Planning on starting a business in Romania?

Many entrepreneurs from foreigner countries are interested in Europe as a business environment. In this article, we highlight Romania's pros and bring out the reasons making this country stand out.

How to set up a company in Romania? 

Starting a Romanian company does not guarantee the success of your business idea. Everyone has business ideas, business plans and the potential to be profitable. The difference between those who are successful and those who are not is the fact that the latter do not apply their ideas or if they apply them, they tend to give up at first failure.

On the other hand, it is good to know that when a company gives you more headaches: documents, accounting, authorizations, controls, reports.

In order to make a business in Romania legal, you should have a registered company. The legally registered company gives you the opportunity to obtain financing (especially concerning European funds), to take bank credits, to hire people, to conclude business partnerships, to simpler collaborate with suppliers and customers.

Company formation in Romania implies multiple mandatory procedures. Benefiting from professional assistance during every stage of this process guarantees final positive results and, most important, financial security. It generally lasts a few days up to two weeks.

How to register a business? 

In order to open a company in Romania, it is necessary to register it with the National Trade Register Office, an institution which operates under the Chamber of Commerce and Industry. This body, the National Trade Register Office, is set up as a public institution that gathers data on all companies that are been registered at a national level. The Romanian government has launched a start-up visa for entrepreneurs from other countries who want to do business in Romania. They no longer need to fulfill certain capital or employment requirements to obtain a residence permit. If the business idea is approved by the panel of experts, it is a basis to apply for a temporary residence permit.

What is a tax identification number (TIN) ?

A tax identification number (TIN) is a numerical code usually used for the purpose of declaring any tax obligations to the Romanian tax authorities (ANAF). Most EU Member States use tax identification numbers to manage taxpayer obligations. A Romanian tax identification number is assigned to persons having Romanian citizenship as of their birth. This is represented by the CNP (the Personal Numerical Code) that is registered in the birth certificate. For Romanian citizens, the CNP also has the role of the tax identification number, and it is not necessary for them to be assigned any other numerical code for fiscal purposes.

When is a Romanian tax identification number (TIN) required?

A tax identification number is required to be obtained by individuals (natural persons) who are usually in one of the following situations:

  • non-resident citizens (whether they are nationals of an EU member state, or from outside the EU territory) who have the obligation to obtain a TIN;
  • foreign citizens who derive income from Romania, and who are subject to taxation on the territory of Romania;
  • foreign citizens who buy or sell a property located in Romania and have not been assigned a personal numeric code by obtaining a Romanian residence permit.

What information is required to get a VAT number in Romania?

EU-based businesses should provide the following documentation, in addition to the appropriate forms, when registering for VAT:

  • VAT certificate (notarized copy) to prove the business is registered for VAT elsewhere in the EU, if appropriate.
  • Articles of Association.
  • An extract (original or notarized copy) from the company’s national trade register.
  • Documentation demonstrating that the business will carry out taxable transactions in Romania e.g. sales or orders and agreements.

Non EU-based businesses require the following additional documentation:

  • Statement of commencement of activity
  • Power of attorney given to Romanian fiscal representative acting for the business
  • Acknowledgement from the Romanian fiscal representative that they will act as fiscal representative for the business and be jointly liable for VAT.
  • Articles of association
  • Copy of an extract from the company’s national trade register
  • Copy of the VAT registration (or other fiscal registration) certificate
  • Estimated annual turnover from taxable transactions in Romania
  • Documents proving the company’s liability for VAT in Romania e.g. purchase/sales orders and agreements.

All additional documentation must be submitted together with an authorized Romanian translation.

We would like to point out several reasons what makes Romania so attractive in the eyes of foreigner entrepreneurs.

MARKET

  • Considerable foreign investments due to the sales market, the economic potential and the specialized workforce.
  • Romania is a member of the EU and NATO, this increases CREDIBILITY in the European business environment.
  • Strategic geographical position for IMPORT / EXPORT.
  • Opening to the Black Sea and access to the Middle East and Asia.

REDUCED TAX

  • Income tax is applied to micro enterprises that have a turnover of up to 1,000,000 euros / year.
  • 1% of the income of your company if you have at least one employee or if the company is a START UP.
  • 3% of the income of your company if you do not have any employees
  • The tax on profit applies to companies that have an annual turnover of over 1,000,000 euros.
  • 16% applied to the profit of the company, paid to the Quarterly State Budget
  • concluded agreements with many countries on avoiding double taxation;
  • a country with relatively inexpensive labor, low price level and no exchange controls

 ADVANTAGEOUS VAT

  • Deduction of VAT in the case of purchases of taxable goods or services.
  • VAT exemption for the purchase of goods and services.
  • VAT recovery when purchases from suppliers (VAT payers) are greater than deliveries to customers to whom VAT is applied.
  • Collaboration with the U.E. collaboration with suppliers and attracting intra-Community customers.

INCOME TAX

  • 5% if the value of the gross dividends owed to a shareholder exceeds 12 gross minimum wages (12 * 1,900 lei = 22,800 lei).
  • 5% (tax on dividends) + 10% (health contribution) out of the amount of 22,800 lei (12 gross wages / year).
  • paid to the State Budget (annual or proportional).

The Romanian business climate provides a platform for reaching broad business objectives that might include penetrating new markets, globalizing company operations, or establishing new supply-chain partnerships.

Romania has a young, well trained and educated workforce (english is widely spoken), abundant natural resources, geographical advantages and one of the largest markets in CEE. It is closer than China and India. Many opportunities are available. It’s currently more affordable to invest in Romania than elsewhere in the EU, but with the prospect of rising prosperity due to EU funding, there is a good chance that the value of the investment will grow in the future.

Positive results are already starting to show. Bucharest, the capital city and the surrounding metropolitan area already surpasses metropolitan areas like Madrid, Berlin or Budapest, with a GDP per capita of 131% of the European average.

Romania has 9 key areas to choose from when investing: Bucharest (the Capital), Constanța, Galați, Iași, Cluj-Napoca, Timișoara, Brașov, Craiova.

Romania has many sectors you could invest in successfully: infrastructure (transportation and energy), industry, agriculture and fishery, education and environment are just a few examples.

Here are 5 good reasons why you should consider investing in Romania:

FDI - Foreign Direct Investment

As more companies from around the world choose to do business in Romania, the FDI in the country increases and the risks of investing decrease.

European Union Funding

Romania is the beneficiary of structural funds from the EU. Here lays the highest EU allocation per capita to a new EU member. Much of this funding is invested in developing the country’s infrastructure and in creating jobs, investments that will make the country’s economy even stronger.

Tourist Arrivals

Romania is developing into one of the most popular tourism destinations among the European countries. As a result, the tourism industry is increasingly becoming one of the most important sectors of the country’s economy.

Taxation Rates

One of the factors that companies consider before investing in a foreign country is the rate of income and corporation tax they will have to pay. Romania’s 16% flat rate of taxation, which was introduced in 2005, makes Romania one of the most attractive countries for investors.

Land price

In Romania you can buy land at low prices (3 to 7 times lower than the rest of EU).

In conclusion, Romania is a convenient and inexpensive jurisdiction to register a company in and to do business with good development prospects.

If you need more information about how to start a company in this country, feel free to contact our team!