The process of company formation in Romania
calls for multiple mandatory procedures that can further determine the overall practicality of the business itself. The steps that are required as per these compulsory procedures relate to clear regulations indicated by the Romanian legal system. Benefiting from professional assistance during every stage of the company creation mechanism guarantees final positive results and, most important, financial security. Our team of Romanian lawyers
gradually introduces clients to more or less intricate legal terms and constantly provides professional advice adapted to each possible case.
Our robust commitment to excellence enabled us to identify and develop strong strategies always oriented towards our client’s best interests. We can deliver optimal solutions designed to anticipate and deflect from a potentially unfavorable course of action.
Question: My partner from France and I are willing to form a company in Romania and would like some legal assistance. Does your firm offer any packages, depending on the client's need to start a company formation in Romania?
Answer: In order to set up a Romanian company, individuals must be equitably informed regarding possible risks and valuable alternatives that might sustain any backup strategy. We provide complete assistance and consulting for company incorporation, starting with choosing the suitable type of legal entity. When working with our team, each client is provided with all the required documents illustrating the process. We list below all of the services included in the package for company incorporation in this country, offered by our law firm and experts.
Company Formation Romania Package
Working with a team of experts who specialize in company formation in Romania is recommended to all foreign investors, given the need to submit forms in Romanian and handle a number of specific matters with the local authorities. Our team is accustomed to working with foreign entrepreneurs from the EU/EEA region as well as from other countries around the world. We tailor our services according to the business field in which the company will activate and we provide ongoing assistance, both in the pre-registration phase and the post-registration period as needed.
Our company formation package includes the following:
• Reservation of the company's name;
• Drafting of the Articles of Association (by-laws) and statements (affidavits) of the shareholders and directors;
• Submitting the share capital to a chosen bank;
• Filling the necessary application and submitting it to the Local Trade Register in the presence of the deputy judge;
• Undertaking the Certificate of Incorporation and the VAT number
• Our law firm can provide you with a registered office or you can opt for the virtual office alternative;
• Following the company formation process in Romania, our attorneys will take all the necessary steps with Romanian authorities in order to obtain the mandatory legal documents or authorizations.
•Bank account introduction for the opening of an account with internet banking and debit card.
This is a complete package that will suit the needs of most businesses and entrepreneurs. However, those who require different or additional services will be able to work together with our team to find suitable solutions that will meet their needs according to the chosen business field in which they wish to invest. Our packages are designed to fit the needs of foreign investors who open a company in Romania. Nevertheless, our team does not use a “one size fits all” approach and packages are tailored to the needs of the clients, from France or other countries.
Question: Romania is interesting to me from a business point of view and I want to start a company here. Can you advise on the types of companies that can be opened here?
Answer: We would like to inform you that there are 2 most common types of companies that can be opened in Romania, and we list them below:
This is the most popular vehicle for carrying out business activities in Romania, for both local and foreign investors. Main reasons demonstrating this fact relate to:
a. Low administrative requirements;
b. A higher level of flexibility compared to other types of companies;
c. Low initial capital requirements;
d. It can be incorporated by a single investor.
e. The founder has limited liability, he is only liable to the extent of the invested capital.
- it is subject to a low registered capital: this value is currently 200.00 lei (approximately 60 EURO);
- the maximum number of shareholders, natural or legal persons, in such a company is 50;
- this type of company is managed by one or more administrators (or directors) who possess full or limited power and who can be Romanian or foreign nationals.
More joint-stock companies are being incorporated in Romania. These types of legal entities are suited to the needs of larger companies and the fact that they can offer their shares publicly makes it easier to gather capital. The founders also benefit from limited liability, thus creditors cannot claim the assets of the founders, only those of the corporation. Our lawyers are specialized in company formation in Romania and can help set up a joint stock company or any other type of company you choose for your new business.
- minimum registered capital: currently 25,000 EUR;
- there is no limit for the number of associates, however, such a company should have at least 2 shareholders;
- when an SA is established, at least 30% of the subscribed share capital, or 100% in respect of contributions in kind, must be immediately contributed upon the formation of the company and all subscribed share capital must be fully paid within 12 months since all steps for company formation in Romania were completed.
Question: What are the issues that require special consideration regarding these two business forms?
The SRL is the most spread business form, however, there are certain limitations to this type of company and they concern the business fields in which it can activate: it cannot engage in banking activities or insurance activities as well as several other services related to the financial sector. One of our Romanian lawyers can give you more details about the legal requirements and limitations for this business form. Other issues to consider are the fact that the company does not have continuity in the event of the death of the sole associate and that an individual cannot act as sole associate in more than one limited liability company.
The SA does continue in the event of the associate’s death, however, investors should know that this business form is subject to more complex incorporation procedures and the accounting, reporting and auditing requirements can also differ, especially for those companies that are publicly traded.
Other business forms can be set up in Romania. Two examples include the sole trader and the LLC-D (debutant limited liability company). Those investors who wish to engage in a sole business can actually to do so in the form of an authorized physical person or a sole trader. These are the simplest business forms with no legal identity and they are the ones that carry the highest degree of liability for the investor. In summary, the following traits apply to the sole trader and the authorized physical person:
- they are set up in only two to three days and they can be dissolved just as fast;
- they are subject to simple accounting and investors can choose to observe the requirements themselves (an accountant is not necessarily mandatory);
- these business forms are subject to a simpler taxation regime and no taxes apply when the owner withdraws profits; one of our the experts at our Romanian law firm can provide you with more details;
- there is a requirement to have a qualification in the business field in which the sole trader/authorized physical person will activate;
- the sole trader can use more NACE codes.
The tax registration is identical for these two simple business forms. Our team can provide you with more details as needed.
The LLC-D or the limited liability company for debutants is a business form that is designed to encourage first-time entrepreneurs in Romania. It has an important advantage because of the fact that the employer is not subject to social security payments. However, in other aspects the LLC-D has certain limitation such as the fact that is can have no more than 5 shareholders and it can only have 5 NACE codes. Also, certain activities such as financial and insurance related ones are prohibited for this simpler business form. A very important issue to note is that a LLC-D needs to be converted into a LLC after 3 years.
Foreign investors who are interested in company formation in Romania can also set up a branch. This business form engages in the same activities as the parent company abroad and the foreign corporation is liable for its debts and obligations in Romania.
Other business forms are the general partnership or the limited partnership (the SNC or the SCS).
Please feel free to reach out to our attorneys in Romania for complete details about any of these types of companies.
Taxation principles described by our lawyers in Romania
Resident companies in Romania, those that are incorporated as per the company law in force and are fully managed from the country, are taxed on their worldwide income. Non-resident companies are only taxed on the income they derive from the country. The effective management place of the company is thus relevant for taxation purposes and, according to law, the definition also applies to headquarters (belonging to companies located here but incorporated under the EU rules; this may include the European cooperative).
In general, all of the income derived by the company is subject to tax, except for dividends in some cases.
An important reason why company formation in Romania is attractive is the low taxation regime. The standard rate is 16% and micro companies are taxed at an even lower rate of 3% or 1% when they meet certain conditions (the lowest rate applies when the company satisfies the conditions for a micro company and also has at least one employee). One of the tax experts at our law firm in Romania can provide more detailed information about how investors can benefit from these very low corporate tax rates.
Other taxes for companies, apart from the corporate tax, include the following:
- Real property tax: rates set by the councils in the area where the building is located; the rate for a building owned by a company can range from 0.08% to 0.2%.
- Social security: the employer pays the contribution of 2.25% of the total gross salary per employee; pension contributions may also be required and these have varying rates.
- Withholding tax: a 16% tax in interest and royalties and a 5% withholding tax on dividends paid to a non-resident company; the latter may be subject to exemptions.
- Others: sector-specific taxes may apply and certain environmental taxes can also be applicable to some companies.
There is no stamp duty or capital duty and no transfer tax.
There are several fiscal incentives of interest, among which 0% profit tax on profit reinvested in new technological equipment used for business, 0% income tax for software developers and for employees in the R&D sector as well as an accelerated depreciation of R&D equipment.
Our lawyers are experts in company formation in Romania and can provide complete details on the taxes that apply to companies and also to individuals, should you be interested in this additional information.
The accounting and reporting requirements for companies in Romania
Another issue that may be of interest to investors who choose to open a company in Romania
is the accounting reporting requirement applicable to their business form. As previously mentioned, the two most commonly used business forms are the private and the public limited companies and these are subject to certain reporting and accounting requirements.
The tax year in Romania is generally the same as the calendar year, however, companies can choose to have is match the financial accounting one. Companies are required to file separate returns, as consolidated ones are not allowed.
Quarterly income tax reporting is applicable and a final computation taxes place at the end of the year when the declarations submitted to the authorities and the tax payment is made. This final payment is to be made by the 25th of the third month after the end of the tax year, in most cases the 25th of March (for those companies that have the tax year match the calendar one).
Advance payments are possible and some companies may opt for this. In this case, they will make quarterly payments (for example, for equal payments based on the income generated by the company in the previous year and adjusted for inflation).
Foreign entities that carry out activities in Romania through multiple permanent establishments can designate one of these establishments to follow through with the corporate tax requirements (this allows them to prepare a single set of returns).
Companies that fail to comply with the ongoing regulations for tax reporting and payment face penalties in the form of interest rates of 0.02% per each day of the delay. Additional penalties apply for underreported returns or for those that have been found to have errors.
Foreign investors are advised to work with a firm that specializes in offering these types of services because of the fact that the tax laws are subject to changes and in some cases, the reporting requirements can change from one year to the other. We recommend getting in touch with our tax lawyers in Romania for detailed information about the latest legislative changes regarding the tax law. In case you are seeking for an experienced team of litigation lawyers, we can recommend our partners at Avocati.co.
Additional information about company formation in Romania
Once they choose the most suitable business form, investors are required to select an available company name and then proceed to execute the company’s constitutive documents, after which they need to register the company with the Trade Register. It is advisable to select more than one company name because the name registrations take place at a national level and the first option for the company name may already be in use. Preliminary name checks can be performed, and one of our attorneys in Romania can provide more details.
An important issue that need to be handled during the early stages of company formation is choosing the NACE codes, the codes that are used for the classification of economic activities and will represent the areas in which the business will activate. A company in Romania can choose a code for its primary activity and any number of codes for its secondary activities. Our Romanian lawyers advise investors to choose as many second codes as possible (as related to the business activity) as they can foresee. This is recommended because, in the event in which the business owners will wish to add additional codes as the business expands and may broaden its activities, the modifications will require some time and they will need to be notified and submitted to the Trade Register. This will include preparing the needed documents and paying the required fees. In the event in which this becomes mandatory, one of our lawyers can assist business owners.
Another issue to take into consideration is the registered office of the company. This address needs to be included in the company’s Articles of Association and it will be the address used for formal correspondence. The effective operational office can be located at a different address if this is the case. Purchasing or renting a property are two viable options when starting a business and our lawyers can also advise foreign investors during this phase or they can provide consulting as needed for renting or purchasing a property. Another possibility is to use virtual office services, which may be advantageous especially for small businesses or startups as the company will benefit from a complete package, with most of the advantages of a traditional office but with reduced costs.
Investors who are interested in the number of companies incorporated in the country can read a set of statistics below:
- 7,674: total number of companies incorporated in Bucharest between 01.01.2019 and 31.05.2019
- 6,439: the number of SRL companies incorporated in Bucharest in 2019, during the aforementioned period.
- 10: the number of SA companies incorporated in the capital city in 2019, according to the same period.
Reasons to invest in Romania
Not only does the country allow full foreign ownership and investors are treated in the same way as national entrepreneurs, Romania is also a strategic location to base a company and an evolving and dynamic market that allows for different types of opportunities. A rich and beautiful country, Romania is worth considering by foreign investors who intend to set up a regional business hub or those who intend to open a local company in one of the key investment sectors such as the Information and Communication Technology Sector.
A strategic location: Romania has a geographically strategic placement in Europe, allowing investors to easily access both the Central European states and enter the Middle East market with great ease;
Transport links: 1/3 of the Danube River is located on Romanian territory; moreover, the Constanta Port is an important Black Sea port;
Richness: the country has an abundance of natural resources, among which natural gas, petroleum, coal, gold, as well as significant portions of arable agricultural land;
Talented workforce: not only is Romania one of the countries in Europe with a low cost for doing business, it is also a country that provides a pool of talented workers in many different fields (programmers, doctors and scientists are just some examples); what’s more, the employees are bilingual and English is widely spoken in the country.
Notable key investment sectors include the ones briefly presented below
IT&C: technology is one of the most important business sectors in Romania and one that offers ample opportunities for development and for foreign direct investment. Te highly qualified employees available in this field are an important advantage; moreover, there are attractive tax exemptions for employees in the IT&C and R&D sector and our attorneys in Romania can give you more details. The top cities to open a company in this field are Bucharest, Cluj-Napoca and Timisoara.
The automotive industry is another important pillar, with Romania being an important car and car parts manufacturer in the CEE. Two major automotive manufacturing plants are in place in Craiova and Mioveni.
Other important business sectors include agriculture, the bio-industry field and the creative industries.
All business sectors benefit from the excellent internet infrastructure in the country and the fact that Romania has one of the top connection speeds in Europe. Network providers focus on maintaining this important advantage and work on reinforcing the infrastructure throughout the country, at the same time providing various services and support systems to individual and corporate clients.
More than 80 industrial parks are spread throughout the country, both private and public, and they offer good conditions for the IT&C industry or the aerospace industry. Some of the facilities include access to utilities as well as other benefits, according to the park’s profile. The majority of the parks are located in the south of the country (24 of them). Three parks are located in the Capital Region, in the Bucharest-Ilfov area. Our lawyers in Romania can provide you with more details about the conditions to open a company in one of the industrial parks, the benefits and other additional information.
Five Free Zones are in place in the country (Curtici-Arad, Braila, Galati, Giurgiu and Sulina) offering quick access to neighboring markets of interest as well as a special tax regime that allows the goods that transit these areas to be free of import duties, VAT and other charges. Investors can open logistics companies in these zones as well as other types of businesses and benefit from the advantages that are offered here.
The agents at our law firm in Romania specialize in all of the steps needed for company formation in Romania and are able to assist foreign investors who are interested in starting a business here. We can provide complete details on the required process upon receipt of more information about the type of business that you wish to open and the business field in which it will activate.
Our law firm located in Bucharest offers additional services, apart from the company formation Romania package. These facilities are intended for both local and foreign companies:
- Ready-Made companies.
- Registered office in Bucharest, Romania;
- Virtual office in Bucharest, Romania;
- Accounting services.
Our law firm provides solid background for all clients interested to set up a Romanian company; the business team in this law firm delivers solutions indicating all necessary details referring to the process of incorporation. Please contact one of our lawyers in Bucharest to give you a free consultation regarding your company formation inquiries