Romania, a country with a rich history and stunning landscapes, is not just a destination for travelers but a land of countless business opportunities for those seeking to expand their business footprint in Europe. The country has witnessed robust economic growth, with a 4.8% growth within the last financial year, making it a preferred destination for business expansion.
In this article, we will look at the process of company registration in Romania and offer insights into the advantages that come with it. Whether you're a budding startup or starting a new business in Romania as a foreigner, Romania’s doors are open to individuals and businesses looking to establish a presence and contribute to its growing economy.
Benefits of Starting a Business in Romania
Romania offers significant benefits to businesses looking to grow in the region, mainly due to its strategic location and European Union membership. Let’s look at some benefits of starting a business in Romania.
Among European nations, Romania boasts the most favorable corporate tax rate.
Moreover, the country has entered into numerous double-taxation treaties that shield businesses from the burden of dual taxation. Romania's Fiscal Code also offers exemptions from corporate taxes for enterprises engaged in technology-enhancing equipment activities. Furthermore, micro-enterprises in Romania are subject to a turnover tax of 1% for those with at least one employee and 3% for those without any employees.
Strategic Business Location
Romania's geographical position is advantageous at the Eastern and Western European crossroads. Since it agreed to be a part of the European Union in 2007, Romania has benefited from the EU's free movement of goods and services agreement. Any business established in Romania enjoys unrestricted access to other EU members such as Germany, France, and Spain.
Furthermore, Romania shares its borders with non-EU countries, including Ukraine, Serbia, and Moldova. It is also located near Moscow, making it an ideal hub for businesses looking to tap into markets within and beyond the European Union.
Skilled and Diligent Workforce
Romania possesses a highly educated labor pool with proficient language skills. Approximately 80% of Romanian schools incorporate English into their curriculum, rendering it the country's most widely studied foreign language.
Furthermore, Romania boasts a considerable number of skilled professionals and ambitious graduates. The nation hosts a burgeoning array of shared services, research and development centers, and exceptionally talented IT experts. Romania ranks sixth globally regarding the number of certified IT specialists it has.
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Business Types in Romania
Romania offers a variety of business types for entrepreneurs and investors looking to establish a presence in the country.
Here are some of the typical business structures in Romania:
Sole Proprietorship (PFA - Persoana Fizica Autorizata)
A sole proprietorship in Romania is a business structure owned and operated by a single individual. It is a straightforward and cost-effective option for small businesses and freelancers. However, one significant drawback is that the owner is personally liable for all business debts, which means personal assets may be at risk.
Regarding taxation, the owner reports business income as personal income and pays personal income tax. Registering a sole proprietorship requires a registration process with the Romanian Trade Register.
Limited Liability Company (SRL - Societate cu Raspundere Limitata)
Limited Liability Companies are among Romania's most common business structures, suitable for small and medium-sized enterprises. These companies can have one or more shareholders, who can be individuals or entities. The essential advantage is that shareholders enjoy limited liability protection, safeguarding their assets from business debts.
Profits are subject to corporate income tax, and shareholders pay personal income tax on dividends. Registration with the Romanian Trade Register is mandatory.
Joint Stock Company (SA - Societate pe Actiuni)
Joint Stock Companies are typically chosen by larger businesses looking to raise capital by selling shares. Shareholders own the company by holding shares in it, and their liability is limited to the value of their shares. These entities require a minimum share capital, making them suitable for significant investments.
Corporate income tax applies to company profits, and shareholders pay personal income tax on dividends. Joint Stock Companies are subject to more complex regulations and reporting requirements.
Partnerships in Romania can be either general or limited. In a general partnership, partners share both profits and liabilities equally. In contrast, limited partnerships have a mix of partners, with some having limited liability and others having entire liability.
Taxation in partnerships is typically pass-through, meaning profits are taxed at the partner level. General partnerships require registration with the Romanian Trade Register. Limited partnerships may also need to be registered with the Romanian Trade Register. However, specific registration requirements and procedures may vary depending on the local regulations and the nature of the partnership's activities.
Selecting the most suitable business structure in Romania depends on your specific business goals, the level of liability protection desired, the amount of capital available, and tax considerations.
What You Need to Know Before Starting a Business in Romania
When setting up a business in Romania, it becomes crucial to understand the various regulatory aspects that come into play. This can be challenging, especially for those lacking prior experience in the country or familiarity with the local employment laws and norms.
Here is everything you need to know before company formation in Romania.
- Business Licensing: All businesses operating within Romania must obtain the requisite licenses. These licenses can be secured through official government channels like the Romania Ministry of Economy or by engaging with professionals authorized to facilitate this process.
- Taxation: Romania's standard corporate tax rate is 16%, which applies to domestic and foreign companies operating in Romania. Enterprises must fulfill their tax obligations, including levies on their profits. Given the potentially substantial tax burdens, businesses must ensure robust financial backing and effective cash flow management to meet these fiscal responsibilities.
- Insurance: To mitigate potential risks, businesses must maintain insurance coverage. This safeguard can be procured through official governmental avenues or by availing services from private insurance providers.
- Business Registration: Registering the business with the pertinent authorities is a prerequisite for obtaining permits, licenses, or any other official recognition from the government, like the Romanian Business Registers. These regulatory bodies may also extend various incentives to businesses, such as tax incentives and access to financial assistance programs.
- Franchising Opportunities: Franchising represents a popular pathway for businesses to commence operations in Romania. This approach often demands less initial capital than individual business licensing, frequently offering advantages like reduced tax burdens and enhanced growth prospects.
- Research and Development: It is incumbent upon businesses to conduct thorough research and development activities to ensure alignment with the needs of their target market before launching their products or services. This process can be particularly challenging if the business needs prior experience in the specific market segment or if language barriers exist.
Efficiently managing these regulatory aspects is crucial for the successful establishment and ongoing operation of a business in Romania.
Steps Involved in a Business in Romania
The procedure for company registration in Romania is outlined as follows:
Step 1: Choosing the Business Structure
The initial phase of the company registration process in Romania involves the selection of an appropriate business structure. Businesses can opt for an entity that aligns with their operational needs. For local and foreign entrepreneurs, choosing a limited liability company is often the most suitable option as it protects their assets.
Step 2: Registration of the Company Name
Following the selection of the business structure, the next step entails registering a distinctive company name with the local Trade Registry. It is essential that the chosen company name effectively represents the core concept of the business venture.
Step 3: Compilation of the Company Incorporation Documents
In the third stage of the registration process, you must compile and submit the necessary documentation to the Trade Register Office. This documentation includes the Articles of Association and affidavits containing the specimen signatures of shareholders and directors, among other prerequisites.
Step 4: Formal Registration of the Company
This registration will establish the company as a micro-enterprise under relevant regulations. It's important to note that this registration process typically spans up to ten working days.
Step 5: Engagement of an Accountant
The final step in the company registration process involves the engagement of a reputable accountant who will manage your company's financial records, ensuring compliance with fiscal regulations.
By adhering to these steps, you can successfully navigate the company registration process in Romania, laying a solid foundation for your business endeavor in the country.
Cost of Registering a Business in Romania
Setting up a business in Romania incurs an initial cost of EUR 3,850 during the first year. Subsequently, there are no ongoing annual fees. On average, the comprehensive process, encompassing company incorporation, establishing a local bank account, and various governmental fees, amounts to approximately EUR 8,820.
Also Read:Cost of Hiring a New Employee
Setting up a Company vs. Partnering with an Employer of Record in Romania
Here is a comparison between setting up a company and partnering with an Employer of Record in Romania:
Hire Talent in Romania Compliantly
While setting up a company in Romania gives access to immense resources, it is also equally challenging and time-consuming. Ensuring that your organization adheres to Romanian employment laws can be cumbersome, yet it is essential to prevent potential fines and penalties.
To dodge these complexities, partner with Skuad.
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1. How much does it cost to incorporate a company in Romania?
Starting a business in Romania involves an initial expenditure of EUR 3,850 in the first year, with no recurring annual charges thereafter. On average, the all-inclusive procedure, which includes company formation, establishing a local bank account, and various governmental charges, averages around EUR 8,820.
2. What is the company registration authority in Romania?
The company registration authority in Romania is the "National Trade Register Office" (Oficiul Național al Registrului Comerțului, or ONRC). This government agency is responsible for maintaining the official records of businesses registered in Romania. It oversees the registration and documentation of various business entities, including sole proprietorships, limited liability companies, joint-stock companies, and more.
3. Can a foreigner own a business in Romania?
Yes, foreigners are allowed to own and operate businesses in Romania. Romania is open to foreign investment and offers a favorable business climate for EU and non-EU nationals.