Advantages of Romania as a jurisdiction
Since joining the European Union in January 2007, Romania has gone through a series of governmental reforms to meet the conditions for the EU membership. Current membership requirements, including the EU directives, are one of the driving forces behind Romania's reform program, modernization and infrastructure investment program. More importantly, these directives are accompanied by the EU funding in the form of structural adjustment funds and other programs that allow new Member States to align their economies with the rest of the countries.
Romania is a market with excellent potential, strategic location and an increasingly robust business climate. Doing business, investing and working in Romania is gradually becoming less challenging than in previous years.The World Bank first identified Romania as a high-income country based on 2019 data (with per capita income of $ 12,630).
Over the past two decades, Romania's GDP per capita has increased from 28% compared to developed countries to 58.6% in 2020.
An increase of 30 percentage points means that in the period 2000 - 2020. the country ranks 5th in the world, ahead of most of the world's economies.
In addition, based on IMF forecasts, Romania will also be one of the fastest recovering countries from COVID in Europe.
Read about company formation in Turkey
Romanian taxation system
Corporate income tax
The standard corporate tax rate for legal entities entities is 16% for Romanian and foreign companies operating through a permanent establishment in Romania.
Micro-companies are subject to a reduced corporate tax.
A prerequisite for a company to be considered as a “micro-company” is a maximum annual income of € 1 million.
Income tax rates in Romania for micro-companies:
- 1% - with one or more employees;
- 3% - no employees.
Newly established companies must comply with the micro-company tax regime from the first fiscal year.
Important!
Amendments to Romanian legislation will come into force from 2023. The 3% turnover tax will be eliminated, and there will be two taxation options for micro-companies:
1% from turnover and 16% from profit.
That is, from 2023, only 1% of the turnover remains, provided that:
1) the turnover of the company does not exceed 500,000 EUR; and
2) at least 1 employee is employed.
If at least one condition is not met, then a notification is submitted to the tax office and an obligation arises to pay 16% of the company's income.
VAT in Romania
According to the Romanian law, prior to starting any economic activity, a Romanian company whose business activity is located in Romania or has its center of activity outside Romania, but has a permanent establishment in Romania, must obtain a VAT number.
In simple words, registration as a VAT payer is compulsory and Romania's standard rate is 19%.
The reduced rate of 9% applies to water, food and beverage, medical treatment and housing.
An additional reduced rate of 5% applies to the supply of social housing, school textbooks, hotel accommodation, restaurants and catering, newspapers, magazines, entrance tickets to castles, museums, sporting events, cinemas, etc.
The standard fiscal VAT period is a calendar month.
For VAT payers whose turnover at the end of the year is below 100,000 EUR, the financial period is the calendar quarter.
Types of companies in Romania available for incorporation
You can incorporate a company in Romania in the form of a limited liability company (LLC), a joint stock company and a branch (these are the most popular forms of legal entities).
Joint Stock Companies (Societate pe actiuni | S.A.)
JSC’s are the most sophisticated types of Romanian companies. They require a minimum of two shareholders, who can be both legal entities and an individuals. Shareholders are only liable to the extent of their contributions to the share capital. The minimum authorized capital is 90,000 ROL (approximately 25,000 EUR). The share capital paid upon registration by each shareholder cannot be less than 30% of the subscribed share capital. JSC shares are freely transferable and can be traded on organized markets.
Limited Liability Companies (Societate cu raspundere limitata | S.R.L.)
LLC is the most commonly used type of company in Romania and can be incorporated with a minimum of one member and a maximum of 50 members. Participants are liable for the company's obligations only up to the amount of their contribution.
The minimum share capital requirement for an LLC was canceled in December 2020 and is no longer required for registration purposes. Prior to this change, the minimum authorized capital for the registration of an LLC was 200 ROL (approximately 45 EUR).
Branch
A branch is a subdivision of a foreign parent organization that is not financially independent. It can only carry out those activities that are permitted and available to the parent foreign organization. No capital or shareholders are required to open a branch in Romania. The parent company is responsible for its subsidiary.
S.R.L. company advantages in Romania
The most commonly used type of company in Romania is an S.R.L. based on the brief description of the most popular legal forms above.
Features of the Romanian S.R.L. company:
- Limited liability of shareholders;
- No share capital requirements;
- The structure of the company is simple and easy to work with;
- Small businesses with an income of up to 500 000 EUR per year can be taxed at a rate of 1%;
- A prestigious European jurisdiction;
- Romania is not blacklisted anywhere in the world as an offshore zone;
- Company formation in Romania is quick and easy;
- You can open a bank account with a local bank in Romania;
- Fast and affordable creation of substance in the country of incorporation;
- Large network of international agreements for the avoidance of double taxation between Romania and other countries.
What documents do you need to form a company in Romania?
In order to establish a one-man company in Romania, you need a standard set of documents and information:
- Passport or other identification document of the founder;
- Registration or confirmation of the address of residence of the participant;
- Individual tax number;
- Information regarding business activity;
- A few name options of the future company.
If the founder plans to register a company in Romania remotely, then the following documents will also be required (the documents are drawn up in the country of residence of the founder):
- Power of attorney in the name of our representative in Romania;
- Application;
- Signature sample;
- Declaration.
We will provide drafts (samples) of all documents and help collecting a complete package of necessary documents.
Manager (director) of a Romanian company
A company in Romania can be established and managed by one person (one-man company). A member of the board and a Manager (director) can be the same person. There are no residency requirements to such persons.
The founder can appoint himself as the manager (director) of the company and pay himself the minimum wage (510 EUR, including tax). In this case, a company in Romania may qualify for a reduced income tax rate of 1% (since the company will have an official employee with a salary).
A personal visit of the manager to Romania is mandatory.
Authorized capital
Despite the fact that the minimum share capital requirement for Romanian companies was canceled in 2020, we still recommend declaring at least 50 EUR as the authorized share capital. We recommend declaring at least some share capital because banks are often suspicious when opening accounts to companies with no or minimum authorized share capital. The amount of share capital should be deposited to the company's bank account in Romania.
As an option, we can register a company first, declare the authorized share capital and pay it only upon opening a bank account.
Accounting and submission of reports for Romanian companies
A company in Romania must obtain a VAT number. The VAT reporting period depends not only on the company's turnover, but also on its activities, therefore we will be able to give more accurate information when we know the company's activities and turnover.
We assist our clients with:
- accounting – submission of reports to the government authorities by an accountant who holds a power of attorney;
- secretarial support – support in communicating with the bank, collection and processing of primary documentation and document management.
Timeline for establishing a Romanian company
The amount of time required to register a company in Romania depends on how fast we collect all the documents from the client. When the full package of documents is delivered to Romania, the incorporation will take up to 4 business days.
An important note! The manager must come in person to Romania for at least a weekin order to pass identification procedures at the bank and issue a power of attorney to the accountant who will handle filing of the company's reports.
Opening bank account in Romania
Having a bank account in a Romanian bank allows its holder make financial transactions not only in Romania, but also worldwide, including the European Union. This significantly expands the range of opportunities for business development from a local scale to international.
Romaina has both multi-profile financial institutions serving various business segments and specialized banks serving companies whose activities are related to a specific industry. The quality of service in Romanian banks grows each year. Analysts predict that in the nearest future the quality of service of local financial institutions will match the quality level of the world's leading banks.
Banks in Romania provide depositing services, opening private and corporate accounts with a high level of protection. Bank clients can monitor their account remotely and wire tranactionsthrough a fully functional mobile application. The Romanian government has passed laws greatly simplifying the procedure for opening a bank account, both for residents and non-residents of Romania.
Choosing a bank in Romania
When choosing a bank in Romania you should consider several points:
- Business goals (whether you want to set up a startup, invest in innovation, receive grants from the government);
- The bank's approach towards entrepreneurs (some banks in Romania have special packages designed for startups or aspiring entrepreneurs);
- Banking services (many banks offer the same services, but there are significant differences between small and large banks);
- Bank charges and fees.
Top 5 banks in Romania
Romania has 37 commercial banks, which, in turn, have about 6,500 branches throughout the country.
Some of the best banks in Romania in our opinion are listed below.
Banca Comerciala Romana (BCR)
Banca Comerciala Romana (BCR), founded in 1990, is the largest Romanian bank in terms of assets. BCR offers retail, treasury and capital markets, and corporate and investment banking services.
BRD - Group Societe Generale
BRD - Group Societe Generale started operations in Romania in 1990 after purchasing assets and liabilities of the former Banca de Investitii. BRD oversees 870 branches and serves 2.2 million customers across three business segments: retail land, investment banking and large corporations.
BRD is the largest bank in Romania in terms of the number of branches. The bank has headquarters in Bucharest and is a member of the French Societe Generale.
Banca Transilvania
Founded in 1994, Banca Transilvania operates in three main segments: retail, small and medium-sized businesses and the corporate sector, with a focus on healthcare, agriculture and European funds. The company has over 10,000 employees and serves over two million customers.
UniCredit Bank
UniCredit Bank was founded in Romania in 1991 as Banca Comerciala Ion Tiriac SA (Banca Tiriac). It is one of the several banks in Romania that provide a wide range of products and services for individuals and private clients, small and medium-sized enterprises, as well as large Romanian and multinational corporations.
CEC Bank
CEC Bank dates back to 1881, making it the oldest bank in Romania. The bank specializes in providing finance to agriculture, government and economic development projects throughout the country.
Raiffeisen Bank, Banca Romaneasca, Alpha Bank Romania and OTP Bank are also alternatives.
We will help you choosing the most suitable bank based on the activities of the future company and your wishes.
What documents are required to open a corporate account in a Romanian bank
The set of required documents for bank account opening in Romania varies from one bank to another.
As a rule, when opening a bank account for a company, the following documents should be presented to the bank:
- Copies of passports / identity cards of all managers (directors) and shareholders;
- Articles of Association of the company;
- A copy of the certificate of incorporation issued by the Romanian Trade Register;
- Extract from the commercial register (not older than 7 days) and samples of signatures.
In the event that another legal entity is a shareholder of a Romanian company, banks usually require a shareholders decision to establish a Romanian company.
Procedure of forming a company in Romania and opening a bank account
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You select 3-4 name options of the company and provide information about its structure and business activities (full information about how and what types of activities the company will be engaged in Romania). After the company’s name is confirmed by the register, we make a reservation of a particular name and receive a certificate.
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You provide us with copies and / or originals of documents (depending on the type of document). We arrange translation of documents at the notary’s office. Further, we prepare a set of documents for incorporating a company in Romania.
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Declaring the authorized share capital, signing a contract for the legal address and drawing up the Articles of Association of the company.
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Upon receiving the certificate of incorporation, we submit the documents for obtaining the tax number and activate any governmental and social services. If the company does international trade, export and import, we also obtain an international customs number.
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After the registration process is completed, we prepare the documents for opening a bank account. We receive the tax number for the manager (director).
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Personal visit to Romania (you will be assisted in person) to open a bank account and powers to the accountant to submit reports.
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All set! We hand over the ocuments of the company and seal to you.
Why TAXTERS?
All simple - we care for each client regardless of where you are from and where you wish to set up a company.
In each case, we can advise you on the most sutable jurisdiction if Romania is not the best option for your specific needs.
