This document provides an overview of key legal and tax considerations for doing business in Romania. It discusses the two most common types of companies - limited liability companies and share capital companies. It also addresses taxation including corporate income tax, VAT, customs duties, and withholding taxes. Additionally, it covers leasing commercial properties, franchising, labor laws, and human resources considerations such as employment agreements and dismissal procedures.

1. DOING BUSINESS IN ROMANIA
LAW, TAX, CUSTOMS

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RETAIL EVOLUTION
80.0
85.0
90.0
95.0
100.0
105.0
110.0
115.0
120.0
125.0
130.0
135.0
140.0
145.0
150.0
155.0
160.0
165.0
170.0
175.0
180.0
July 2015 August 2015 September
2015
October 2015 November
2015
December
2015
January 2016
Year 2010 = 100
•• pharmaceuticals ,
cosmetics and perfumery
•• textiles, clothing ,
footwear and leather
•• furniture, lighting
equipment, electrical
appliances , ironware and dye
•• other products sold in
specialized stores
source: National Institute
of Statistics

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Incorporating Romanian companies – basic facts
1. Two types of company are most frequently used: limited liability
company (SRL) and share capital company (SA).
2. Foreign companies may open representative offices and local branches
in Romania if the laws in the country of origin allows it and the
Romanian legislation is observed.
GENERAL LEGAL ASPECTS

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A. Limited liability company
• Most used company type;
• Minimum share capital – 200 RON; all shares must be fully paid;
• Minimum 1 shareholder, maximum 50;
• Incorporated usually in 5 to 7 working days from submission of the
complete file to the Trade Registry;
• Cannot issue bonds, cannot make IPO;
• Shares transfer may be difficult and time consuming;
• Recommended for small ventures or large businesses in early stages of
development.

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B. Share capital company
• Minimum share capital – 90.000 RON (25.000 Eur equivalent); can be paid
in tranches, minimum 30% as of incorporation;
• Minimum 2 shareholders, no maximum shareholders number;
• Incorporated usually in 5 to 7 working days from submission of the
complete file to the Trade Registry;
• May issue bonds, can go public;
• Shares transfer easier and faster;
• Must have 3 censors or, in some circumstances, financial auditor and
internal auditor.

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C. Local branches
• A foreign company may open local branches in Romania in the same
conditions as local companies;
• A branch is not a separate entity, doesn’t have its own patrimony and
cannot contract in its own name (but on behalf of the mother company);
• Before starting operations a branch must be registered with the local
Trade Registry;
• Although it is not a separate entity, it must get a Romanian sole
registration number (fiscal code) and maintain proper accounting books
under Romanian rules.

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Leasing offices and shops in Romania - several points to keep in
mind:
1. Leases usually on long term (especially shops located in commercial
centers) and difficult to cancel or amend during the term;
2. Many taxes, contributions and side expenses that may double the actual
rent;
3. High levels of penalty for late payment or leaving the premises before
lease expiry;
4. Extended liability burden placed on the lessee.

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Franchising in Romania at a glance:
1. Franchising agreement highly regulated by the law;
2. Intellectual and industrial property of the franchisor must be secured
and protected beforehand according to European/Romanian law;
3. The initial term should allow the franchisee to recover the investment
and make a decent profit;
4. Exclusivity and Non-compete clauses are allowed, but should reach a
reasonable balance between the legitimate interests of the parties.

9. Starting January 1st 2016, Law no. 227/2015 on the Fiscal Code (“the New
Fiscal Code”) has replaced the existing Fiscal Code, approved by Law no.
571/2003, having as main purpose to lighten the tax burden.
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GENERAL TAXATION ASPECTS

10. DIRECT TAXATION
TAX ON PROFIT – the current profit tax rate is 16%
As an exception from the general rule regarding the corporate income
tax mentioned above, microenterprises are taxed at 3% of their total
income or depending on the number of the employees at 1%-2% of their
total income.
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11. DIRECT TAXATION
SALARY TAX – the current tax rate is 16%
Minimum gross salary: Lei 1.050
Example:
Net salary of Lei 1.000
Total cost for Company: net salary X 1,72= Lei 1.720
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12. DIRECT TAXATION
Additional information:
 Interest expenses on foreign currency loans will be deductible up to a rate
of 4%, except the interest from financial institutions or similar;
 Tax relief for profit reinvested in equipment and IT equipment (including
software).
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13. DIRECT TAXATION
INTEREST, DIVIDENDS AND ROYALTIES
• Interest. The Romanian tax legislation provides that a 16% withholding tax
must be applied to the interest paid to a non-resident company,
depending by the double taxation avoidance treaties;
• Tax on dividends. Dividends are subject to a 5% withholding tax, or the
withholding tax according to the double taxation avoidance treaties;
• Tax on royalties. Withholding tax of 16% applied to the royalties paid to a
non-resident company, tax that might be reduced under a tax treaty.
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14. DIRECT TAXATION
LOCAL TAXES
Building tax - Building tax is payable by the owners of buildings located in
Romania.
Land tax - Generally, the tax is established as a fixed amount per square
meter.
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15. INDIRECT TAXATION
VALUE ADDED TAX (VAT): standard VAT rate in Romania is 20%
and is applied to all supplies of goods and services, including imports.
A reduced VAT rate of 9% is applied amongst other things to supply of
foods and non-alcoholic beverages, touristic services, while a reduced rate
of 5% is applied, amongst other things, to certain residential buildings.
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16. INDIRECT TAXATION
CUSTOM DUTIES
Given Romania’s status as an EU member, the Community customs
regulations, including primarily Community Customs Code, as well as the
EU Common Customs Tariff and all acts regulating EU trade policy
measures, are applicable.
Custom taxes, generally 0%, separate analysis is required depending on
the goods.
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17. ADDITIONAL OBLIGATIONS
TRANSFER PRICING
The Romanian legislation provides that transactions between related
parties be carried out at market value. In case transfer prices are not set at
arm’s length, the Romanian tax authorities have the right to adjust the
taxpayers’ revenues and expenses in order to reflect the market value.
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18. ADDITIONAL OBLIGATIONS
THIN CAPITALIZATION RULES
If the debt-to-equity ratio is higher than 3, loan-related cost (interest and,
possibly, foreign exchange loss) is non-deductible in the period.
Interest paid to third parties, such as banks, leasing companies and other
legal entities authorized for granting loans shall always remain deductible.
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19. ADDITIONAL OBLIGATIONS
WITHHOLDING TAX: general rate 16%, tax may be reduced based on
Double Taxation Treaties concluded by Romania
The tax is withheld by the payer of the revenue at the moment of the
payment and is transferred to the state budget.
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20. LEGAL ISSUES ABOUT HUMAN RESOURCES
• Labor Code contains the minimum provisions established for labor
relations between parties: employer - employee;
• As completion to the Labor Code, a large amount of other laws are
reglementing labor relations, such us:
− Occupational Health and Safety;
− Data protection;
− Health inssurance;
− Law regarding collective bargaining;
− Maternity protection;
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GENERAL HUMAN RESOURCES ASPECTS

21. LEGAL ISSUES ABOUT HUMAN RESOURCES
• Main issues to be kept in mind in order to avoid legal issues with
employees:
• Content of the labor agreement;
• Content of the job description;
• Internal Rules document;
• Clauses to the labor agreement;
• Evaluation procedure;
• Disciplinary procedure;
• Employees' acknowledgment of all the above mentioned.
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GENERAL HUMAN RESOURCES ASPECTS

22. LEGAL ISSUES ABOUT HUMAN RESOURCES
• Compensations to be paid after dismissals:
• According to the Labor Code valid at this moment there are no mandatory
payments in case of dismissal;
but
• In case the collective agreement at unit/branch level contains this kind of
provisions, than the compensatory payments in case of dismissal are
mandatory;
To be kept in mind that:
• For employers having at least 21 employees it is mandatory to proove that
the collective negotiation was innitiated;
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GENERAL HUMAN RESOURCES ASPECTS