Investment Gateway to Europe: Romania
On 1 January 2007, Romania became a member of the European Union and has been a NATO country since 2004. Romania, which has a coastline on the Black Sea, is a strategic transit country in Eastern Europe and the Balkans. It is possible to establish a company in Romania quickly and cheaply. With attractive tax rates and a highly skilled and competitive labor force, Romania is one of the leading countries as an epicenter for foreign investors wishing to expand into the European market.
Okuma Tavsiyesi
Romanya’da yatırım yapmanın avantajlarıyla ilgili derin bir iç görü sahibi olmak için “Romanya’da Yatırım Yapmak İçin 23 Neden” başlıklı makalemizi gözden geçirmenizi tavsiye ediyoruz.
Types of Companies in Romania
In Romania, we can generally classify the types of companies as follows:
- Limited Liability Company (SRL)
- Joint Stock Company (SA)
- General Partnership Company (SNC)
- Limited Partnership Company (SCS)
- Share Limited Partnership Company (SCA)
- Sole Proprietorship (PFA)
Let’s learn more closely the legal forms of the most common of these company types, the Joint Stock Company (SA) and the Limited Liability Company (SRL).
Limited Liability Company (Societate cu răspundere limitată) (SRL)
It is the most advantageous and most common type of company in Romania. It is also the most preferred form of the company by foreign entrepreneurs. The minimum establishment capital must be 200.- Romanian leu (RON) (40 EUR). The capital is divided into shares and one share cannot be worth less than RON 10. If all documents are ready, they can be incorporated legally within one week.
Limited liability companies can be established by at least one natural or legal person or a combination. All partners may be foreigners. There is no obligation to have Romanian partners. The number of all partners, natural or legal persons, local or foreign, cannot exceed 50. A person who is a partner in one SRL company cannot be the sole partner of another SRL company.
The liability of the partners is limited to the capital invested. The partners are not liable for the company’s debts with their assets. In this type of company, the shareholder can also be an employee. In this type of company, shares cannot be divided and offered to the public. Its management and decision-making processes are much easier and faster than joint stock companies.
Joint Stock Company (Societate pe acţiuni) (SA)
This type of company is mostly preferred by investors who want to obtain large capital by going public. A company with a joint stock company structure also has a perception that provides substantial prestige to its owners. As in a limited liability company, the responsibilities of the partners are limited to the capital they put in. Shareholders do not need to obtain the consent of other shareholders to sell their shares. Shares can be quickly sold or transferred.
The minimum share capital of a joint stock company is RON 90,000 (EUR 18,000). A minimum of 30% of the authorised capital paid up by each shareholder or partner must be deposited on the date of incorporation and the remainder within 12 months. The number of partners must be at least 5 private/legal persons. There is no distinction between local and foreign partners. All partners can be foreign.
The partner late in depositing the cash capital must pay interest as of the date the capital should be deposited.
In cases where there is no other explanation in the establishment documents, profit distribution is paid to each partner in proportion to the contribution to the capital. Dividend distribution shall be paid only from actual profits. In case of a decrease in capital, the capital shall be increased first, and then dividends shall be distributed.
Romanya’da Vergi Oranları ve Teşvikleri Nasıldır?
Minimum Wage | RON 2,550 gross (EUR 515) and RON 1,524 net (EUR 305) by 2022 |
Corporate Tax | Between 1% and 3% for small companies with an annual income of less than EUR 1,000.00 Other than that, the overall rate is 16 per cent. |
Dividend Tax | %5 |
VAT Rate | 19%; Exemption from VAT up to 60.000 Eur |
Personel Income Tax | %10 |
Declaration Periods | Monthly, quarterly, half-yearly or annually. |
Income Tax Incentives | Personnel employed in the IT sector, personnel working within the scope of R&D and construction workers are exempt from income tax. |
Corporate Tax Incentives | Profits invested in technological equipment, computer and related equipment, software programmes are exempt from tax. Taxpayers operating in the field of innovation and R&D are exempt from corporate tax for the first 10 years. |
If the investment value of foreign companies in Romania is at least EUR 1 million;
- expenses for the construction of new buildings,
- rental costs of an existing building,
- expenses related to intellectual property rights,
- capital expenditure on technical supplies and equipment
It is incentivised by the Romanian state. Incentive rates vary according to the region where the investment is made. For example, the incentive rate is 10% in Bucharest, 35% in the Western Region and Ilfov, and 50% in other regions of the country.
Establishment of Companies in Romania by Foreign Investors
There are no procedural differences between establishing a company with foreign capital and a company wholly owned by Romanian capital. There are no restrictions for companies with foreign capital in Romania regarding company establishment, tax law, and free movement.
A company’s establishment is mandatory to carry out commercial activities in Romania. The establishment procedures of companies in Romania have become much easier since 1997. For company establishment procedures, investors only need to contact the Trade Registry Office of the region where they will operate. Apart from this, the company has transactions with the Notary Office where the articles of association will be approved. Immediately after the establishment of the company, direct activity can be started.
For foreigners to establish a company in Romania, they must first choose a company that fits their business plans and investment objectives. The most preferred type of company by local and foreign entrepreneurs is the limited liability company (SRL), which imposes limited liability on the partners and has a shallow capital requirement. After the company type is determined, the other steps to establish a company in Romania, regardless of the company type, are as follows:
- At least three names for the company are declared in writing in order of preference, and the Trade Registry Office approves one.
- The company’s incorporation agreement must be notarized.
- The company capital is paid.
- The application form and the following documents are submitted to the Regional Trade Registry Office for authorization to establish a company.
- After the approval of the Trade Registry Office, the incorporation decision is published in the Trade Registry Gazette.
- The company is registered with the General Directorate of Public Finance, and a tax registration number is obtained.
The examination by the Trade Registry of all approvals and licenses required from the authorities related to the company’s field of activity is completed within one week from the date of registration. The competent authorities issue the approvals or licenses within two weeks. After obtaining a tax registration number, the company can only open an account at any bank.
The summary of the documents to be submitted to the Trade Registry Office is as follows:
Notarised company establishment agreement,
Bank receipt showing that the registered capital has been paid,
Documents prove the ownership of the company’s head office and, if other small offices are created by the articles of association, their ownership.
Notification in writing that it is the applicant’s responsibility whether there is any illegal aspect.
Note: According to Romanian law, persons who have been arrested for fraudulent management, abuse of trust, fraud, misuse, deceit, false evidence, bribery, etc., cannot be founders, directors, and supervisors of companies.
When the incorporation agreement appoints a director, the management agreement prepared by the appointed director,
For foreign companies establishing a company or a branch in Romania, copies of the sworn translation or summary of the Articles of Association obtained from the Commercial Register,
Proof of payment of statutory taxes
You can find a detailed list of these documents on the official website of the Romanian Trade Registry Office.
Note: obtaining an establishment permit from competent legal authorities is necessary to operate in some sectors controlled by the state, such as insurance and banking.
Opening Branches in Romania by Foreign Investors
Under Romanian law, branches only have legal nature with the legal nature of the companies they are affiliated with. They must be registered before establishing where they will operate in the Commercial Register of the Region. Legal entities with headquarters abroad are subject to the same laws as local companies. The legal requirements for branches also apply to member companies, agencies, or representative offices with branch status.
The following conditions are required to open a branch office of a foreign company:
Application for registration in the Commercial Register of the region where the head offices of the branches are located
Copies of the sworn translation or summary of the contract of the foreign company established in Romania
The decision of the company’s board of directors on the establishment of the branch. The decision must include the following information:
- The address of the branch headquarters.
- Its field of activity and purpose.
- The authorised person to represent the branch.
In cases where the Articles of Association do not contain provisions on the establishment of a branch, an additional agreement amending the Articles of Association in the actual form
Documentation that the branch has a center
The declaration of the person authorized to represent the branch that all legal provisions have been fulfilled and that they take responsibility
After opening a branch office, the company may open another branch office without providing copies of a sworn translation or summary of its articles of association.
Opening of Representative Offices in Romania by Foreign Investors
Representative offices to be established in Romania cannot carry out commercial activities on their own; they can carry out activities such as advertising and promotion etc., on behalf of the parent company, but they cannot issue invoices.
Foreign investors must obtain permission from the Foreign Trade Department within the Romanian Ministry of Economy and Trade to open a representative office in Romania. They start the application process by submitting some documents and the application form.
Following the application submission, it is approved within 30 days at the latest. Afterward, the representative office is registered with the Romanian Chamber of Commerce and Industry.
What are the Attractive Sectors for Foreign Investors?
Romania’s EU membership since 2007 has made the country a center of attraction for investors. In 2003, the amount of stock Foreign Direct Investment (FDI) in the country was EUR 10 billion, which increased to EUR 83.9 billion in 2019. Romania’s geographical location on the European continent provides an attractive ground for foreign investors to establish companies here to expand into all European economies safely.
In Romania, the services sector accounts for the largest share of the gross national product (47 percent). The service sector employs 36% of the total labor force. However, this situation is different in the industries where foreigners invest. As of 2018, the manufacturing sector ranked first in the sectoral distribution of foreign investors with 32 percent, construction, real estate with 15 percent, trade third, and financial intermediation fourth.
In Romania, which aims to become an IT&C center in the Eastern Europe region, the sector reached a size of EUR 6.5 billion in 2022. The Romanian government provides significant incentives to the software sector. Profits invested in technological equipment, computers, and related equipment, software programs are exempt from tax. Taxpayers operating in innovation and R&D are exempt from corporate tax for the first ten years. The income tax rate is 0% for employees working in the IT sector and personnel engaged in R&D activities. Global software companies (Oracle, Amazon, IBM, and Deutsche Bank) have already invested in the country.
Romania will receive EUR 27 billion in grants and loans from the “Next Generation EU” financing through the National Resilience and Recovery Plan (NRRP). Distributed between 2021 and 2026, the NRRP funding aims to support Romania’s green transition, digitalization efforts, and the resilience of the healthcare system.
The automotive sector in Romania is proliferating. Today, the annual turnover of the automotive industry exceeds EUR 30 billion. Therefore, there are investment opportunities for foreign companies producing spare parts for the automotive sector in Romania.
There are major government projects for the development of infrastructure. The significant amount of EU funds available to support investment in this sector makes the infrastructure development sector attractive for foreigners.
There are also potential development areas for foreign investors in the healthcare and agricultural machinery sectors.
Romania’s tourism sector is very vibrant and well-developed. This sector also harbors significant opportunities for foreigners.
Romania’s most developed cities where investment can be made are Bucharest (capital city), Constanța, Galați, Iasi, Cluj-Napoca, Timişoara, Braşov, Craiova.
Foreign persons, not Romanian citizens, can buy residential and business premises, but not land. However, companies established by non-Romanian citizens can purchase houses and land in the name of the company.
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As MHR & Partners, we are directly and indirectly active in more than 20 countries worldwide. We aim to operate with 10 branches in 100 countries in 10 years. We offer you end-to-end consultancy and support services in establishing a company, obtaining a residence permit, and in all operational processes abroad, primarily financial issues.
Our priority is to provide consultancy services to companies with a growth vision and business strategy abroad. We attach particular importance to the uninterrupted continuation of our services with the assurance of MHR & Partners (Mühür YMM AŞ) after the company establishment stages. Our core mission is to be a safe harbor and provide sustainable services.
We want to be a bridge to our customers’ business plans for growth and development, even in the most remote parts of the world.
To establish a business in Romania, you can contact Sworn-in Certified Public Accountant Mehmet Akif Özmen directly (+90 542 830 3408 or akif.ozmen@mhrpartner.com). If you wish, you can reserve a meeting by filling out the form below.
Where Should I Start to Do Business in Romania?
First of all, you should create a business plan. For this purpose, visiting Romania, making business contacts, and establishing connections with local partner is very useful.
It is imperative to determine your vision, the sector in which you will operate, and your business details to clarify your goals and objectives and to extract your investment budget and capital in your business plan for at least three years.
The next step after the research and planning phase is to take action. The lowest risk and cost strategy in an unfamiliar market is to proceed through partners or consultants who know the Romanian market well.
As MHR & Partners, we established our own company in Germany and opened a physical office in Mannheim. Germany serves as the focal point for our global operations. As an end-to-end consultancy service provider with local partners in the Netherlands, the UK, Belgium, Romania, Montenegro and Bulgaria, we help you set up a business from scratch safely and quickly, as well as manage all the processes you’ll need once it’s established.
You can contact Sworn-in Certified Public Accountant Mehmet Akif Özmen directly (+90 542 830 3408 or akif.ozmen@mhrpartner.com) to set up a business in Romania.
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