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Starting a Business in Romania

Establishing a Subsidiary Business in Romania: A Comprehensive Guide

Romania is one of the high-income countries in the world with a prosperous economy, making it ideal to set up a subsidiary business in Romania. The country is ranked 12th among the nations of the European Union in terms of a flourishing economy. Romania has contributed significantly to strengthening several vital institutions of the European Union.

Romania has a GDP of $299.885 billion and is ranked 46th in nominal GDP. The industry and the services sector contribute 27.78% and 58.2%, respectively, to the country’s GDP. It is a popular destination for foreign direct investment.

Romania is a hub for mobile technology, hardware, and information security industries. Therefore, if you want to start a subsidiary business in these fields, there is no better country than Romania. 

Rich countries like Bulgaria, Serbia, etc., surround Romania providing easy access to the market and customer base. Hence, when you incorporate a foreign subsidiary in Romania, you can also increase the span of your business to these countries. 

Discover the best ways to establish a subsidiary business in Romania.

What are the Types of Subsidiaries in Romania?

There are different types of legal subsidiary businesses in Romania. Let’s understand these types in detail.

Limited liability company

  • A limited liability company is also known as Societate cu Raspundere Limitata or SRL in Romania.
  • You must have a capital of RON 200 and a shareholder to incorporate a limited liability company. 
  • The liabilities of the shareholders who come together to form a limited liability company are limited to their capital participation. 
  • The minimum value of the shares issued by a limited liability company in Romania should be RON 10.
  • There can be more than one director in an SRL who can be both Romanians and foreign nationals.

Joint stock company

  • A joint stock company is one of Romania’s most popular forms of subsidiary business. It is known as Societate pe Actiuni in Romania. 
  • This type of company is only suitable for business owners who intend to get their company listed on a local stock exchange. 
  • These companies are known for their complex structures and are usually incorporated to attract investments. 
  • They must have two shareholders and a minimum capital of RON 90,000 to incorporate a joint stock company in Romania. 
  • Forming a General Assembly of Stockholders is essential as they take important decisions like dissolution, name change, issue of new shares, etc. 
  • Depending on the company’s structure, these companies can have a sole administrator or a board of directors.

Collective name Company

  • A collective name company is unique to Romania, and it is known as Societatea in Nume Colectiv in local terminology. 
  • At least two shareholders must come together to incorporate this company. However, the shares of a collective name company are not transferable. 
  • The law does not mandate a minimum share capital. Hence, the shareholders can decide on their share capital. 
  • The shareholders of a collective name company are unauthorized to become a member of any unlimited liability companies in the same line of business.
  • The owners are liable for any obligations that the company has.

Sleeping partnership company

  • While a sleeping partnership company is uncommon in Romania, a few companies get into commercial activities via this form of business. 
  • You need at least two partners to incorporate a sleeping partnership. These partners will be personally liable for any obligations and liabilities of the company. 
  • There are no restrictions on the minimum number of shareholders. However, there must be a shareholder who can be held liable for the company’s debts. 
  • The company can onboard shareholders with limited liability but are willing to contribute to the growth of the business.

Partnership limited by shares

  • This is another type of partnership firm that is found in Romania. It is known as Societatea in Comandita pe Actiuni. 
  • While several overlaps exist between a sleeping partnership and a partnership limited by shares, a limited partnership company can raise its capital by floating its shares.
  • These companies have a mix of limited and unlimited partners. The partners with unlimited liability are known as ‘comanditati’, and the limited partners are called ‘comanditari’. 
  • You must bring in the minimum share capital of RON 90,000 to incorporate this subsidiary business in Romania.

How to Set Up a Subsidiary in Romania?

You must complete a few mandatory steps to establish a subsidiary business in Romania, which are as follows:

Step 1: Select the company type

  • You must select the type of company you want to set up in Romania. Limited liability companies are the most common subsidiary business in Romania. However, you can also consider other options based on the structure and the company’s requirements.

Step 2: Select a company name

  • Once you decide on the company type, you must choose a name for your company. 
  • You need to contact the local Trade Registry of the city where you plan to set up your business.
  • You can check for available names by submitting a paper file to the Trade Registry office. Alternatively, you can visit https://portal.onrc.ro to look for names. 
  • Ensure that your company name is unique and suggestive of your business activities. You should avoid choosing names that are generic or already taken by other companies.

Step 3: Create an incorporation file

  • As soon as you get a name for your company, you must start preparing an incorporation file. 
  • You must attach all the documents the Trade Registry prescribes to your incorporation file. 
  • You can submit the file at the Registry Office or by logging in to https://portal.onrc.ro
  • The incorporation file must contain the company bylaws and the parent company’s documents. You must also add a declaration of the founders of the company.

Step 4: Onboard an accountant

  • It is mandatory to onboard an accountant responsible for managing all your company records. 
  • You must hire an accountant even before you start incorporating the company. The accountant will also be instrumental in completing all the taxation registration. 

Step 5: Collect the Financial Number and the Incorporation Certificate

  • Once your company is incorporated, you must collect the financial number. This number will be used while paying taxes.
  • You must also collect the certificate of incorporation from the trade registry before commencing with the business activities.

Benefits of Setting Up a Romania Subsidiary

There are different benefits to setting up a subsidiary business in Romania, which as listed below:

  • Romania ranks 55th out of 192 countries in the ease of doing business index. Hence, setting up a subsidiary business in Romania is free of hassle. 
  • The entire incorporation process takes only a couple of days. Hence, you can avail the benefits of a faster registration process. 
  • A single foreign shareholder can start a subsidiary business in Romania, as the regulations governing foreign investments are quite flexible. 
  • Romania provides an affordable business climate and a well-educated workforce. Businesses can make use of this advantage to create a strong market presence.

Documents to Prepare When Opening a Subsidiary in Romania

Before you incorporate a subsidiary business in Romania, you must collect a few important documents that will go into your incorporation file. The list includes:

  • Name availability form 
  • Registration application form
  • Annex for fiscal registration form
  • Standard declaration form declaring the names and addresses of the registered offices
  • Proof of name availability
  • A document stating that the owners have the right to use the declared space as their office
  • Identification documents of the founders and the shareholders
  • Articles of association
  • Memorandum of association
  • Passports of the foreign directors of the company
  • Extracts published by the Trade Registry for the incorporated-legal entities that serve as the shareholders.

What Business Forms Can Romania Subsidiaries Take?

Romania is a high-income economy that supports different kinds of subsidiary businesses in the country. Therefore, a subsidiary business in Romania can take numerous forms. You can incorporate a part or a wholly-owned subsidiary in Romania based on the company structure you want to follow.

A Societate cu Raspundere Limitata or SRL is the most found company type in Romania, and incorporating them is also relatively easy. The best thing about these companies is that the owner’s liability is limited to their capital contributions. Hence, the company can operate as a separate legal entity. Moreover, you can choose a subsidiary type based on the nature of the business activities and your budget. 

Romania Subsidiary Laws

You must follow all local labor laws and rules issued by the government for your subsidiary business to be legally operating in Romania. Integrating these laws into your system is essential so that you adhere to a system that the Romanian Government has decided. These subsidiary laws also seek to safeguard employees’ rights within your business.

You must have the certificate of incorporation and the registration certificate of the parent company. In addition, open a Romanian bank account to ensure all business transactions are processed smoothly.

Post-Incorporation Compliance

Once the company is successfully registered, you must adhere to a few compliances for a foreign subsidiary in Romania. 

  • Companies need to hold an annual general meeting once a year. You must maintain the minutes of the meeting for regulatory purposes.
  • If you incorporate a joint stock company, you must organize a board meeting every three months. 
  • The deadline to file tax returns is the 25th of the month, which follows the quarter for which the earnings tax liability is calculated.
  • You must submit the annual profit tax return by the 25th of March of the following year for which the profit tax is calculated.
  • It is essential to file the VAT returns after the fiscal year ends. The activity must be completed by the 25th of the month that follows the fiscal year.

Taxes on Subsidiaries in Romania

A subsidiary business in Romania is treated as any regular company operating there. Hence, the same corporate tax rate applies to the country’s subsidiaries. Currently, the corporate tax rate in Romania is 16%. The subsidiary businesses must pay taxes on their worldwide income.

All the Romanian legal entities are subject to the same tax rate, except the taxpayers are subject to micro-enterprises tax. These taxes apply to companies with a turnover of less than €1,000,000. The companies need to pay a VAT of 19%.

Tax Incentives for Businesses Setting up a Subsidiary in Romania

Romania has double taxation treaties with different countries. Hence, subsidiaries can save some tax money when they operate in Romania. The country provides several investment incentives to foreign companies establishing a subsidiary business in Romania.

Starting from 2023, all businesses that meet specific requirements and generate revenues below the threshold of EUR 500,000 computed at the NBR exchange rate in effect on the last day of the fiscal year are required to participate in the microenterprise regime. Under this regime, the tax rate is 1%.

Under certain legal requirements, a business that develops computer programs for trading purposes may benefit from tax exemption for its personnel who engage in such activities.

Other Important Considerations

It takes time to establish a Romanian subsidiary. It would be advisable to take a few weeks off to concentrate on expanding your business and meeting all legal obligations. You can delegate the task to another business executive or work together if your parent company keeps you occupied.

You must also stick to a budget to complete each phase of creating a Romanian subsidiary company. Before beginning a foreign subsidiary in Romania, create a budget to help you maintain control.

How Can Multiplier’s Employer of Record Help You Hire and Expand in Romania?

You require guidance to comply with all applicable labor laws and municipal ordinances if you want to establish a subsidiary business in Romania. For assistance in overcoming this growth barrier, use a service partner like Multiplier. Multiplier will handle all the formalities in entering a new market, so you don’t need to worry. Our knowledgeable staff will assist you in establishing a subsidiary company in Romania that is conversant with local and international rules. We ensure that Romania’s labor laws and conventions are carefully adhered to. With a PEO like Multiplier, you can quickly establish teams internationally and take advantage of new market prospects.

Frequently Asked Questions

No, a company in Romania can be incorporated without the presence of the promoter of the company.

The corporate tax for micro-companies without any employees stands at 3%.

A limited liability company in Romania can have a maximum of 50 shareholders.

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