MINIGUIDE FOR DOING BUSINESS
IN ROMANIA
SETTING UP COMPANIES IN ROMANIA
A new investor in Romania has a number of options available when considering the legal form its investment may take. The allowed types of business presence range from limited liability companies and joint stock companies to artnerships, as well as branches and representative offices.
1. Commercial companies
Limited Liability Company (SRL) - MINIMUM EQUITY CAPITAL: is currently RON 200 (about USD 60). The maximum number of shareholders in such a company is 50. A SRL is managed by one / more administrators which may have full / limited powers and which may be Romanian / Foreign Nationals.
Joint-stock company (SA) - MINIMUM EQUITY CAPITAL: is currently RON 2500 (about USD 700). There is no maximum number of associates. However, such a company should have at least 5 shareholders.
Registration Procedure
-The constitutive documents (by-laws) must be prepared, approved, and signed by the shareholders
-The subscribed capital must be paid upon registration of the company. In the case of a joint stock company (SA), each shareholder must pay at least 30% of its subscribed capital. The registered capital may be subscribed and paid in by the shareholders by contributions in cash, in kind and/or in receivables;
-The company is registered with the Trade Register by issuance of a Registration Certificate. This provides registration Code valid for both the Trade Register and the tax authorities. The Registration Certificate also includes in a certificate of acknowledgement stating that all conditions for carrying out commercial activities are fulfilled. The company legally exists and has the right to start and run its activities from the date of its registration with the Trade Register.
2. Branches
Branches are corporate entities with no legal status, set up by Romanian or foreign companies subject to registration with the relevant trade registry. The legal status of the branch applies to any other secondary office (agency, working points, etc.) established as branch by the foreign parent company.
Registration Procedure:
Branches must be registered using the same procedures as for SRLs and SAs. The setting-up of a branch requires the following documentation:
-Record of the existence of the parent company (i.e. company memorandum and articles of association, setting-up certificate of foundation, trustworthiness letter from bank);
-Decision of the Board of Directors to establish a branch in Romania, listing the activities of the branch and appointing a General Manager.
3. Representative Offices
Foreign companies and economic entities may open Representative Offices, that may undertake on behalf of the parent company only transactions that are consistent with its object of activity and set forth in the authorization. A Representative Office cannot commit to any contractual engagements in its own.
Registration Procedure:
-In Romania, representative offices are subject to authorization by the Ministry of Economy and Commerce.
-Upon registration, an operation authorization is issued, stipulating the activity object, the terms and conditions for carrying out the activity, the duration and headquarters of the Representative Office.
TAXES ON CORPORATE INCOME AND GAINS
Corporate income tax
Resident entities are subject to tax on worldwide income. An entity is resident in Romania if incorporated in Romania or if its effective management and control are in Romania.
Associations" or "consortia" between Romanian legal entities, which do not give rise to a legal person, are taxable in Romania separately at the level of each partner. For such associations between a Romanian legal entity and individuals or foreign entities, the tax must be computed and paid by the Romanian legal entity on behalf of the individuals or its foreign partners.
Non-resident companies are subject to tax on their Romanian-sourced income only. Sale of shares held in Romanian companies by non-resident companies and sale of real estate are also subject to profits tax in Romania
Non-resident companies are taxed in Romania at the standard rate of 16% on earnings derived exclusively from their Romanian operations (through branches, other permanent establishment or consortia). A foreign company is considered to have a permanent establishment in Romania, without a legal presence here, if it has any of the following types of presence in Romania: an office; a branch; an agency; a factory; a mine; a place of extraction for gas or oil; a building site that exists for a period exceeding six months.
Rates of corporate income tax
The standard rate of income tax for Romanian companies is 16%. Profits tax payable by companies earning their revenues from night bars, nightclubs, discos, casinos and sports betting (including revenues obtained based on an association agreement) is computed at the standard 16% rate, so long as the tax amount is not less than 5% of the total realized revenues. In case the profits tax payable is below the threshold, the taxpayer is liable to pay corporate income tax computed as 5% of the revenues realized from such activities.
Representative offices are taxed on a yearly basis, at a lump sum of ROL equivalent of EUR 4,000, payable in two equal installments.
ACQUIRING LAND OR REAL ESTATE
Currently, Romanian individuals and legal entities (including companies with foreign participation) are free to acquire land. Under the Romanian Constitution, non-Romanian citizens and stateless persons are allowed to acquire land in Romania only under the following circumstances:
-Under the conditions of Romania's accession to the EU
-In accordance with an international treaty to which Romania is party and on reciprocity bases
-By inheritance under the laws of intestacy.
Non-Romanian individuals or legal entities may own buildings and/or acquire the right to use the land based on lease agreements, concession agreements, etc.
Legal entities without Romanian nationality (i.e. headquartered abroad) may not own land in Romania. Companies headquartered in Romania may own land even though their share capital owned is 100% foreign.