Registration of a Romanian Company – Company Setup in Romania
Senior Business Consultant
Romania has long been an attractive jurisdiction for doing business due to its membership in the European Union and is now increasingly used as an alternative to such expensive European countries as Switzerland, Germany, Austria and others as it has a high reputation and provides an opportunity to open a bank account in the country of incorporation. Romania also offers the best environment for small businesses in terms of taxation, which gives the country maximum advantages and makes it the most optimal jurisdiction for start-ups.
The most common and frequently used form of doing business in Romania is a limited liability company, SRL (“societate cu raspundere limitata”).
- Attractive conditions for small businesses with annual revenue of up to EUR 500,000 (this applies with effect from 1 January 2023, the previous annual threshold was EUR 1,000,000);
- Positive image of a European jurisdiction;
- Not on any offshore blacklists;
- Quick company registration;
- Local bank account can be opened;
- Quick and affordable creation of substance in the country of registration;
- 1% corporate tax (for maximum 3 companies with annual revenue of up to EUR 500,000 and at least 1 full-time employee who can be the same person as the director of the company (if some conditions are met));
- Large network of double tax treaties.
- The affairs of a limited liability company in Romania are managed by the administrator (acting as the director). The administrators can be physical persons or even legal entities (but a physical person which is representing that legal entity is required to be named as the director; and the more complicated procedure is required for appointment of a legal entity as the administrator). The minimum number of administrators is 1. The same individual can be both the administrator and the member. There are no statutory requirements as to the residency. However, if the administrator (director) wants also to be legally employed in Romania to meet the microenterprise requirements, not being a shareholder is a condition; and the administrator must apply for a long term stay visa “for other purposes” (commercial management of a company).
- The minimum number of shareholders / associates in a company is 1. They can be individuals or legal entities and there are no statutory requirements as to their residency. The maximum number of members is 50. In July 2020, Romania adopted amendments to its corporate law, abolishing the restrictions imposed by Article 14 of the Companies Law. These restrictions prohibited an individual or a legal entity from becoming the sole shareholder of more than one limited liability company registered under the laws of Romania, and prohibited a limited liability company from having another limited liability company consisting of one person as its sole shareholder. From 1 January 2023, shareholders can own more than 25% of shares in a maximum of 3 (three) different companies.
- Unlike most European jurisdictions, Romania does not require companies to have a secretary.
- The recommended minimum share capital is RON 200 (approximately EUR 50) divided into shares of minimum RON 10 each.
A new limited liability company is registered within 2 weeks.
A Romanian company incorporation procedure includes the following steps:
STEP 1 – NAME AVAILABILITY CHECK
We request 2 – 3 names to be checked with the Registry in order of priority. The name must meet the following requirements:
- must not be identical or similar to the name of an existing company, the name must be checked in the register for its availability, which takes 2 – 3 business days;
- can be in any language using Latin letters;
- the use of geographical names and the word “Romania” is restricted and requires special approval;
- must have an ending that denotes the type of company (“SRL”).
STEP 2 – COMPLIANCE PROCEDURE
The Prevention and Suppression of Money Laundering and Terrorist Financing Law requires corporate service providers to identify the beneficial owners of the company, the source of their funds and the nature of activities for which they will use the company. However frightening it may sound, this compliance check is quite simple and requires a client to supply the above information in free form, as well as provide proof of identity and of residential address for all the individuals in the company’s structure. Also, for each company, the beneficial owner fills in and signs a client information form, to be kept solely in our files.
STEP 3 – INVOICE PAYMENT
STEP 4 – PREPARING A PACKAGE OF DOCUMENTS FOR COMPANY INCORPORATION
DOCUMENTS NEEDED for company incorporation:
- confirmation of company name reservation at the Trade Register;
- notarized proof of identity of the administrator / member (passport, national identity card);
- notarized proof of address of the administrator / member (address card or gas / electricity bill or credit / debit card bank statement, not older than 3 months);
- notarized financial declaration that the administrator / member has no public debt in Romania regarding the Romanian authorities;
- Articles of Association (“Act Constitutiv”) signed by all associates (members / shareholders);
- proof of the right to use the company’s registered address and having an office for the company to conduct business (lease / sublease agreement and land register extract not older than 30 days).
If the administrator / member is not a resident of Romania, they can sign the documents remotely, have the originals notarized and send them to Romania. Translation of documents into the Romanian language is done in Romania by an authorized translator (and certified by a public notary).
If the administrator / member is ready to travel to Romania for the company registration, all documents will be executed at a local notary. This will save the cost of translating some of the documents into Romanian and certifying these translations.
The documents can also be signed using an electronic signature.
STEP 5 – FILING the documents with the trade register
Documents can be filed with the Trade Register in two ways:
- in original, i.e. physically;
- in electronic form through the Trade Register online portal.
Within 3 business days of the filing, the Trade Register conducts a first initial checking, which results either in the registration of the company or a request for additional documents, indicating the deadline for their submission. After receiving the additional documents, the register conducts a second initial checking, as a result of which the company is either registered or a refusal to register is issued with an explanation of reasons. In such case, only a new filing can be made, with fee to be paid a second time.
STEP 6 – FORMING AND DELIVERING TO THE CLIENT A SET OF CONSTITUTIVE DOCUMENTS
In Romania, the documents issued by the Trade Register upon the registration of a company are:
- Certificate of Incorporation (“Certificat de Inregistrare”);
- Resolution of the Trade Register approving the registration of the company (“Rezolutia de admitere a dosarului”);
- Certificate (“Certificat constatatare”) confirming the company’s details where it is specified which activities the company has enabled from the CAEN list codes;
- Articles of Association (“Act Constitutiv”) signed by the members during the registration of the company – it is verified by the Register.
Depending on the form in which the documents are initially filed with the register, they are issued either in original or in electronic form. According to Ordinance No. 38/2020, documents issued by the Trade Register in electronic form and containing the electronic signature of a judge of the Trade Register have the legal effect of originals.
A seal is not required under Romanian law.
PUBLICITY OF REGISTERS
In Romania, as in most European jurisdictions, the details of administrators and members are filed with the Trade Register and thus are available to third parties and are public. On 18 July 2019, Romania adopted a law introducing a unified centralized register of beneficial owners, thereby fulfilling the requirements of the European Union to bring domestic legislation in line with the 4th and 5th Anti-Money Laundering Directives. Access to the beneficial ownership information was available not only to tax and judicial authorities, individuals and entities that carry out due diligence in relation to money laundering or terrorist financing but also to anyone interested. Now due to the decision of the European Court of Justice (CJUE) stated that general public access to information on beneficial ownership constitutes a serious interference with the rights guaranteed in Articles 7 and 8 of the Charter of Fundamental Rights of the European Union, all EU members work under some restrictions to the access to the beneficial ownership information (most likely, for individuals the access to such an information will be restricted with proof of the legitimate interest).
FURTHER MAINTENANCE OF THE COMPANY
Each company should be renewed on an annual basis (starting from the second year) before the date of each anniversary of its incorporation. The renewal includes the provision of a registered address / making of an office lease agreement for a new period.
In Romania, there is no requirement to file Annual Return to the Register.
CORPORATE INCOME TAX
The standard rate of corporate income tax is 16%.
PREFERENTIAL TAX REGIME FOR MICRO-ENTERPRISES
Romania offers the EU’s most attractive tax regime for small businesses. A company is deemed a micro-enterprise if its revenue in the previous years does not exceed EUR 500,000 (this threshold applies with effect from 1 January 2023). In this case, the corporate income tax rate will be 1%, if:
- the company has at least 1 full-time employee; even multiple part-time employees are allowed if put together the full-time norm is met;
- the shareholder is not owning over 25% of share equity capital in more than 3 other microenterprises;
- the company does not receive income from consulting and management activities of over 20% from its turnover (exception: tax / fiscal consulting activities are allowed).
In all other cases the company automatically switches to Romania’s standard taxation regime, with a corporate income tax rate of 16%.
From 1 January 2023, tax on dividends will increase from 5% to 8%. When distributing dividends to an EU company, the company is exempt from tax on dividends provided it has held at least 10% participation for at least 1 year.
When making payments under “artificial arrangements” to bank accounts in countries that are not parties to the automatic exchange of information mechanism (CRS), withholding tax on dividends can be increased to 50%.
Tax on interest and royalties is 16%. A company is exempt from tax if interest and royalties are paid to an EU company with participation of at least 25% and the holding period of at least 2 years.
A Romanian company is subject to mandatory VAT registration. The current VAT rate is 19%. Depending on the turnover and profit of the company, VAT returns must be filed:
- Monthly, if the annual turnover exceeds EUR 100,000 or if the goods are purchased within the EU;
- Quarterly, if the annual turnover is below EUR 100,000 or if no goods were purchased within the EU;
- Twice a year / annually – if granted a special permission from the tax authority.
AUDITED FINANCIAL STATEMENTS AND TAX RETURNS
Businesses in Romania are required by law to submit annual financial statements.
In addition to the annual report, micro-enterprises are required to confirm their status on a quarterly basis and must submit the relevant declarations to the tax office.
The annual financial statements of legal entities that exceed at least 2 of the following criteria are subject to a compulsory independent audit:
- total assets: EUR 3,650,000;
- net turnover: EUR 7,300,000;
- average number of employees during the financial year: 50.
|Company incorporation with one shareholder and standard Articles of Association||3 465|
|Registered address for the first year: physical office lease (without physical placement of employees)||3 565|
|Local bank account opening||945|
|Preparation and submission of financial accounts, and conduct of an audit||100 – 400 per hour of work|
Payable in the cases of:
|225 (standard rate, includes the check of 1 individual)
+ 45 for each additional individual (administrator / member) or legal entity (member) if such legal entity is administered by ITA
+ 90 for each additional legal entity (member) if such legal entity is not administered by ITA
315 (rate for a High-Risk company, includes the check of 1 individual)
 The fees do not include 19% VAT, which may arise under certain conditions. Please refer to the ITA consultants for details.