then Romanian Government do to boost the entrepreneurial ecosystem? Support innovative SMEs, provide better access to funding, encourage internationalization, and (yes!) improve public administration’s response to SME needs.
PS: While recognizing that data sources are a bit old (2014-2015), we still find the report useful to be shared. Hope you’d agree.
Take action: grasp opportunities for advancing business in (and/or with) Romania. What others think & do. What business events to attend.
Romanian Tech Diaspora wants home
A recent Financial Times article was praising Poles starting to leave the UK and return to their country: not so much because of Brexit (it surely helped!) but because their country is booming again. A similar trend might become noticeable for Romanian IT professionals.
77% of Romanian IT specialists from Diaspora would consider returning home: this is what the study called “IT Community Relocation Survey” revealed recently. It was conducted on 400 such individuals and run by Deutsche Bank Global Technology and Catalyst Solutions. What else is the study revealing?
- 43% of respondents are not fully aware of the recent developments in the Romanian IT sector -> this led the organizers to create an “IT Community Relocation Guide” which can be downloaded here. There is so much good content in there that we’ll dedicate a separate article to this guidebook next time
- The most important source of information for Diaspora technologists is LinkedIn (72%)
- 40% of those respondents who would not consider returning home cite the lack of oportunity to save money. We say: with IT&C salaries going up to 3.500 Eur and no income tax, some myth busting might be needed (and the guidebook mentioned above makes this point, too)
- Major concerns for everyone, regardless of their interest to return to Romania: healthcare system, educational system, political context … all in quite a mess right now, unfortunately 🙁
And to end in a positive note, we leave you with some nice stories of Romanians having already returned. They don`t regret it, apparently.
Know your game: Build your Aces for when you meet a Romanian business partner for coffee. What we (might) like to talk about.
November business events in Romania
A lot is happening each year during November period. Here are few of the business events you can enjoy throughout the country:
- Champions in Business Awards Gala in Cluj (Nov 9th, from 18:00 at Grand Hotel Italia) – contact organizers here, there doesn`t seem to be a dedicated registration form
- Champions in Business Awards Gala in Bucharest (Nov 15th, from 18:00 at Biavati Events) – contact organizers here, there doesn`t seem to be a dedicated registration form
- ABSL – Business Services Annual Conference in Iasi (Nov 14th). The Conference is about emerging technologies and their impact on the business services industry. If you register until Nov 5th you pay 290 Eur, early bird fee
- Impact Hub Bucharest organizes 12 events during the month of November alone. Are you ready? See them all (and register) here
Romanian Overview Report: In this comprehensive report you will find information about: macroeconomic landscape, industries and investments, infrastructure and technology, taxation system, human capital, governmental support and last but not least quality of life in Romania (if you decide to move over here ;)).
Investor Guide Romania: In this well-structured guide you will find information about: investment climate in Romania, economy in general and the business ecosystem in particular, availability of financing, employment and labour law, fiscal policies, as well as how it is for an expat to live in Romania (not too bad, we can assure).
#MondayMemo Newsletter (register): If you are Romanian (or able to speak the language) we highly recommend you register to MondayMemo. It is a weekly newsletter dedicated to entrepreneurs covering news from Romania and abroad (written exclusively in Romanian though!). While we just like to read news and share them with you, the author(s) of MondayMemo are experienced and high quality journalists: Mona Dirtu and Andreea Rosca.