Geographical overview:

Romania is situated west of the Black Sea in Southeast Europe and has an area of approximately 238,391 sq km. Moldova and Ukraine border Romania on its east and north, while Hungary and Serbia border Romania on its west, and Bulgaria borders its south.
Population and language:

Romania has an average density of 91 inhabitants per sq km and a population of 21.5 million (according to the latest available data, 2008), 91% of whom are ethnic Romanians. Minorities include Hungarian (6.7%), Roma (1.1%), German (0.2%), and Ukrainian (0.3%). Romanian is the common language used throughout the country. In the northwest and central regions, Hungarian and German are also spoken. Under the Constitution, ethnic minorities are allowed to use their mother tongue in certain circumstances (e.g., in court).

Political and legal environment:

Romania is a republic, and its present Constitution was adopted by Parliament on 21 November 1991. It was subsequently amended and ratified by legislation, and has been effective since 29 October 2003. The Romanian Constitution guarantees a multi-party system, a free-market economy, and protection of human rights. Legislative power is vested in a bicameral Parliament made up of a lower house (Chamber of Deputies) of 345 seats and an upper house (Senate) of 140 seats. Parliamentary elections are held every four years, while presidential elections are held every five years. Being part of the European Union (EU), Romania also holds 33 seats in the European Parliament. The President is elected by direct vote and has powers limited by the Constitution. The President is required to:

• Nominate the Prime Minister following consultation with the majority party
• Promulgate laws passed by Parliament
• Cooperate with the National Security

Council on relevant issues Under the Constitution, private property is guaranteed and protected by the Romanian state. Foreign nationals and stateless persons may obtain ownership right for land under conditions resulting from Romania’s accession to the EU or by virtue of domestic laws and other international treaties to which Romania is a party. All statutory provisions of civil, commercial, criminal, administrative, and tax matters are enacted by Parliament. International treaties are binding only if ratified by Parliament. Since signing the association treaty with the EU in 1993, Romania has adopted several regulations issued by EU bodies in domestic legislation. In 1994, Romania ratified the European Convention for the Protection of Human Rights and Fundamental Freedoms and agreed to enforce its provisions, including the right of individual petition, and recognized the competence of the European Court of Human Rights. Any Romanian citizen may bring a case against the Romanian state before the European Court, whose rulings are binding upon the state. Romania has enacted several legislations necessary for instituting and strengthening a free market, including laws concerning dispute resolution and related procedures. The concept of arbitration is also quite popular.

Reforms and economic development:

Type of economy:

Since early 1990, Romania has had a free market economy despite continuing government presence in the industrial sector. Successive governments have taken steps to liberalize and privatize the economy.
General economic trends:
Like many countries in Eastern Europe and the former Soviet Union, Romania had been struggling to turn its command economy into a market economy. Successive governments have found it difficult to turn the economy around because of a lack of hard currency and the inability to secure external funds due to the country’s high budget deficits. Much of this deficit accrued from financing loss-making state industries. Old economic and financial structures have been slow to change, similar to the bureaucratic culture inherent in many old institutions. In the last six years, the overall business climate has constantly improved and economic indicators look healthier.
Leading industries:

Manufacturing and engineering are Romania’s backbone industries. The country also possesses substantial energy resources and agricultural land. Most sectors of the economy remain under-exploited and offer great potential, particularly manufacturing, agriculture, and tourism.In the first 6 months of 2010 the industrial production advanced 5.6% in the gross series and 4.4%, adjusted according to the number of working days and seasonality. Industrial production in Q1 2010 compared to Q1 2009, increased by 4.4% due to increases in production and supply of electricity and heat, gas, steam and air conditioning (11.1%) and manufacturing industry (4.6%). The technology sector continues to play an increasingly important role in the economy due to the high level of skill among its workers and rather low wage costs. The real estate sector also offers significant growth opportunities.
Foreign direct investment:
Foreign direct investment (FDI) fell by 29% in the first six months of 2010, to EUR 1.838b, as a reaction at the reduction of almost three times the amount of intragroup loans to EUR 430m. Equity, including reinvested earnings, climbed 2.1% to EUR 1.408b. In January - June 2009, FDIwere worth of EUR 2.588b.In the first 6 months, investments have financed 50% of current account deficit, EUR 2.865b, according to data published by National Bank of Romania (NBR). In 2009, FDI shrank to EUR 4.89b, half of 2008 recorded value, covering 96.9% of the current account deficit. In 2008, FDI in Romania were around EUR 9.49b. Sectors that attracted foreign investment in past years include automotives, insurance, food processing, telecommunications, construction, and consumer goods manufacturing. More recently investors have shown interest in the field of renewable energy, with a special focus on wind farms.
Regional and international trade agreements and associations:
Romania has been a signatory to the General Agreement for Tariffs and Trade (GATT), the World Trade Organization (WTO), the European Free Trade Agreement (EFTA), and the Central European Free Trade Agreement (CEFTA). Furthermore, Romania has entered into over 80 agreements for the avoidance of double taxation and the prevention of tax evasion on income and capital (see in the Appendix). Romania is also a member of the International Monetary Fund, the World Bank (i.e., the International Bank for Reconstruction and Development and the International Finance Corporation), and the European Bank for Reconstruction and Development.

Types of business:
There are no specific investment approvals required for setting up a business in Romania. The procedure requires fulfilling certain legal formalities such as registering with the Romanian Trade Registry and the Fiscal Administration.
Limited Liability Company (SRL)
Joint Stock Company (SA)
Representative Office
Branch of a foreign company:

A branch of a foreign company does not have its own legal personality or share capital. Being a unit of the parent company, branch activities cannot exceed the scope of activity of the parent company.

Partnership as a legal form is seldom used in Romania. The three kinds of partnerships provided by law that lead to the creation of an entity with legal personality are:
• General partnership (societate în nume colectiv)
• Limited partnership (societate în comandita simpla)
• Partnership limited by shares (societate în comandita pe actiuni)

The partners in a general partnership and the active partners in a limited partnership have unlimited liability with respect to the obligations of the partnership toward third parties. Among themselves, each partner is individually and collectively responsible for these obligations. The minimum capital is stipulated only for a partnership limited by shares (i.e., RON 90,000, equivalent of approximately EUR 21,428, calculated at the exchange rate of RON 4.2/EUR). No capital requirements are provided for the other forms of partnerships.
Economic Interest Group (EIG):

An EIG is an association of two or more individuals or companies set up for a definite period. Its main objective is the development of the activities of the members; the development of the EIG itself is secondary. An EIG is allowed a maximum of 20 members. A key feature of EIGs is the unlimited joint liability of its members and the fact that it may not, directly or indirectly, own shares in one of its member companies or in another EIG. An EIG is not allowed to issue shares, bonds, or other negotiable instruments.
Investment legislation:
Small and medium enterprises (SME) :
Law 346/2004 provides certain incentives for private investors who set up or run small and medium-sized enterprises (SMEs). Domestic legislation defines a SME as a company with the following characteristics:
i. An annual average number of employees below 250
ii. Net annual turnover does not exceed EUR 50m, or whose total assets value does not exceed EUR 43m, according to the latest approved financial statements
iii. Fulfils independence criterion (it should not hold more than 25% of the shares or voting rights of another entity and not more than 25% of its share capital or voting rights should be held directly or indirectly on a global or sole basis by one or more public entities)

Regarding the independence criterion, the following exception is allowed; enterprises owned by public investment companies, venture capital companies, institutional investors, business angels (on condition that the total investment amount of such investor into the same company does not exceed EUR 1.25m), universities and non-profit research centers, and local public administration authorities. Banking companies, insurance and reinsurance companies, companies managing investment funds, financial investments companies (i.e., security trading companies), and companies that have foreign trade as the sole object of activity cannot qualify as SMEs.

Micro enterprises:
Pursuant to Order 101/2010 of the National Agency for Fiscal Administration, as of 1st January 2010, all micro enterprises were automatically switched to the standard income tax regime. Prior to this regulation, micro enterprises were required to pay 3% tax on any income, except certain items of revenue specifically provided (e.g., income from stock variations, income from provisions).

Capital markets:
Stock exchange and regulatory authority:

The Romanian capital markets function according to the provisions of the Consolidated Capital Markets Law 297/2004. The main regulations are implemented through instructions and norms issued by the CNVM, which is the main regulatory body and supervising authority. The regulated market in Romania is the Bucharest Stock Exchange (BSE). The regulated market is governed by the BSE Code that provides (i) the conditions for admission to trading on different categories of sections, (ii) the types and procedures of the market orders, and (iii) the main principles applicable to the trading. The BSE was established in 1995 with Canadian assistance and uses a computerized trading system that connects brokers (through remote terminals), theshareholder registry, and the clearingand settlement system.Trading is carriedout through an order-driven system. Asof September 2010, 88 companies were
listed on the BSE, with a total marketcapitalization of around EUR 21b. The BSE has three official indexes: the BET, based on the 10 most liquid stocks listed in the first tier; the overall BET-Composite index; and the BET-FI, which measures the performance of investment funds. The ROTX (Romanian traded index) was introduced in 2005, which reflects the movement of the most liquid blue chip stocks traded on the BSE. Additionally, the Alternative Trading System has been established, however, its operations shall begin on the date CNVM approves the applicable rules and regulations.

Work regulations for foreigners:
Romanian visa regime:

Romanian legislation allows two main categories of visas for foreigners, i.e., shortterm and long-term visa, single or multiple entries. Both visa categories allow foreign citizens to stay in Romania for a period or several periods exceeding 90 days within a sixmonth period. While the short-term visa cannot be extended, the long-term visa may be extended upon request by applying for a residence permit from Romanian authorities. Visas are obtained from Romania’s diplomatic missions or consulates while abroad and prior to the individual’s arrival to Romania. The main documents foreign nationals must submit to obtain a Romanian long-term visa are as follows:

Medical insurance for the visa period
• Proof of accommodation in Romania
• Means of support in Romania
• Proof of crime-free record issued by the authorities in the home country

Residence permits:

According to the Romanian immigration law, foreign nationals staying in Romania for more than 90 days in a six-month period should apply for a Romanian residence permit. Similar residence permits will be issued, upon request, to the family members (i.e., spouse, children) accompanying the individual during the assignment in Romania. According to the current Romanian legislation, companies located in an EU or EEA member state can second the EU and EEA nationals to Romania for an undetermined period without the need to obtain a Romanian work permit. The individuals should apply directly for a Romanian registration certificate/residence permit.The secondment of the non-EU nationals is limited to one year, and any subsequent extension is contingent upon obtaining a Romanian work authorization for local employment purposes. Foreigners assigned as heads of Romanian branches of foreign companies, as well as foreigners nominated as administrators of Romanian companies, may apply for a residence permit only if certain conditions are fulfilled.

Work authorizations:

The EU citizens carrying out activities in Romania based on secondment letters or local employment agreements are no longer required to obtain Romanian work authorizations. In addition, the assignors (i.e., foreign company) must give Romanian labor authorities at least five days prior notice regarding the beginning of the individuals’ assignment.

The legal framework for M&A transactions is rather limited, including Company Law 31/1990 and Order 1376/2004 (concerning accounting procedures for merger, spin-off, dissolution, liquidation,withdrawaland exclusion of shareholders, as well as the fiscal regime for such operations). M&As involving at least one public company must also comply with the Capital Market Law 297/2004 and observe the regulations issued by the Romanian National Securities Commission (CNVM).

The existing Romanian regulations provide two options for a merger:
• Two or more companies resulting in a new company with the original companies ceasing to exist
• Absorption of one or more companies into another company with only the absorbed company/ies ceasing to exist

The merger process involves a number of steps:
General Meeting of Shareholders deciding on the structure of the merger
• Preparation of a merger plan
Preparation of a set of financial statements for the planned merger date, as well as other valuations and expert reports
• Registration of the merger plan with the Trade Registry for examination and a judge’s approval
• Publication of the merger plan in the Official Gazette, followed by a 30-day break allowing any creditor of the merging companies to file an opposition to the merger

For specific sectors, a supervisory body must issue an endorsement for the merger to be completed (e.g., in case of financial institutions, the approval of the NBR is required). There are some instances where companies involved in a merger are subject to certain competition regulations if they are part of the same group.


The privatization process offered foreign investors a wide range of opportunities to invest in Romania by acquiring shares or assets, as well as set up joint ventures with state-owned companies. Moreover, strategic investors were offered a number of incentives. The Privatization Law was amended on a number of occasions to increase the attractiveness of the companies offered for sale. A revised Privatization Law (Emergency Ordinance 88/1997, approved by Law 44/1998) was adopted in December 1997 and recognized as the singular piece of legislation governing the privatization process. To speed up privatization, Law 137/2002 was enacted in 2002, which supplemented the provisions of EO 88/1997.

Privatization methods:

In accordance with the provisions of Law 137/2002, the state’s share in a commercial company could be reduced through:
• Sale of shares
• Increase of share capital by private capital contribution
• Free transfer of shares with assets
• Sale of assets
• Any combination of the above
Important elements in the privatization process could be reconsideration of the company’s debts with a view of increasing its attractiveness for privatization and the issuance of an official tax healthcheck certificate showing the company’s outstanding liabilities to the state budget. Sale of shares is the most common privatization method. Shares may be sold to either individuals or legal entities, Romanian or foreign, using one of the following methods:
• Public offer
• Sale methods specific to the capital market
• Negotiation
• Open or sealed auctions Romania Business Passport 2010 edition 27
• Certificates of deposit issued by investment banks on the international capital market
• Any combination of the above Irrespective of the method used, potential investors are required to prepare and submit a presentation file and a letter of intent to the privatization authority. For listed companies, these documents must follow CNVM’s rules.

Prospective investors are entitled to carry out full due diligence prior to submitting their non binding/binding offers. The minimum offered price should be equal to the nominal value of shares.

Romania Corporate Tax Rate

In Romania, the Corporate Income tax rate is a tax collected from companies. Its amount is based on the net income companies obtain while exercising their business activity, normally during one business year.
The Corporate Tax Rate in Romania stands at 16 percent. In the long-term, the Romania Corporate Tax Rate is projected to trend around 16.00 percent in 2021. Corporate Tax Rate in Romania averaged 21.96 percent from 1995 until 2020, reaching an all-time high of 38 percent in 1996 and a record low of 16 percent in 2005.
Revenues from the Corporate Tax Rate are an important source of income for the government of Romania. Romania Corporate Tax Rate - values, historical data and charts - was last updated on March of 2020.


Romania: Economic Outlook:


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