Business entities in Romania in 2021
Thanks to its attractive tax system, EU membership and low-cost manpower, Romania is often considered for registration or relocation of light manufacturing businesses selling their products to European customers. Most of our Clients are consequently interested to register a limited liability company in one of the country’s industrial parks. Alternatively, other business entities can be used, such as the joint stock company or the branch. Please read the page below for further information available on the different types of business entities available in Romania, and their best uses.
The Romania limited liability company (SRL)
- Thanks to its ‘micro company tax regime’, Romania is an attractive low tax location for entrepreneurs looking to start a business in the European Union (EU).
- Companies with a turnover below €1 million benefit from a reduced corporation tax rate of i) only 1% when at least one full time employee is in Romania or ii) 3% if there is no employee in the country.
- Companies exceeding the turnover threshold of €1 million for a single year can still benefit from the above tax regime by maintaining i) a minimum paid up capital of US$10,715 and ii) two employees in Romania.
- Best uses for a Romanian limited liability company: a Romanian LLC is a good entity for most trading and manufacturing activities.
Read more about the Romania Limited Liability Company here.
The Romania joint stock company (SA)
- The Romanian joint stock company requires to have at least two shareholders and a minimum paid-up capital of €25,000. The Board of directors can have a single member, although it is customary to appoint at least three directors. Romanian JSCs also frequently appoint a Board of administrators, to ensure the interests of the shareholders are well served by the management of the business;
- Like for LLCs, an audit of the financial statements is required by law if the JSC i) has over 15 shareholders or a Board of administrators or ii) has exceeded at least two of the following three thresholds: a) annual turnover over 7.3 million b) assets over 3.6 million and c) more than 50 employees. If no audit is required, the entity is still required to appoint internal censors (corresponding to internal auditors);
- Best uses for a Romanian joint stock company: a Romanian JSC is the best business entity for projects involving higher amounts of investment or when the shareholders want to be freely able to transfer or sell their shares to third parties, without having to seek prior agreement from the other owners of the business.
The Romania free zone company (IDZ company)
- Foreigners can register their Romanian business in the industrial parks of Romania. The benefits of doing so include i) exemption from custom duties ii) corporate income tax holidays iii) easier access to transportation infrastructure, manufacturing space and iv) simplified procedures to obtain manufacturing and construction permits;
- Industrial park registration is only available to businesses running manufacturing and processing activities. The park authority will also require a business plan including financial projections, feasibility study and environmental impact study, and evidence the business will have the resources to cover its initial expenses;
- Best uses for a Romania free zone company: Romanian companies are usually conducting light manufacturing activities for products then re-exported to France, Germany, the UK, Italy and other Western European markets.
The Romanian branch of a foreign company (branch office)
- Foreign corporations can register a branch of their company in Romania. The same will require appointment of a resident representative, who can be a foreigner but then must hold a work permit if he is not citizen of one of the EU States. If needed, Healy Consultants can provide nominee services for professional passive resident representatives;
- Best use for a Romanian branch office: the main advantage of registering a Romanian branch compared to a subsidiary is the ability to prepare consolidated accounts. Otherwise, it is usually better to opt for registration of a subsidiary.
The Romanian representative office of a foreign company (liaison office)
- Registration of a representative in Romania will require appointment of a resident representative, who can be a non-EU citizen but then must hold a work permit. If needed, Healy Consultants can provide nominee services for passive resident representatives;
- The representative office will not be legally tax exempt in Romania. Such office is subject to a flat corporate income tax amount of €4,000 per year;
- Best use for a Romanian representative office: the Romanian representative office is a good option for a first venture in Romania, when our Client is not sure yet of his future expansion plans in this country.
Table of comparison between different entity types
|Operations and logistics||LLC||JSC||Free zone||Branch||RO|
|Locally known as||SRL||SA||IDZ company||Branch||RO|
|Doing business in Romania permitted?||Yes||Yes||Yes||Yes||No|
|Allowed to sign contracts with local Clients?||Yes||Yes||Yes||Yes||No|
|Allowed to invoice local Clients?||Yes||Yes||Yes||Yes||No|
|Can rent local office premises?||Yes||Yes||Yes||Yes||No|
|Allowed to import raw materials?||Yes||Yes||Yes||Yes||No|
|Allowed to export goods?||Yes||Yes||Yes||Yes||No|
|Accounting and tax|
|Corporate tax rate?||16%||16%||16%||16%||€4,000|
|Corporate bank account?||Alpha Bank||Bank Leumi||Unicredit||Alpha Bank||Bank Leumi|
|Statutory audit required?||No||No||No||No||No|
|Annual tax return to be submitted?||Yes||Yes||Yes||Yes||No|
|Access to DTAAs?||Yes||Yes||Yes||Yes||No|
|Issued capital required?||€50||€50||€50||None||None|
|Issued capital recommended?||€50||€25,000||€50,000||€50||€50|
|Resident director required?||No||No||No||No||No|
|Local shareholder required?||No||No||No||No||No|
|Minimum number of directors?||1||1||1||1||1|
|Minimum number of shareholders?||1||2||1||Parent entity||Parent entity|
|Individual shareholders allowed?||Yes||Yes||Yes||No||No|
|Corporate shareholders allowed?||Yes||Yes||Yes||Yes||Yes|
|Public register of shareholders and directors||Yes||Yes||Yes||Yes||Yes|
|Can the entity hire expatriate staff?||Yes||Yes||Yes||Yes||Yes|
|How long to get work permit approved?||3 months||3 months||3 months||3 months||3 months|
|Draft invoice||View invoice PDF||View invoice PDF||View invoice PDF||View invoice PDF||View invoice PDF|