The process of company formation in Romania calls for multiple mandatory procedures that can further determine the overall practicality of the business itself. All legal steps imposed by 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 during for company formation in Romania, 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 formation in Romania, offered by our law firm and experts.
Company Formation Romania Package
This 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:
• Limited Liability Company (SRL)
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. Greater 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.
- minimum registered capital: currently 200.00 lei (about 60 EURO);
- the maximum number of shareholders, natural or legal persons, in such a company is 50;
- an SRL is managed by one or more administrators (directors) who may have full or limited power and whose nationality may be Romanian or foreign.
• Joint-stock Company (SA)
The number of joint-stock companies (SA) is growing 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.
- 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 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 lawyers in Romania 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 can be a sole associate in a single 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.
Question: What are the taxation principles 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.
Our lawyers in Romania can provide complete details on the taxes that apply to companies and also to individuals, should you be interested in this additional information.
Question: What are 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.
The agents at our law firm in Romania specialize in all of the steps needed for company formation 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