Romania: To attract digital nomads – how will it work?
Corina Mîndoiu and Iulian Pasniciuc of EY Romania take a closer look at the documents required for ‘digital nomads’ in Romania and the tax implications involved.
Digital nomads or ‘employees from anywhere’, for whom since 2020, countries such as Estonia, Portugal and Croatia have relaxed immigration requirements, encouraging employees to work locally and offering employees work visas to tax exemptions, are now required by Romania as well.
The Senate has recently approved a draft law that would give employees the opportunity to obtain a temporary residence visa, under certain conditions, some more bureaucratic and complicated to fulfil. The project is good news and a step forward, as the current legal regulations do not contain provisions regarding a possible residence of an ‘employee from anywhere’, for obtaining a work visa; the existence of a Romanian employer or a beneficiary of services is required.
What are the pros and cons of the legislative proposal and what changes should the Chamber of Deputies, the decision-making body in this case, take into account?
The Senate has established that the digital nomad is a foreigner employed with an employment contract with a company registered outside Romania, which provides services through the use of information and communication technology.
A digital nomad is also a foreigner who owns a company registered outside Romania, within which he provides services through the use of information and communications technology and who can work as an employee or carry out the activity within the company, remotely, by using information and communications technology.
Thus, these nomads can obtain a long-stay visa, if they want to travel and stay in Romania, while continuing to obtain income from performing remote activities.
In order to obtain a visa, applicants must meet several cumulative conditions including having the means of support obtained from the activity they carry out, amounting to at least three times the gross average monthly salary in Romania for each of the last six months prior to the visa application filing date, as well as for the entire period registered in the visa, and to carry out activities from which they obtain income, remotely, by using information and communication technology.
The draft project of the Senate does not specify, however, how the nomad will prove to be using information technology.
Now comes the tricky part. Because every digital nomad needs a whole list of documents, in order to obtain a visa: an employment contract concluded with a company registered outside Romania, through which to prove the supply of remote services, a document issued by the employing company or the one they hold, through which to present all the identification and contact data, as well as the field of activity, information on the legal representatives of the company.
The nomad also needs a letter of intent, which must include the purpose of the trip to Romania and the activities they intend to carry out here. The series of necessary documents does not stop here.
A certificate is also required that states that, at the date of the visa application, they or, as the case may be, the company they hold, has paid taxes, fees and other up to date compulsory contributions, and that they are not registered with documents and deeds that have or have had the effect of tax evasion and tax fraud.
Also, the reservation of a travel ticket valid to the destination or the driver's license, green card, proof of health insurance for the entire period of visa validity, with coverage of at least €30,000 is required, and a certificate of the means of support obtained from the activity carried out, amounting to at least three times the gross average monthly salary in Romania for each of the last six months prior to the visa application filing date, as well as for the entire period registered in the visa; proof of accommodation conditions.
The nomad also needs a criminal record certificate or other document with the same legal value. Of course, if the competent Romanian authority finds it necessary to request something else, the nomad must present other supporting documents as well.
If they want to extend the visa, again there is further bureaucracy. Because the nomad needs, once again, the employment contract, proof of remote work, by using, of course, technology, a document from the employer to present all the identification and contact details of the company, as well as proof of an income of at least three times the gross average monthly salary for the period for which the extension of the right of residence is requested (the first extension of the right of temporary residence is granted for a period of six months).
Although, as we have seen, the state intends to request all kinds of documents, the draft law does not mention the digital nomad's family members, the conditions under which they can accompany them and how they can enter Romania. In addition, obtaining a visa is not easy, as it can take up to 60 days from the application filing date.
The impact on the employee's tax status must also be taken into account. Remote work in Romania, for any period longer than 183 days, over 12 consecutive months, could, for example, lead to the treatment of the employee as a tax resident in Romania, but also in the country of origin at the same time, which could cause the employee many problems.
The employee may also be subject to local salary income taxes. The conditions of the existing applicable double taxation treaties may repeal local rules depending on individual circumstances; for example, an international tax treaty generally provides for an exemption for income taxes in the host country for periods less than 183 days, subject to certain conditions.
Problems could also arise in the area of social security contributions. Generally, a person must pay social security in the country where they work. Therefore, the foreign employer should check whether it has local social security reporting and collecting obligations and whether special arrangements need to be made in accordance with the relevant regulations in Romania.
The submission of the draft law in Parliament was motivated by "Romania's huge potential in tourism and attracting professionals" – a justification used by other European countries, which saw nomads as the way to counteract the decline of tourism, the visa for digital nomads being seen as a tool that can attract financial resources to the economy.
At the beginning of 2021, the digital nomad index placed Romania in third place, after Canada and the UK at the top of ‘attractiveness of working from home’ - with an average broadband internet speed of 188 mb/s, an internet cost of €7.5 and a rent of €323.
Yes, there is potential, only that, as approved by the senators, the draft fails to achieve it. In other words, if we intend for Romania to attract digital nomads, the Chamber of Deputies, the decision-making body in this case, should also consider clarifying the problems that may arise in respect of social security contributions.
Associate partner, EY Romania
Senior manager, EY Romania