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Differences between Branches and Subsidiaries in Romania

Updated on Thursday 31st July 2014

Question: What can I do if I want to extend my business in Romania?

Answer:  A foreign company has several options if being interested to organize its operations on the Romanian territory. The most important aspects regard the maneuverability that the mother company can exercise over the newly established enterprise.
Before going into details we would like to emphasize the importance of understanding of all legal terms describing this process and also the mandatory presence of a qualified lawyer able to assist you during this entire process. There are certain alternatives that might play an extremely significant role for the future of your business and becoming aware of all these options proves essential while examining all possibilities that you have on the Romanian market.
Probably the crucial difference between these two concepts refers to having legal personality, and therefore managing to build strategies more or less connected to mother companies.
Branches do not have a legal personality and they become highly dependent on the entity which created them.  As an instrument for establishing the legal terms in this matter, the Law no. 105/1992 on the Regulation of the Private International Law Relationship dictates all responsibilities of a branch indicating that the governance must conform to national law under which the parent company was established. From an economic point of view, the branch is dependent on the mother company. Consequently, the branch does not possess an individual share capital while assets and liabilities are under the authority of the mother company.

Subsidiary - independent and autonomous entity

The subsidiary has legal personality and it is a separate entity with individual prerogatives as compared to the mother company. It represents a corporation which functions under Romanian law and it has its own share capital. The parent company may conduct activities which can be different from those carried out by the subsidiary. Being an independent and autonomous company the subsidiary may conclude contracts and it is fully responsible for this. The parent company has the right to decide on three important features related to subsidiaries. It decides the setting up, the business activity and the termination moment. Creating a subsidiary actually translates into following the main steps which are common for company creation procedures.  There are specific requirements to be fulfilled and also a minimum share capital imposed. The parent company must submit a set of papers including a certificate of good standing, its article of association, a document mentioning the designated administrator of the subsidiary and also proofs indicating the registered office.

Question: I would like to open a subsidiary or a branch in Romania. What taxes do I need to pay?

Answer: Our specialized team of best lawyers in Bucharest is pleased to inform you about the taxation aspects involved when opening a subsidiary and a branch.

Before starting and operating the business itself, the branch must be registered with the Trade Registry in the county where it will be conducting its activities. For the subsidiaries the registration process with the Trade Registry is followed by the registration with the Public Finances General Directorate since it is subject to Romanian tax law. Various aspects may be taken into account based on the double taxation conventions involving Romania as a signatory state. There are also some in-depth analyses which should be made in order to identify best strategies sustaining your basic financial interests. Cooperating with a legal expert helps in determining very important features related to future approaches. It plays a fundamental role in discerning what is to be considered an avoidable risk and what can be defined as a necessary action; it builds a clear perspective on how to identify profitable niches able to guarantee full success.
The process of registering a company with the Trade Registry in Romania can be delayed if the person handling the issue is not an expert in legal matters. We want to help you avoid all the hassle when it comes to starting or expanding you business. Our law firm has a specialized team of lawyers in Bucharest that can help you open a branch or a subsidiary in Romania. Please contact us now for a free case consultation!

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