PFA is one of the simplest and most popular forms of self-employment in Romania, frequently used by freelancers, consultants, or small entrepreneurs. Setting up a PFA involves a relatively quick process, low costs, and clearly defined tax obligations. However, before getting started, it is essential to understand what a PFA means from a legal perspective, what obligations it entails, and whether this form of organisation is suitable for you.
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What does PFA mean?
PFA is the abbreviation for Persoană Fizică Autorizată (Registered Sole Trader) and represents a legal form through which an individual can carry out economic activities independently. In practice, a PFA allows you to work on your own account, issue invoices, and earn income from commercial, production, or service activities.
The term “PFA company” is very commonly used in everyday language, but from a legal standpoint, it is incorrect. A PFA is not a company and does not have a separate legal personality. The activity is carried out directly in the individual’s name, and the PFA holder is also the person who is liable for the obligations undertaken.
In Romania, the PFA is legally regulated and is intended for carrying out an economic activity in an organised and continuous manner. A PFA is not a legal entity, but rather a form of organising the activity of a natural person, with rights and obligations clearly established by law.
PFA in Romania – general framework
Any adult individual with full legal capacity can set up a PFA in Romania, provided they meet the legal requirements for the chosen activity. In certain fields, proof of qualifications or professional experience is required.
PFAs can operate in a wide range of fields, from IT, marketing, design, or consultancy, to production, trade, or services. The activity must be classified under an authorised CAEN code, chosen according to the main scope of activity.
There are, however, legal limitations. A PFA cannot have an unlimited number of employees and cannot carry out activities reserved exclusively for other legal forms. In addition, the PFA holder is liable with their entire personal assets for the obligations arising from the activity carried out, an aspect that must be carefully considered before registration.
How to open a PFA: steps for setting up, documents and costs
Setting up a PFA in Romania is a relatively simple process, especially compared to other legal forms. However, it is important to know the correct steps, the required documents, and the actual costs involved in order to avoid delays or rejection of the application.
Steps to set up a PFA
The process of setting up a PFA can be completed in two ways: the traditional method, by submitting documents to the Trade Register, or online, via the available digital platforms.
In the traditional method, the main steps are:
- Choosing and reserving the PFA name
- Establishing the registered professional address
- Choosing the CAEN codes
- Preparing and submitting the file to the Trade Register
In the online version, the documents are completed and submitted electronically, reducing the time spent at the counter.
The average duration for setting up a PFA is approximately 3–5 working days, depending on the accuracy of the documentation and the chosen method.
Required documents for a PFA
A frequently misunderstood aspect is the existence of a PFA articles of association. In reality, a PFA does not have articles of association, as is the case with limited liability companies (SRLs). The activity is regulated through the registration application and declarations on one’s own responsibility.
Mandatory documents include:
- Registration application submitted to the Trade Register;
- Copy of the identity document;
- Document proving the right to use the professional address;
- Declaration on one’s own responsibility regarding compliance with legal requirements;
- Documents proving qualifications or professional experience (where applicable);
- Specimen signature.
Initial costs and the possibility of free setup
At present, the administrative costs for setting up a PFA are minimal, and in many cases, they can be zero. The fees charged by the Trade Register for registration have been eliminated, making it possible to register a PFA free of charge if you submit the file personally.
However, indirect costs may arise, such as:
- Obtaining qualification documents;
- Certified copies or translations;
- Consultancy services, if you choose to work with a specialist.
PFA online: digital establishment
Setting up a PFA online involves completing the entire authorisation process without physically going to the Trade Register. Documents are completed, signed, and submitted electronically, and communication with the authorities takes place exclusively in digital format.
The main advantage of opening a PFA online is time efficiency. There is no need to be present at the counter, and the application can be submitted at any time. In addition, the process is more flexible, and the status of the application can be tracked in real time.
The documents submitted online are the same as in the traditional version: the registration application, identity document, proof of the professional address, declarations on one’s own responsibility, and qualification documents where applicable. The difference lies in the fact that they are uploaded electronically and digitally signed.
Common mistakes include choosing incorrect CAEN codes, uploading incomplete or illegible documents, and omitting proof of qualifications for regulated activities. These errors can lead to rejection or delays in processing the application.
How many CAEN codes can a PFA have?
A PFA can have several CAEN codes, but the law imposes a maximum number of activities that can be authorised simultaneously. These must be chosen based on the type of services or products the holder intends to offer.
Choosing the appropriate CAEN codes is essential, as a PFA may only carry out authorised activities. The main CAEN code reflects the core activity, while secondary codes allow for the legal expansion of services.
Certain activities require additional documents, such as diplomas, qualification certificates, or special permits. Without these, authorisation of the CAEN code may be refused.
If the activity changes or diversifies, CAEN codes can be modified or added later by submitting a notice application to the Trade Register. The procedure is simple and generally does not involve high costs.
Tax obligations for PFAs in Romania
A PFA in Romania has clear tax obligations that must be complied with to avoid penalties or issues with the tax authorities. The main obligation is submitting the Single Tax Return, the document through which earned income and due taxes are declared.
Income tax is applied to net income, calculated either under the real system or based on the income norm, depending on the activity carried out. The chosen taxation method influences both the level of taxes and the way accounting records are kept.
In addition to income tax, a PFA may owe social security contributions (CAS) and health insurance contributions (CASS), depending on whether certain annual income thresholds are reached. These contributions are linked to the public pension and health systems and are also declared through the Single Tax Return.
PFA accounting is basic and simpler than that of commercial companies, but it still requires accurate tracking of income and expenses to ensure tax compliance.
PFA risks – what you need to know before you start
Before choosing a PFA, it is important to understand the risks associated with this form of organisation. The most significant is unlimited liability. The PFA holder is liable with their entire personal assets for debts and obligations arising from the activity, including personal property.
There are also tax risks, usually resulting from errors in completing declarations, failure to meet legal deadlines, or misinterpretation of tax obligations. Penalties and interest can increase rapidly, especially in the case of repeated delays.
Another important aspect is income instability. Unlike an employment contract, a PFA’s income can vary significantly from one month to another, which requires good financial planning and a reserve fund.
A PFA is not recommended when the activity involves high financial risks, significant investments, or the need to protect personal assets. In such cases, a limited liability legal form may be a safer option.
PFI vs PFA – what is the difference and what do you choose?
A PFI (Persoană Fizică Independentă – Private Finance Initiative) is another form of independent activity in Romania, intended for individuals who carry out economic activities without setting up a company. Unlike a PFA, a PFI has a simpler fiscal and legal framework and is suitable for professionals who invoice sporadically or have moderate income levels.
The legal differences between a PFI and a PFA are significant: a PFA is more structured, can have multiple CAEN codes, and involves liability with personal assets, while a PFI is more flexible but more limited in terms of fields of activity.
Fiscal differences include the way tax is calculated, and social contributions are paid: a PFA can choose between the income norm and the real system, while a PFI generally pays income tax without the option of an income norm.
In general, a PFA is suitable for those with consistent and more complex activities, while a PFI is better suited for small or occasional projects.
PFA cancellation – how to close a legal PFA
Deregistering a PFA means the official cessation of activity and removal of the PFA from the Trade Register. This is required when you no longer carry out the activity or wish to switch to another legal form.
The main steps include submitting a deregistration request to the National Trade Register Office (ONRC) and informing the tax authority (ANAF) in order to settle any outstanding tax obligations. It is important to have all accounting records and declarations up to date.
In addition, before closure, you must pay any due income tax, CAS, and CASS, and submit accounting registers if they were used. Deregistering a PFA is also recommended when the activity becomes unprofitable or is transformed into an SRL or another type of company.
Conclusion
A PFA is a practical and flexible solution for individuals who want to work independently, issue invoices, and manage their own income. It is suitable for freelancers, consultants, small entrepreneurs, and professionals with ongoing activities, but with full personal liability under a simple structure.
Therefore, choosing a PFA becomes a good option when you have clarity regarding the field of activity, the appropriate CAEN codes, and tax obligations. Proper information before registration is essential to avoid financial risks or long-term legal issues.
