Company registration in Romania

Registering a business in Romania is a profitable solution for many reasons. This article provides general recommendations on how to register a company in Romania and the basic requirements that foreign entrepreneurs need to know.

What are the jurisdiction's advantages for business development?

• Romania is located in the heart of Europe, is a member of the European Union and has access to the EU single market, which facilitates free trade with other eurozone countries.
• Romania's favourable trade position is due to its geostrategic location at the crossroads of major markets such as the European Union, CIS countries and the Middle East.
• The country has a stable political and economic situation, as well as a relatively developed legal system. This creates a favourable business and investment climate.
• A large reserve of qualified labour and a developed scientific and innovation base contribute to the development of technological and research projects.
• Romania has a developed transport infrastructure, including an extensive network of roads, railways, and seaports. This infrastructure facilitates and speeds up the movement of goods, while providing access to various regions of Europe. In addition, a network of 100 industrial parks has been created to provide investors with a wide choice of business sites.
• Start-up and operating expenses for a business in Romania are relatively low compared to other European countries, promoting economic efficiency and increased competitiveness.
• The Romanian government actively promotes entrepreneurship and investment through various infrastructure and business development programs through which entrepreneurs, among other things, gain access to advisory services and financial support.
• Due to the increasing number of global companies choosing to operate in Romania, the influx of foreign direct investment into the country is increasing, and investment risks are decreasing.
• Romania offers one of the lowest corporate tax rates in Europe at just 16%, as well as a VAT rate of 19%.
• In addition, Romania respects the rights of foreign investors in accordance with standard practice.

All these advantages create an attractive environment for foreign direct investment in Romania.

Romania offers a variety of company structures to suit different business needs. 

When starting a business in Romania, prepare the following info

1. Application for registration.
2. Memorandum and Articles of Association.
3. Documents appointing a company's CEO.
4. The founders or directors passports that show their domicile or registration address.
5. Confirmation of the company's address in Romania.
6. Documents confirming the authorised capital.

Ready-made company in Romania

Buying a ready-made company in Romania is suitable for you if you do not want to go through the business registration procedure. A ready-made company is an already created legal entity that has no previous economic activity. In this way, you acquire a company that is already registered in Romania and can start operating immediately after the re-registration of the ownership rights to the new owner.

See the general plan for buying an existing company in Romania.

1. Using a local business broker or relevant online marketplaces, research available offers that meet your needs and business objectives.
2. Engage lawyers and financial experts to conduct due diligence: check the company's financial position, outstanding debts, legal compliance and any other relevant information.
3. Negotiate the deal: Negotiate the terms of the purchase, including the purchase price, related obligations and transfer of ownership.
4. Draw up a sale and purchase agreement or contract outlining the terms of the sale. It should include details of the business, its assets, liabilities and any warranties or representations made by the seller. Use a local lawyer or law firm with experience in Romanian company law.
5. Both parties must visit a notary in Romania to sign the sale and purchase agreement and other necessary documents.
6. Update the company's ownership details in the Commercial Register once the purchase is complete. This can be done in person or by appointing a representative.
7. Open a bank account for the company and register for VAT.

Once you have purchased the company, you can start trading, hire employees and carry out your planned activities.

Investor Visa in Romania for residency and business

An investor visa in Romania offers foreign investors an opportunity to reside and work in the country in exchange for investments in businesses or economic activities. Here's a glimpse into the process of obtaining an investor visa in Romania.

Criteria for permanent residence in Romania

Investors must meet specific criteria to obtain a permanent residence permit in Romania, which include:

• the investment should be at least €1,000,000,
• investors need to create a certain number of jobs for local citizens,
• visa programs often require investments in vital sectors like tourism, manufacturing, and services.

 Securing such a visa in Romania gives you the privilege of accessing the EU market. 

Taxation

The following basic tax rates apply to companies:

1. Income tax 
   • The standard rate is 16%.
   • Benefits: vary by company size, location, and type of activity.
2. Value added tax
   • The standard rate is 19%.
   • Reduced rates: 9% or 5% may apply to basic food items, medicines, or books.
3. Property tax
   • The rate varies depending on location and property value.
4. Income tax for individuals
   • Fixed rate of 10% of personal income.
5. Social contributions
   • Social contributions of employers to employees.
   • Rates vary.
6. Tax for micro-enterprises (meeting certain criteria)
   • Special tax regime with income tax rate at 1%.
7. The regime applies to companies
   • with an annual income not exceeding 500,000 euros (equivalent in Romanian lei);
   • not in the process of dissolution with subsequent liquidation;
   • 80% of the firm's total income must come from non-consulting or management activities (excluding tax advice).

Meeting specific tax exemption or reduction criteria, particularly under the micro-enterprise tax regime in Romania, can have a significant impact on the overall tax liability of a business.

Challenges facing foreign entrepreneurs 

Here are some typical challenges that foreign entrepreneurs and investors may face:

1.  The most common reasons for denying an investment visa in Romania are: 

• Failure to meet the official investment requirements.
• Submission of an incomplete or inaccurate visa application.
• Providing misleading or false information, such as misrepresenting the source of funds, investment amount or personal details.
• Applicants with a criminal record or history of serious offences may be refused a visa.
• Insufficient financial resources to support themselves and their dependants while in Romania.
• A poorly prepared or unrealistic business plan.
• Failure to comply with the rules and regulations of the investor visa programme, such as failure to maintain the required investment.
• Overstaying or breaching a previous visa.

2. When purchasing an existing business in Romania, potential difficulties may include:

• Hidden debts or liabilities associated with the shell company for which you may be liable. It's crucial to assess the financial position of the company with the help of third-party experts.
• Contracts or agreements within the shell company that may not be in line with your business plans, requiring review and possible renegotiation or termination.
• Ensuring that the acquired company is in good standing with the tax authorities and complies with tax obligations, as any outstanding tax liabilities or non-compliance issues may become your responsibility.
• The time-consuming process of transferring ownership and updating the company's trade registry records, which involves multiple administrative steps.
• Possible changes to the company name, branding, and trademarks to reflect your business style, incurring additional costs and time.
• Reviewing employment contracts, benefits, and compliance with labour laws if the company has employees, which may require adjustments or changes.

3. The initiation of a new enterprise in Romania may pose the subsequent obstacles:

• Navigating complex and time-consuming bureaucratic procedures for business registration, including interactions with various government agencies and securing necessary permits and authorisations.
• Language barriers for non-Romanian speakers when communicating with government agencies, service providers or potential partners.
• Financial requirements for opening a business, including registration fees, notary fees and administrative costs.
• Possible restrictions on foreign ownership or the need for authorisation in certain business sectors. Thorough research is essential to ensure that your activities are not subject to such restrictions.
• Access to finance and credit may be more difficult for foreign entrepreneurs, as local banks may have special requirements for foreign-owned businesses.
• Protecting intellectual property rights in Romania, including understanding the requirements for registering trademarks and patents.

Seeking professional assistance, including legal and financial advice, is highly recommended to address these challenges. Reach out to the specialists at IQ Decision UK thorough research and preparation are key to successfully establishing a business in Romania as a foreign entrepreneur.