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How to Set up a Subsidiary in Romania

How to Set up a Subsidiary in Romania --> Updated on Wednesday 30th September 2020

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The subsidiary is a corporation that is owned by another foreign company, called the holding or the parent company. this is one of the manners in which an overseas corporation can conveniently conduct their business in Romania, the other one being a branch. These two forms of organization have important differences, as highlighted by our team of attorneys in Romania
 
In essence, the subsidiary has legal personality and it is regarded as a Romanian entity while the branch is not seen as separate from the foreign company and the legal entity abroad will be liable for the branch’s actions.
 
According to the Law No.31/1990, a Romanian subsidiary of a foreign company has a Romanian legal personality and, consequently, it is subject to Romanian laws. It is liable, on its own behalf, for the actions taken. The Romanian subsidiary has its own patrimony and bank account.
 
In order to open a subsidiary, investors will need to follow the procedure for company formation in Romania. Our lawyers in Romania can take care of the entire company fomartion procedure and can help you open any type of company, including micro companies.
 

How is the subsidiary treated in Romania?

 
The subsidiary is treated as an independent legal entity from the foreign or parent company. It is a locally registered company, as chosen by the founders (most often a private limited liability company) that is partially controlled by the holding company (because of the fact that the foreign company owns shares in its Romanian subsidiary).
 
It does not need to have the same name as the parent company and it does not need to engage in the exact business activities (it can include more business activities in its secondary activities as per the NACE code list, for example). Moreover, the subsidiary will prepare its separate accounts, as per the Romanian accounting and auditing regulations. One of our lawyers in Romania can provide complete details on these requirements. They can also assist you in the VAT registration procedure in Romania.
 

What are the requirements for opening a Romanian subsidiary? 

 
The subsidiary is registered with the National Trade Register Office in the area in which the business will activate. The steps are the following:
 
  • - Company name: this needs to include the name of the foreign company together with the name of the location where it is incorporated;
  • - Application forms: these are the form for registration with the Trade Register and an annex for fiscal registration;
  • - Constitutive documents: the foreign company’s Articles of Association and Memorandum, notarized copies.
  • - Power of attorney: for the subsidiary representative as well as copies of the representative’s identification documents.
  • - Decision to incorporate: the foreign branch’s decision to incorporate the subsidiary in Romania and the decision to appoint the representative.
  • - Others: included here are different statements, accounting records and others that may be required; our attorneys in Romania can provide a complete list.
 

What is the difference between the subsidiary and the branch?

 
The main difference between the branch and the subsidiary lies in liability. The foreign company is liable for the debts and obligations of the branch while it is not liable for those of the subsidiary, as the subsidiary acts in its own name, as any other resident company. The branch is a non-resident company in Romania. 
 
Another difference is in terms of taxation: the branch is only taxed on its Romanian-sourced income while the subsidiary is taxed on its overall income.
 
The branch and the subsidiary can be suitable for foreign corporations that will expand to Romania according to the business field in which they operate. For example, banks can expand using a branch. 
 
If you need further details on the most important differences, please reach out to the experts at our law firm in Romania.
 

How can I open a subsidiary of my company in Romania? I sell IT devices in Europe already

 
In practice, in order to open subsidiary Romania, you have to follow the same steps as those described for the registration of a company, i.e. notarizing the statutes and registering the subsidiary with the National Trade Register Office.
 
The formation of a subsidiary must conform to requirements under the Romanian Company Law. You should also know that in order to incorporate Romanian subsidiary, you must comply with the minimum capital requirements under the Romanian Company Law no.31/1990.
 
A company that sells IT devices will generally be exempt from obtaining special permits and licenses, other than those that may be required to import certain products. One of our Romanian lawyers can give you complete details about the conditions that apply in this business field. Our team can also provide investors with extensive information about the current incentives available to companies, according to sector.
 
The subsidiary, as one of the ways in which a foreign company can expend to Romania, is the suitable choice for those foreign entrepreneurs who are concerned with liability. By setting up an independent corporate structure in the country, investors can partially control the activities and management of the subsidiary through share ownership, without the disadvantage of being liable for their branch’s actions in the country. 
 
Moreover, the provisions of the EU Parent-Subsidiary Directive are applicable in their situation, meaning that the profits distributed by the Romanian subsidiary will be exempt from tax, should the foreign company own at least 10% of its Romanian subsidiary. One of our lawyers in Romania can provide in-depth details about these conditions. 
 
According to the National Trade Register Office, the statistics for new company registrations were the following:
 
  • - 1,164 new private limited liability companies in Bucharest in January 2019;
  • - 743 companies registered in the country in the same period in the information and telecommunications sector and 2,852 companies in the wholesale trade sector during the same period.
  • - 7,674 total number of new companies in Bucharest in May 2019, with 6,439 being private limited liability companies.
  • - at the end of January 2019, there were 221,768 companies in the country that had foreign subscribed capital; most of the foreign investors were from the Netherlands, Austria, and Germany. 
 
Foreign investors can always reach out to our Romanian law firm for complete details about subsidiaries and foreign direct investments in the country.

 

Please do not let any legal matters stand in the way of opening or expanding your business. Our Romanian lawyers are here to help and make the incorporation process of a subsidiary in Romania hassle-free. Call us now for free consultation!

 

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