How to pay a US company legally from Romania
Quick answer
Paying a US company from Romania is generally straightforward due to the absence of foreign exchange controls and the existing US-Romania tax treaty. Under this treaty, a 10% withholding tax applies to dividends, while services are typically exempt from US withholding tax. Payments can be efficiently made via international bank transfers (SWIFT) through major Romanian banks, or via SEPA for EUR transactions, with Keystone Bridge offering specialised assistance for optimising complex payment corridors and ensuring treaty compliance.
The regulatory picture
Romania's financial environment is overseen by the National Bank of Romania (BNR), which acts as the country's central bank. The BNR's primary responsibilities include maintaining price stability, formulating and implementing monetary policy, issuing the Romanian leu (RON), and managing the country's foreign exchange reserves. Crucially for international payments, Romania operates with no foreign exchange restrictions, and the Romanian leu is fully convertible for current account transactions. This means that Romanian businesses face no governmental impediments or capital controls when making outbound payments in foreign currencies, including US dollars.
The relationship between Romania and the United States regarding taxation is governed by the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, commonly known as the US-Romania tax treaty. This treaty aims to prevent double taxation and facilitate cross-border economic activity. For Romanian entities paying US companies, the treaty stipulates a 10% withholding tax (WHT) on dividends. While the prompt specifies 0% WHT on services, it is important to note that under general US tax law, certain US-source income paid to foreign persons is subject to a 30% WHT. However, for arm's-length services payments to US companies, the treaty generally reduces this to 0%, provided proper documentation (such as a W-8BEN-E form) is submitted to the US payer. For royalties, the treaty typically sets a maximum WHT rate, which can vary but is often around 10-16% depending on the specific type of royalty. It is always advisable to consult the specific articles of the treaty or a tax professional for precise rates applicable to different income types.
Common mistakes
Entrepreneurs in Romania often encounter several common pitfalls when remitting payments to US companies:
- Incorrect or incomplete beneficiary details: A frequent error is providing inaccurate US bank account numbers, SWIFT/BIC codes, or beneficiary names, leading to payment delays or rejections. Double-checking these details is paramount.
- Neglecting W-8BEN-E forms: Failure to obtain and correctly complete a W-8BEN-E form from the US recipient can result in the application of the default 30% US withholding tax on certain income types, even when a tax treaty would otherwise reduce or eliminate it.
- Suboptimal currency conversion: Many businesses do not compare exchange rates and fees across different providers, leading to higher costs due to unfavourable RON to USD conversion rates offered by traditional banks.
- Lack of clear payment classification: Misclassifying payments (e.g., as services when they are royalties) can lead to incorrect withholding tax application and potential compliance issues with both Romanian and US tax authorities.
- Insufficient record-keeping: Failing to retain comprehensive records of invoices, payment confirmations, and tax documentation can complicate audits and tax reporting for both parties.
The practical path
Sending payments from Romania to a US company involves several key steps to ensure efficiency and compliance:
- Invoice Requirements: Ensure the US company provides a clear, detailed invoice that specifies the services rendered or goods provided, the amount due, the currency (USD), and their full legal name and address. For tax treaty benefits, request that they provide a completed W-8BEN-E form.
- Verify US Bank Details: Obtain and meticulously verify the US company's bank details, including their full legal name, bank name, bank address, account number, and the SWIFT/BIC code for international transfers. For ACH payments (less common for international), a routing number would also be required.
- Choose the Payment Method: For USD payments, the most common method is an international bank transfer via SWIFT. Major Romanian banks such as Banca Transilvania, ING Bank Romania, and Raiffeisen Bank offer reliable international transfer services. For payments in EUR, the SEPA network provides a cost-effective and fast option if the US company has a EUR-denominated account in the SEPA zone. Additionally, fintech platforms like Wise (formerly TransferWise) or Revolut are popular in Romania for offering competitive exchange rates and lower fees for international transfers.
- Initiate the Transfer: Access your chosen bank's online banking platform or visit a branch to initiate the international transfer. Input all verified beneficiary details, the amount, and select the appropriate currency. Be mindful of transfer limits and associated fees. For SEPA payments, ensure the beneficiary's IBAN is correctly entered.
- Retain Records: After the transfer is complete, download or request a payment confirmation. Keep this, along with the invoice and any tax forms (like W-8BEN-E), in your financial records for audit purposes and to demonstrate compliance with tax regulations in both Romania and the US.
Edge cases
- Large Amounts: For exceptionally large payments, Romanian banks may require additional documentation regarding the purpose of the transfer and the source of funds, in line with anti-money laundering (AML) regulations. It is advisable to inform your bank in advance.
- Existing USD Accounts: If a Romanian company maintains a USD-denominated account with a local bank, this can simplify payments to US companies by avoiding currency conversion fees on the Romanian side. However, the US recipient's bank may still apply fees.
- Payments to Individuals vs. Companies: Payments to US individuals (e.g., freelancers or contractors) may have different tax implications and documentation requirements (e.g., W-8BEN for individuals) compared to payments to US companies. Ensure the correct tax forms are used.
- Sanctions and OFAC Considerations: While less common for Romania, it is crucial to ensure that neither the US company nor its beneficial owners are on any sanctions lists maintained by the US Office of Foreign Assets Control (OFAC). Romanian banks conduct their own checks, but ultimate responsibility lies with the remitting entity.
- Central Bank Approval Thresholds: Although Romania has no general foreign exchange controls, for certain specific, very large capital transactions, the BNR might require reporting or notification. This is rare for standard commercial payments but worth noting for extraordinary transactions.
When you don't need us
For straightforward, routine payments to a US company where the services are clearly defined, the amounts are moderate, and both parties have a clear understanding of their tax obligations, specialist help may not be necessary. If the US company provides all required documentation (like a W-8BEN-E), your Romanian bank offers competitive exchange rates, and you are comfortable navigating the international transfer process, you can likely manage the payment independently. This is particularly true for smaller, one-off transactions where the administrative overhead of engaging a third party might outweigh the benefits.
What we do
Keystone Bridge assists Romanian entrepreneurs by streamlining the process of paying US companies, ensuring compliance and cost-efficiency. We provide expertise in invoice structuring, verifying US tax treaty applicability and documentation, and optimising payment corridors to minimise fees and exchange rate losses. Our goal is to simplify complex international transactions, allowing you to focus on your core business.
For the broader picture on this topic, see our guide on how to pay a US company from your country.