Taxation in the EU

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Taxation in Romania

Located on the western shores of the Black Sea, Romania is one of the largest countries in Eastern Europe by size and population. Bordered by Moldova and Ukraine to the north, Hungary and Serbia to the west, and Bulgaria to the south, Romania has long represented a gateway between the East and West. A developing country, Romania emerged from a period of political and financial turmoil in the late 20th century, introducing a series of reforms designed to simplify regulation and tax and attract international investment. In the 21st century, Romania’s economic recovery has continued: in 2019 it reached an estimated GDP of $244 billion with a growth rate of 4.1% – one of the fastest in the EU. Important industries in Romania include electronics, textiles, mining, timber, and food processing and it has also become a hub for mobile technology, information, and security hardware research. The agriculture industry is also historically important to Romania’s financial profile, employing around 26% of the country’s population and contributing around 4.3% of GDP. Romania is a member of the EU and NATO and was ranked 55 on the World Bank’s Ease Of Doing Business Survey 2019.

Why Invest in Romania?

There are plenty of reasons to regard Romania as an investment target, including:

  • Economic strength: Romania’s economic growth rate (around 5.2% in 2017) is outpacing many European competitors. Growth has been driven by industrial strength and forecasts predict the trend will continue.
  • Government reforms: To transform the economy, Romania’s government introduced a series of reforms in the early 21st century designed to boost business and attract investment. These reforms include a flat 16% corporate tax rate, 0% tax on reinvested income, and a minimal regulatory environment.
  • Market potential: Romania’s domestic market holds around 21 million potential consumers. These consumers form part of a young, sophisticated population – which hosts a growing middle class with a rising per capita income.
  • Skilled labour: Romania’s labour force is skilled and embodies a cultural dedication to hard work. Enrolment in education has been rising steadily in the 21st century at both the high school and university levels – where the most popular disciplines are business, administration, and law. Many Romanians speak multiple languages.
  • Strategic location: Romania’s location, at the crossroads of the East and West, offers numerous lucrative trade connections – including access to the EU’s free trade area and a market of around 500 million consumers. A modern, efficient transport infrastructure of road, rail, air, and sea links serves regional and international locations.

Foreign Direct Investment in Romania

Romania joined the European Union on 1 January 2007 and began the transition from communism in 1989 with a largely obsolete industrial base and a pattern of output unsuited to the country’s needs. The country emerged in 2000 from a punishing three-year recession thanks to strong demand in EU export markets.

Company Registrations and Incorporation of a Legal Entity in Romania

Both foreign individuals and legal entities can establish corporate presence in Romania. Companies need to have their own patrimony, registered capital, management, registered offices, assets, names and bank accounts. All companies must be registered with the National Trade Register Office, organized by the Romanian Chamber of Commerce and Industry. Companies should register with the Trade Registry at the Local level, at one of the 42 territorial offices, depending on the address chosen for the registering its office.

The National Trade Register Office is a public institution, which has the function to maintain statistical information on business activities in Romania. Thus, in Romania, it is required that a company specifies its main activity and is allocated a code number which relates to that particular activity, such as ‘Property Investment’, when using the formation of the company to buy land in Romania.

In Romania you can register a foreign entity for payroll purposes.

Documents and Information

To start incorporating a company in Romania the following are required

  • Company name which must be reserved at the Trade Registry;
  • The director/s full name, date of birth, PIN (personal identification number), address and nationality;
  • The shareholder/s full name, date of birth, PIN, address and nationality;
  • Company business objective;
  • A registered office;
  • Bank at which the share capital/operational capital account will be opened;

Business Banking in Romania

It is mandatory to have an in-country company bank account to make employee salary payments and third-party authority payments.

Banks are generally open Monday to Friday, from 09:00 to 17:00. Some banks are also open on Saturday from 09:30 to 12:30.

What Are the Working Days and Working Hours in Romania?

The Romanian working week is typically Monday to Friday.

The work week for full-time employees is generally limited to no more than five days (eight hours per day) and a maximum number of 40 hours per week, with 2 consecutive days of rest, usually Saturday and Sunday. According to law, the maximum legal length of working time may not exceed 48 hours per week, including the overtime.

Basic Facts about Romania

General Information

The territory, which became known as Romania, was founded in 1859, as a union of the two principalities of Moldavia and Wallachia. Ruled by a variety of successive European powers, the country eventually gained independence from the Ottoman Empire and began to be recognised by a variety of international political powers. With a rich cultural heritage and home to areas of natural beauty, Romania is a popular tourist destination: forests and rivers are scattered across the country while the spectacular Carpathian Mountains tower over its central region. Temperate and continental, Romania experiences warm, hot summers, and mild, cold winters. Its proximity to the Black Sea also plays a part in Romania’s international appeal as a tourist destination.

Full Name: Romania

Population: 19.53 million (World Bank, 2018)

Capital: Bucharest

Primary Language: Romanian

Monetary Unit: Romanian Leu (RON), divided into 100 bani

Main Exports: Electric machinery and equipment, textiles and footwear

GDP Growth: 1.30% (second quarter of 2019)

Internet Domain: .ro

International Dialing Code: +40

Taxation for legal entities

The standard VAT rate in Romania is 19%. The reduced tariff of 9.5% is applied to certain services and goods according to a special act. VAT refund is provided for companies with annual turnover of more than €50,000 or applying to the tax authorities of Romania providing proofs of future profitable transactions with partners.

Income Tax

The tax rate in the Romanian territory is 19% and is paid one time during the year. Insurance companies, investment and pnsion funds benefit from a special rate of 0% in case they follow certain conditions. Income tax in Romania is progressive with a minimum size of 16%. Preparation and submission of a balance sheet is carried out annually until the end of March.

Turnover of funds

There are no requirements for compulsory monthly or annual turnover of enterprise funds and the established amount of income in current Romanian legislation “On the Employment of Foreigners” and “On Foriegn Citizens”. Company’s work should be carried out with full compliance of labor registration and the conditions of conducting business in Romania with regular payments of taxes and salaries.

Not sure where to start?

Acquire Romanian Residency

Those who register a company in Romania with over EUR50,000 in capitalization, make EUR10,000 in monthly revenue, or provide full-time employment to European employees are entitled to European residency and a work permit.

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