Table of contents
In recent years, Romania has become a country that attracts more and more investors from all over the world. The growing popularity of Romania among foreign investors is due to several of reasons.
- Foremost, EU membership provides Romanian companies an opportunity to trade goods and offer services to any of the EU state members without additional costs or restrictions, opening up access to more than 500 million customers.
- Another advantage is the ease of registering a company. You can establish a company in Romania without personal presence while spending a minimum amount of time, funds, and human resources.
- The tax burden in Romania is one of the most favorable in Europe, especially for small businesses.
Types of companies in Romania
Romanian Company Law (no. 31/1990) stipulates several legal forms of business:
- Limited liability company (SRL)
- Joint stock company (SA)
- Limited partnership on shares (SCA)
- General partnership (SNC)
- European company (SE)
- Branches and subsidiaries of a foreign company.
The most common form of doing business in Romania is SRL. The liability of each SRL shareholder is limited to the size of the contributed share to the authorized capital and does not extend to his assets. There is no requirement for a company to have a share capital, although we advise forming a company with a minimum share capital of at least one RON for each shareholder.
Any person can be a shareholder in a Romanian company, including legal entities. There is no limitation on the citizenship or residency of the shareholders. The maximum number of SRL’s shareholders is 50. A Shareholders meeting is the governing body of the company. If the number of shareholders exceeds 15, the company should appoint censors to supervise the management of the company.
Every company is required to have at least one administrator at the time of incorporation. An administrator is obliged to implement the decision of the shareholder’s meetings. The administrator of a company may be a Romanian or a foreign citizen. The Company Law provides that it is prohibited for an administrator to manage two or more Romanian companies having the same object of activity or that are competitors without the prior consent of the shareholders.
Process of company formation in Romania
- Application to the Romanian Trade Registry for the reservation of the name of the company. The company must be registered within 90 days from the date the reservation is issued by the Trade Registry.
- Preparation and signature of the Constitutive Act (Memorandum and Articles of Association) and other required documents.
- Application to the Trade Registry for the registration of the company. Application documents can be signed outside of Romania and then legalized for use in Romania.
- Approving of the registration by Trade Registry. After approval, an announcement about company incorporation must be made in the Official Gazette of Romania.
- Signed Memorandum and Article of Association of the company.
- The reservation of the name of the company.
- Details of the registered address of the company.
- Declaration as to the identity of the ultimate beneficial owner of the company.
- Details of the capital – the amount of the capital and how it will be contributed, in cash or kind.
- A declaration made by the shareholders about awareness of the provisions of the Romanian Penal Code referring to the false declaration and about compliance with the provisions of Romanian Law.
- A declaration made by the administrator that the conditions required for their appointment have been fulfilled.
- The signature of the administrator.
- Declarations made by foreign administrators and shareholders that they do not have outstanding tax obligations to the Romanian authorities.
- Receipts proving the payment of the registration fees.
- A power of attorney in favor of the person or persons empowered to deal with the registration of the company.
The standard corporate income tax is 16%. For companies whose annual turnover does not exceed EUR 1,000,000 (micro-SLR), a turnover tax of 3% is applied instead of corporate tax. If micro-SLR has at least one employee, the turnover tax rate is 1%.
New tax rates will apply start January 1, 2023.
- The income threshold of a micro-SLR is reduced from EUR 1,000,000 to EUR 500,000.
- The 3% tax on turnover is eliminated and remains only the 1% tax on turnover. To trigger the 1% tax, the company must have at least 1 employee or the director must conclude a management agreement with the company for the monthly minimal gross wage (EUR 510).
The Dividend tax is currently set at 5% but will rise to 8% from January 1, 2023.
Depending on the number of dividends, a health insurance tax of at least 300 euros is also applied to shareholders. Health insurance tax does not apply if the shareholder proves that he has health insurance in the country of residence.
The Standard VAT rate is 19 %. For some kinds of goods and services, the reduced tax rate of 5 % or 9 % is applicable. Local VAT number is mandatory for companies, whose yearly turnover is more than 300,000 RON (approx. 60,000 euro).
After joining the EU in 2007, Romania is constantly engaged in improving corporate and tax legislation, which allowed the country to become one of the EU’s leading options for investors. A stable business environment, strategic location and healthy economy make Romania a very favorable market with great potential. Establishing a business in Romania is a great solution for both startups and international corporations with significant experience.