Romania has a long experience in the management of internal and external of trade changes, in the field of taxation, financial, banking, labor market which are determined not only by the processes of economic restructuring but also the transition period simultaneous with the entry in the U.E.
I'll show you briefly what are the advantages and disadvantages of starting a business in Romania.
First, to start a business in Romania we need to know where is placed the Romanian taxation system in relation to European and world context.
This, because there is a substantial difference between the new Member States and the "the old states”, from UE (Poland, Slovakia, Czech Republic, Hungary, Estonia etc). In many of the countries that joined the EU in 2004 income tax was reduced lately, Romania passing directly to an income tax cut.
There, on the other hand I think that should be considered whether this advantage of taxation of profits earned Romania, leads to a rapidly gain through a minimal investment compared to systems in other EU member countries, because things are changing but if we look and the tax on dividends. There are countries where such a tax on dividends does not exist, such as Latvia, Slovenia, Greece, Malta, etc.
So, if we consider, cumulatively, the tax profits but also on dividends (with the 16% from 2006), in Romania the taxation is not small it is average.
If we look only at the level of taxation on profits things are even better, Romania is at present among the countries with the lowest tax in the UE.
The tax on reinvested profits.
Another advantage that we believe to be taken into account on the tax regime in Romania, is that from October 1, 2009 tax on reinvested profits will be removed.
Who benefits and how:
- Non-taxation of profits reinvested apply to assets considered new, in the sense that were not previously used.
- Those who benefit from these facilities have an obligation to retain heritage assets that at least a period of time equal to half their normal operation, otherwise they followed to pay income tax and increases delay.
- If income tax of company receiving tax relief on reinvested profit is below the minimum tax, the minimum tax will be paid.
- Tractors and agricultural machines with an older age than 10 years were included in the Program Jalopy for which the Romanian Government allocated 228 million lei.
- Also the legal persons benefit from the facilities of Program Jalopy.
The flat tax.
If we talk about the tax regime in Romania we can not take into account the flat rate tax.
Is obvious that Romania has entered recession for instance has been applied to flat tax. Although the example was taken from France, the flat tax was seen that should not be thinking on long term.
In conclusion...
The tax sophistication of a country is directly proportional to the level of maturity of the economy in that country.
Companies with whom we spoke acknowledged the progress made and clearly scored a series of tax benefits.
Flat tax (16%) and standard rate of VAT (19%) are two of the main competitive advantages of the Romanian fiscal system.
We remember, there is a reduction of income tax from 25% to 16% level - to join in an international trend. This in my optics is the biggest advantage to start a business in Romania.
The labor force in Romania
Another point of view that should not be overlooked is represented by the employees in Romania.
The competitiveness of an economy depends ultimately on human as person. And therefore I think it is important that is well known in Romania is cultivate both as employees and as employee, methods and techniques and action, in the spirit of teamwork based on mutual interest.
After the first quarter of 2009, we can say that all areas were affected, these severe changes had consequences on the human resources area. Most companies have adopted a strategy to reduce costs based on salary reduction and restructuring of posts.
Although cross a period of financial crisis, here are some advantages in terms of registry of the employee - the employer for what is worthwhile to invest in a business in Romania.
For instance, analyzing all the existing 298 articles in the current Labor Code, in terms of rights and obligations of both sides shows the following:
- for employees:
- Total of: 246, of which direct rights, 120;
- Total liabilities: 58, from which direct obligations, 15;
- the employer:
- all right: 58, from which direct rights, 43;
- Total liabilities: 246, of which direct obligations, 126.
Since about 2003, (Law no. 53/24 January 2003) representatives of employees changed their attitude towards the business approach and they beacome a real resource in business development, identifying common interests with employers and business development as part of the process.
Romanian state has reconstituted resources from taxes and payroll taxes, decreasing substantially the uncontracted labor and untaxed.
Romanian banking system
In Romania after 1990 the banking system is considered to be the most fragile economy mechanism, meaning that felt most strongly induced shocks in the economy.
Romanian banking system has evolved continuously, absorbing some of inflection evolution of Romanian economy.
The most important event can be highlighted with safety as the privatization of Romanian Commercial Bank.
Privatization in general and in particular the privatization of Romanian Commercial Bank is the first step towards a market economy based on fair competition and freedom from Romania to acts of commerce.
Banks begin to think about becoming more serious in mutual funds as a variant to attract household savings.
There are a number of major advantages of the transition from a system of payments based on interbank exchange and natural movements payment documents on paper to an electronic system for interbank payments processing.
Basically, the payments are initializate and completed during the same banking day.
Also we considered to be taken into account the Export Credits
The export credits were put in hand and the beneficiaries are companies Romanian with export activity.
Characteristics of this credit are:
- granting period: up to 2 years;
- repayment in monthly or quarterly, correlated to conditions of export transaction.
Advantages and facilities:
- custom solutions depending on the export transaction;
- the costs advantages the beneficiary;
- the guarantee is flexible.
Knowing all these national and global trends, the Romanian banking system adopted the most appropriate measures to be fully accepted by the market in Romania, continuing development activities of a banking culture among clients, both natural and legal persons.
The Import and Export in Romania
EU is the main partner of Romania in agricultural trade. Romania's export is increasing.
Romania's exports in October 2005 were maintained close to the level of two billion euro, recorded the previous month, informed the Ministry of Economy.
In January 2010 Romanian exports of agricultural products increased after the first nine months of 2009 to 11.6% to 1.64 billion euros, up from 1.47 billion euros in the same period in 2008, while imports fell 8.3%, from three billion to 2.75 billion euros.
Romania import less oil.
Our country's oil imports have fallen by about 20 percent in the first 10 months of 2009.
Romania imported in the first ten months of this year, an amount of 5.706 million tonnes of crude oil equivalent, with 1.419 million toe (19.9 percent) less than in the corresponding period of 2008, according to data centralized by the National Institute of Statistics.
Oil production riseed in January-October 2009 period, from 3.5 million toe, by 5.5 percent higher than that of same period in 2007.
Romanian exports of IT products and services.
Romanian exports of IT companies could overcome in next two to three years, the annual one billion euros, representing an annual increase of approximately 50%.
Romania is a net exporter of software services with exports three times higher than imports, and net importer of hardware, domestic production covers only 20% of the domestic market, according to a study by the Institute of Engineering and Calculation.
Although it has a smaller share, the software and IT services, is still the most dynamic segment of the IT, with increases in income, production and value added of over 40% annually for the last eight years.
So, the economic crisis may become a sustainable development opportunity for companies?
Romania is in crisis or not?
Crossing the year 2009, highlights the fact that besides real estate and financial capital, your business depends heavily on human capital and natural resources which is used.
Newly entering 2010, we expect and wish to shift to a developmental model for generating interest in knowledge and innovation because the current economic crisis that shook the ground up and some of the most powerful companies should be a warning sign for those who chose this time rather to panic and react not only to think of sustainable strategies and to build a competitive advantage.
What does not kill you, makes you stronger! This may be the basic principle in 2010.
Romania is in a position most favored over other countries, especially developed ones, where the crisis hit in domestic production.
Crisis proportions in us has in other countries, but all international forecasts indicate that the situation will become critical in 2010. And now comes salvation in Brussels.
The European Commission is a smart plan: wants to destroy two birds with one shot. What I mean? Economic Recovery Plan is in two times: It aims and immediate measures that the EU can get out of the current economic crisis, but at the same time aims and measures for further development.
Business could be a big winner in this economic recovery plan.
Everything is to have projects, as well as public authorities. European Investment Bank has supplemented the financial package for loans to small and medium companies from 10 billion euros to 15 billion euros annually, so 30 billion euros during the period covered by the plan of recovery.
For instance: it is just need someone to go and they say those in Brussels: "We want to make a freeway project that we do well? Help us! ". It is a matter of will, now we are Europeans and projects, or help us to do, things can be simpler than that.
Moreover, the Commission has now announced that it will help Member States to make large infrastructure projects to be implemented with structural funds. Moreover, given advances in faster and larger amounts. Do you want further proof that we get to do it again that we lack highways in Romania.
The Commission also give 1.5 billion euros for refurbishment of small European companies, because they become ... how else? ... "Greener!!!".
It's a paradox, but Romania could come out of the crisis much more quickly than other EU countries and much more modern.
Soon, if they follow the Commission will adopt the directive of reducing VAT on services that involve "intensive work". The beneficiaries are small firms of repairs, the repair of shoes and clothes to electrical repairs, hairdressing and hairstyling salons, but also companies that offer home services or assistance - child care, elderly or persons with disabilities. Everything for those left without a job to retrain, to find a another, and be driven employers to hire them.
It takes courage, innovation and change of switches for things to begin to enter their normal path. Beyond technology, finance and strategy, but most important are the people, those vital resources that can make the difference between success and failure.
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