Doing Business in Romania

Romania is one of the largest countries in Eastern Europe by size and population. On the western shores of the Black Sea, and bordering Bulgaria, Serbia, Hungary, Moldova, and Ukraine, Romania has, for centuries, represented a gateway between East and West. A developing country, Romania emerged from a period of political and financial turmoil in the late 20th century and today its economic momentum continues to gather pace: in 2016, Romania’s GDP was around $186.7 billion, while in 2017, its average growth rate was more than 5% (one of the fastest in the EU). The modern Romanian economy draws heavily on its service sector, and the manufacture and export of technology, software, automobiles, pharmaceuticals and agricultural products. After a series of reforms in the late 90s and early 2000s, Romania’s economy modernised, and it began to attract rising levels of investment with attractive tax rates and lower levels of regulation. Romania is a member of the EU and NATO, and was ranked 45 on the World Bank’s Ease Of Doing Business Survey 2018.

Why Invest in Romania?

There are plenty of reasons to regard Romania as an investment target, including:

  • Economic strength: Romania’s economic growth rate (around 5.2% in 2017) is outpacing many European competitors. Growth has been driven by industrial strength and forecasts predict the trend will continue.
  • Government reforms: To transform the economy, Romania’s government introduced a series of reforms in the early 21st century designed to boost business and attract investment. These reforms include a flat 16% corporate tax rate, 0% tax on reinvested income, and a minimal regulatory environment.
  • Market potential: Romania’s domestic market holds around 21 million potential consumers. These consumers form part of a young, sophisticated population - which hosts a growing middle class with a rising per capita income.
  • Skilled labour: Romania’s labour force is skilled and embodies a cultural dedication to hard work. Enrolment in education has been rising steadily in the 21st century at both the high school and university levels - where the most popular disciplines are business, administration, and law. Many Romanians speak multiple languages.
  • Strategic location: Romania’s location, at the crossroads of the East and West, offers numerous lucrative trade connections - including access to the EU’s free trade area and a market of around 500 million consumers. A modern, efficient transport infrastructure of road, rail, air, and sea links serves regional and international locations. 

Foreign Direct Investment in Romania

Romania, which joined the European Union on 1 January 2007, began the transition from communism in 1989 with a largely obsolete industrial base and a pattern of output unsuited to the country’s needs. The country emerged in 2000 from a punishing three-year recession thanks to strong demand in EU export markets.

Company Registrations and Incorporation of a legal Entity in Romania

Both foreign individuals and legal entities can establish corporate presence in Romania. Companies need to have their own patrimony, registered capital, management, registered offices, assets, names and bank accounts. All companies must be registered with the National Trade Register Office, organized by the Romanian Chamber of Commerce and Industry. Companies should register with the Trade Registry at the Local level, at one of the 42 territorial offices, depending on the address chosen for the registering its office.

The National Trade Register Office is a public institution, which has the function to maintain statistical information on business activities in Romania. Thus, in Romania, it is required that a company specifies its main activity and is allocated a code number which relates to that particular activity, such as ‘Property Investment’, when using the formation of the company to buy land in Romania.

In Romania you can register a foreign entity for payroll purposes.

Documents and Information

To start incorporating your company in Romania the following is required:

  • Proposed Company Name which must be reserved at the Trade Registry
  • Articles of Incorporation
  • Memorandum
  • Resolution of Shareholders’ General Assembly, if at least one associate is a legal entity
  • Proof of having a legally registered office, which is constituted by:
  • A purchase, a lease or a free lease agreement depending on the company’s needs;
  • Documents concerning the space chosen as head office (Excerpt from the Land Registry Office, cadastral sketch), the documents certifying the ownership rights over the property for the presumed owner (if the company chooses to use a lease or a free lease agreement);
  • Affidavit regarding meeting the conditions related to the registered office when the certificate issued shows that other documents are already registered at the Fiscal Office showing alienation of the usage rights of the same space assigned to be the registered office;
  • Statement from the Owners’ Association in the building in which the other owners (neighbors) in the building agree with the use of the location for the stated purposes;                                                                                                       
  • Statement that the person is acting as the sole shareholder of only one private limited company or that the limited liability company with only a sole shareholder is not a sole shareholder in turn, in another private limited company;
  • Authenticated affidavit (if applicable) of the foreign citizen natural person, in his/her own name or by a representative of the foreign legal person which is not fiscally registered in Romania, attesting that there are no fiscal debts, in original and translated by an authorized translator whose signature is authenticated by a notary public, if applicable - details;
  • Affidavit of the founders/administrators/financial auditors or of the natural persons representing the legal person appointed as administrator or financial auditor, attesting that they meet the legal conditions to hold such capacity, if applicable (original);
  • Signature specimen for the company representative (Administrator);
  • Proof of identity for Director (legal representative, administrator) and Shareholders, either a passport or the national identity card;
  •  Proof of residential address. Gas/electricity bill or credit/debit card bank statement dated within the last 3 months;
  • Proof of contributions to the share capital submitted by the partners/associates (copy of bank statements), which should have a total value of 200 RON according to the law;
  • If you do not travel to Romania, a power of attorney will be required to allow your lawyer or fiscal representative to set up the company and act on your behalf for the following steps:
  • Incorporation and registration of the company
  • Opening a bank account (first as a share capital bank account which will become a full operational bank account upon the registration of the company);
  • Obtain the VAT number.
  • After registration of the Company to the Trade Registry and Tax Authorities, the company must be registered at the Labor Inspectorate when the first employment contract is issued.
  • Legal Authorities for payroll are Ministry of Finance, Ministry of Labor and Ministry of Health. Please note you could require other authorities. 

Business Banking in Romania

It is mandatory to have an in-country company bank account to process payroll.

Banks are generally open from 09:00 a.m. to 1 p.m. and from 2:30 p.m. to 5 p.m. Some banks are also open on Saturday from 9:30 a.m. to 12:30 p.m.

Working Days in Romania 

The Romanian working week is typically Monday to Friday.

The workweek for full-time employees is generally limited to no more than five days (eight hours per day) and a maximum number of 40 hours per week, with 2 consecutive days of rest, usually Saturday and Sunday. According to the law, the maximum legal length working time may not exceed 48 hours per week, including the overtime.

Basic Facts about Romania

General Information

The territory, which became known as Romania, was founded in 1859, as a union of the two principalities of Moldavia and Wallachia. Ruled by a variety of successive European powers, the country eventually gained independence from the Ottoman Empire and began to be recognised by a variety of international political powers. With a rich cultural heritage and home to areas of natural beauty, Romania is a popular tourist destination: forests and rivers are scattered across the country while the spectacular Carpathian Mountains tower over its central region. Temperate and continental, Romania experiences warm, hot summers, and mild, cold winters. Its proximity to the Black Sea also plays a part in Romania’s international appeal as a tourist destination.

Full Name: Romania

Population: 19.9 million (UN, 2014)

Capital: Bucharest

Primary Language: Romanian

Monetary Unit: Romanian Leu (RON), divided into 100 bani

Main Exports: Electric Machinery And Equipment, Textiles and Footwear

GDP Growth: 0.7%

Internet Domain: .ro

International Dialing Code: +40

Hello Buna

Good morning Bună Dimineața

Good evening Bună Seara

Do you speak English? Vorbiți Engleză?

Good bye La Revedere

Thank you Multumesc

See you later Ne Vedem Mai Târziu

Dates are usually written in the day, month and year sequence. For example: 1st of July 2015 or 1/7/15. Numbers are written with a period to denote thousands and a comma to denote fractions. For example, RON 3.000,50 (three thousand RON and fifty bani).

Income Tax & Social Security in Romania

Annual Tax returns (Financial Statements: Balance Sheet, P/L Sheet, Trial Balance) are due by 25th May of each year for the previous year in Romania but in certain cases, such as for employment income derived from non-Romanian employers, tax returns are due on a monthly basis by the 25th day of each month for the previous month.

That tax year’s ends on the 31 December.

Where foreign individuals are employed by a Romanian entity, both salary tax and social contributions are applicable except for the case when a certificate for social security coverage is available, such as the A1 form used for assigned European citizens.

Income Tax In Romania

Both Romanian nationals and Romanian companies must pay tax on any income within Romania and any income from outside of Romania. Non-residents that are declared Romanian fiscal residents are required to pay tax on their total income, the income obtained in Romania, and the income obtained abroad.

For tax purposes, an individual who resides in Romania for more than 183 days within a 12-month period, should submit to the local Tax Authority the “Questionnaire to establish the fiscal residence of an individual upon arrival in Romania”. Following the submission and the review of the file, the Tax Authority will issue a notification regarding the fiscal residence of the individual (the individual will be declared fiscal resident in Romania or in the country of origin).

An individual does not have to be in Romania for 183 consecutive days, but the total number of days must not exceed 183 in any 12 consecutive months. Romania does have double taxation agreements in place with most countries.

Employers are required to deduct tax payments on behalf of their employees through the payroll.

The Tax System in Romania is a great incentive for expats wishing to relocate to Romania with a flat tax-rate of 16% on corporate and individual income. Some smaller companies only need to pay a 3% Tax-Rate.

New categories of non-taxable salary income have been introduced:

  • The employee can pay contributions to voluntary pension funds and private health insurance authorised by the Romanian Financial Supervisory Authority up to the equivalent of  €400 per year each.
  • Food rights granted by employers to employees, where specific legislation prohibits employees from bringing their own food to the premises.
  • Personal deductions are available for an income of up to RON 3,600 per month, if the taxpayer has dependents the amount will increase.

Social Security in Romania

All employed and self-employed persons must pay Social Security Contributions (pension and health insurance), with contributions paid by each employee and employer, as required by fiscal legislation.

Employees’ contributions are calculated, withheld, and paid to the State Budget by the employer. This must be completed by the 25th of the month following the reporting month. Social Security contributions are paid by employers only for employees with special, hard, or dangerous work conditions.

Where foreign individuals are employed by a Romanian entity, both salary tax and social contributions are applicable except for the case when a certificate for social security coverage is available.

Social Security is mandatory and has to be paid by the 25th of next month.

Reporting Tax in Romania

Monthly

Declaration 112

  • All individuals under working contracts or assimilated with employees, incomes, taxes
  • On-line registration on the website of Ministry of Finance, based upon a digital certificate
  • Can be submitted on behalf of the client
  • The client needs to have digital certificate

Yearly

Annual Tax reports are submitted at the end of the financial year to the Tax Authorities. In Romania, annual Tax returns are due by the 25th of May each year for the previous fiscal year.

In certain cases, such as for employment income derived from non-Romanian Employers, tax returns (D224 tax return) are due on monthly basis by the 25th day of each month for the previous month. The D224 return submitted in December must include the tax incomes for the whole year (for all previous months from January until November).

New Employees in Romania

All employers in Romania must comply with Romanian labor law, whether they employ Romanian citizens or foreign nationals and regardless of the size of business. The Romanian Labor Code (Codul Muncii), which was enacted in 2003, governs the relationship between employers and employees, and covers local employees working for Romanian employers in Romania and abroad, as well as foreign citizens working in Romania.

All the new employees are required to be registered with the Labor Chamber and in specific software for evidence of all Employees, called Revisal, 1 day before starting their working contract at the latest.

All the new employees must be issued with an Employment contract which should include the following information:

  • The identity of the parties;
  • The workplace or, in the absence of a permanent workplace, the possibility of working in several places;
  • The headquarters or, as appropriate, the domicile of the employer;
  • The position/occupation according to the Romanian Classification of Occupations or other regulatory documents and the job description;
  • The job-specific risks;
  • The date when the contract takes effect;
  • In the case of an employment contract of limited duration or of a temporary employment contract, its respective length;
  • The length of the leave the employee is entitled to;
  • The conditions under which the contracting parties may give notice and its length;
  • The basic pay, other components of earned income, and the payment frequency for the wage the employee is entitled to;
  • The normal length of work, expressed in hours per day and hours per week;
  • The reference to the collective labour agreement governing the working conditions of the employee, if applicable. Only employers with more than 20 employees are due to conclude a collective agreement at unit level, according to the law.
  • The length of the probationary period.

The documents required for hiring a Non-EU expat are:

  • Passport
  • Work Permit obtained from the Immigration Office
  • Employment visa issued by the Romanian Consulate in the country of origin;
  • Signed Labour Contract and payroll documents;
  • Valid lease agreement for a residence address in Romania (the domicile address is considered the one in the country of origin)

Non-EU citizens have the legal right to stay and work on the Romanian territory only upon obtaining the employment visa. EU citizens benefit from the same treatment as Romanian citizens and can be hired without a work permit.

Leavers in Romania

All the final payments to the Leavers should be made latest by 15th of next month.

The notifications have to be made to the local authorities when there is a leaver. The termination must be recorded in the specific software Revisal, latest on the first non working day.

Payroll in Romania

Employers are required to withhold tax and social security contributions from their employees’ wages - and report those to the national tax authority. Residency status is relevant to income tax collection in Romania: non-residents must pay tax on income derived only from within Romania, while residents must pay tax on all worldwide income.

Income tax in Romania is charged at a flat rate of 16%, while social security contributions amount to 15.5% for employees, and up to 32.6% for employers (depending on working conditions). Social security contributions cover pension, unemployment and health funds.

It is acceptable for employers in Romania to provide employees with online payslips, while payroll reports must be kept for a minimum of 50 years. Given Romania’s often complex tax requirements, international businesses setting up in Romania may choose to engage a global payroll provider to handle the process - ensuring compliance and the efficient delivery of pay.

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