Industries

The IT industry is one of the largest and most profitable industries in Romania, having also strong workforce given the technical and IT educational environment.

The following industries have the strongest workforce in Romania:

Investment incentives

IT&C companies are favoured by investment incentives in Romania. The income tax for employees working in IT&C companies is 0%, in compliance with the Romanian current legislation.

In addition, investors setting up manufacturing locations or offices in an industrial, scientific or technological park benefit from some exemptions on local taxes.

Employees who have income in the agricultural and food industry can be supported by fiscal incentives. Taxpayers that are performing R&D activities may also enjoy tax incentives in the area of corporate income tax and salary tax.

The most common form of business in Romania is the Limited Liability Company (or LLC in short). The minimum required capital for setting up an LLC is only RON 1.

An LLC in Romania can have between 1 and 50 shareholders. The shareholders respond in the limit of the contribution to the share capital.

A Limited Liability Company can be founded by natural or legal entities and must be registered to the Trade Register.

The limited liability company may be managed by one or more directors, separately or together, appointed within the Article of Association and which can be revoked by shareholders’ resolution (GSM/EGSM) or by the sole shareholder’s decision, as the case may be.

Certain activities need prior authorization (e.g., credit institutions, insurance brokers, companies which produce and/or sell firearms and ammunition, pension fund).

Certain activities need to be authorized after the registration of the company (e.g., temporary work agents, companies that require transportation licence).

• company’s name and its registered seat
• a list of the company’s members, with their respective addresses, date of birth, personal tax number
• the company’s business (main) activities (certain activities require special permits)
• the amount of share capital and distribution
• representation of the company, the method of signing in the name of the company
• identification data, the duration of the mandate, the powers conferred on them and whether they are to exercise them jointly or separately details identifying the beneficial owners and how the company control is exercised, if applicable
• the duration of the company, if founded for a fixed period
• all other items are relevant to the given form of business as required by the prevailing act of law

The incorporation procedure of the Romanian company consists mainly in:

• reserving the name of the company
• drafting the relevant documents (mainly constitutive act of the company and shareholders and directors’ statements)
• filling the registration application within the Trade Register

The registration of a company is mandatory in Romania:

• the incorporation procedure must be initiated by request.
• the registration request must be filed with the competent Trade Register Office.
• company registration request may be submitted with electronic signature via the Trade Register portal or at the registrar’s office of the authority.

There are no fees applicable for the Trade Register, however Official Gazette fees for publishing documents will be applied.

After submitting the complete file to the Trade Register, the request is usually processed in 3 working days. Sometimes, the approval of the file may be delayed because additional documents are requested by the Trade Register’s referents. The website of the Trade Register where online request can be submitted is https://portal.onrc.ro

After the incorporation, the company must register within the Romanian Fiscal Authorities in 30 days and open the bank account.

Corporate income tax

• 16% is the standard rate of corporate income tax in Romania
• 16% rate applies to taxpayers that carry on activities such as gambling and nightclubs on the taxable profit, or
• 5% is the rate that is applied to taxpayers that carry on activities such as gambling and nightclubs on income received from such activities, depending on which is higher

The tax period in Romania can be either the calendar or fiscal year, which may differ than the calendar year

Taxpayers must submit their quarterly CIT returns by the 25th day of the first month following the first, second, and third quarters. The annual CIT return is due by March 25 of the following year for which the CIT is due in case the fiscal year equals the calendar year. For 2023, the deadline was extended to 25^th of June. In case the fiscal year is different than the calendar year, the annual CIT return is due by the 25th day of the third month after the end of the company’s fiscal year.

A company is considered as resident in Romania if:

VAT

• 19% is the standard VAT rate in Romania
• 9% the reduced rate applies to medicines, water, food and beverage industry – save for alcoholic beverages and beverages with a high concentration of sugar, restaurant and catering services, hotel accommodation, etc.
• 5% an extra-reduced rate applies to supplies of social housing under certain conditions and to schoolbooks, newspapers, magazines, admission fees to castles, sport events, museums, cinemas, etc.

VAT registration

Romanian tax residents are required to register for VAT when their annual turnover exceeds EUR 88,500 (RON 300,000). Voluntary VAT registration before the threshold is exceeded is also possible.

Non-resident taxable persons established in Romania through fixed establishments and non-residents having no actual presence in Romania can register for VAT without exceeding the threshold of EUR 88,500 (RON 300,000) on annual turnover or may be even required in certain specific cases.

A taxable person that is not established in Romania performing intracommunity distance sales of goods to Romania (mail order business) to any non-taxable person or a person not registered for Romanian VAT, shall either register for VAT purposes in Romania if the annual volume of intracommunity distance sales, as well as the volume of telecommunication, broadcasting and electronic services cumulatively exceed the EUR 10,000 threshold. Alternatively, the One-Stop-Shop regime that was designed to avoid VAT registration in multiple EU countries may be applied if the prerequisites are met.

Other taxes

Entitlement to work

According to article 10 of Law no. 53/2003 (Labor Code), the Individual Employment Contract is the agreement based on which a natural person, referred to as the employee, undertakes to perform work for and under the authority of an employer, natural or legal person, in exchange for payment.

As such, any natural person can be employed, regardless of whether they are a Romanian citizen, a foreign citizen, stateless person or a refugee.

According to the Romanian law, the future employee must be at least 16 years old to be able to conclude an individual employment contract.

For teenagers who have reached the age of 15, such a contract can be concluded only with the consent of the parents or legal representatives and only if the job does not endanger their health.

Employment contracts

In Romania, the individual employment contracts can be classified according to several criteria, as follows:

Duration

The Individual employment contract concluded for an indefinite period

This type of contract is regulated by art. 12 para. 1 of the Labour Code and represents the rule regarding the duration for which the individual employment contracts are concluded. This assumption is regulated by the Romanian law as a means of employee protection.

Individual employment contract concluded for a fixed period

In accordance with the provisions of art. 82-87 of the Labor Code, the individual fixed-term employment contract will be concluded in writing and will expressly contain the period for which the contract is concluded, a period that cannot exceed 36 months (3 years).

The individual employment contract can be concluded for a determined duration only in the following cases:

1. replacing an employee whose employment contract is suspended, except for the case in
   which that employee participates in the strike;
2. the increase and/or temporary modification of the structure of the employer’s activity;
3. carrying out seasonal activities;
4. in the event where the employment contract is concluded based on legal provisions issued
   with the aim of temporarily favoring certain categories of unemployed persons;
5. employment of a person who, within 5 years from the date of employment, meets the
   conditions for retirement due to the age limit;
6. occupying an eligible position within trade unions or non-governmental organizations, during
   the term of the office;
7. the employment of retirees who, under the law, can cumulate the pension with the salary;
8. in other cases, expressly provided by special laws or for carrying out works, projects or
   programs.

Between the same parties, no more than 3 individual fixed-term employment contracts can be concluded successively. Individual fixed-term employment contracts concluded within 3 months of the termination of a previous fixed-term employment contract are considered successive contracts and cannot have a duration greater than 12 months each.

Number of working hours

Full-time employment contract

This type of contract usually involves a work schedule of 8 hours per day, i.e., 40 hours per week, in principle from Monday to Friday (inclusive).

Part-time employment contract

This type of contract assumes that the number of normal working hours, calculated weekly or as a monthly average, is lower than the number of normal working hours of a comparable full-time employee.

Such an agreement must include provisions related to the duration of the work and the distribution of the work schedule, the conditions under which the work schedule can be changed and the prohibition to work overtime, except in cases of force majeure or for other urgent works intended to prevent the production of accidents or removing their consequences.

If these elements are not specified in an individual part-time employment contract, the contract is considered to be concluded for full time.

These types of contracts, in turn, can be concluded either for an indefinite period or for a fixed period.

Place of activity

On-site

An employment contract is considered concluded for on-site work if the employee must perform his activity either at the employer’s headquarters or one of its workstations.

Work-from-home

The work-from-home contract is regulated by art. 108 para. (1) of the Labor Code and implies that the employees must perform their duties at their domicile or place of residence. In this case, the employee sets his own work schedule, observing the deadlines and the number of hours provided in the contract.

The work-from-home employment contract is concluded only in written form and must contain, apart from the provisions specified in art. 17 para. (3) of the Labor Code, the following:

1. the express statement that the employee works at home;
2. the program within which the employer is entitled to control the activity of his employee and
   the concrete way of carrying out the control; and
3. the employer’s obligation to ensure the transport to and from the employee’s home of the
   resources and materials they use in their activity, as well as of the finished products they
   make.

Teleworking

Telework is the type of work organization through which the employee, on a regular and voluntary basis, fulfils the duties required by their position, occupation or job they hold in a place other than the workplace organized by the employer, using information and communication technology, as regulated by the provisions of art. 2 of Law no. 81/2018 on the regulation of telework activity.

In the case of telecommuting, the individual employment contract contains, apart from the elements provided for in art. 17 para. (3) of Law no. 53/2003, republished, with subsequent amendments and additions, the following:

1. the express statement that the employee fulfils their duty in telework regime;
2. the period and/or days in which the teleworker carries out his/her activity at a workplace
   organized by the employer;
3. the program within which the employer is entitled to verify the activity of the teleworker and
   the specific way of carrying out the control;
4. the method of highlighting the working hours provided by the teleworker;
5. the responsibilities of the parties depending on the place/places of the telework activity,
   including the health and safety responsibilities, in accordance with the provisions of art. 7
   and 8;
6. the employer’s obligation to ensure the transport to and from the place of the telework
   activity of the materials that the teleworker uses in his activity, as the case may be;
7. the employer’s obligation to inform the teleworker about the provisions of the legal
   regulations, from the applicable collective labour agreement and/or the internal regulation, in
   the matter of personal data protection, as well as the teleworker’s obligation to comply with
   these provisions;
8. the measures taken by the employer so that the teleworker is not isolated from the rest of
   the employees, which ensures him the opportunity to meet with his colleagues on a regular
   basis;
9. the conditions under which the employer bears the expenses related to the telecommuting
   activity.

An employment contract that does not require the physical presence of the employee at the employer’s premises gives the employee the same rights as those who work at the employer’s premises.

In Romania, there is another type of individual employment contract, namely the apprenticeship contract. This type of the contract is regulated by the provisions of art. 208-210 of the Labour Code. In this case, the employer will pay the employee a salary, but will also undertake to provide him with the necessary training for the job qualification, for a certain period.

Not least, art. 88 of the Labour Code, regulates one more type of work, namely work through a temporary work agent. In this situation, the work is performed by a temporary employee who performs the work for a final beneficiary, following the disposition of the temporary work agent.

In Romania, the beneficiaries of income from salaries and salary assimilated income owe a monthly, final tax, which is computed and withheld at source by the payers of the income amounting to 10% of the Beneficiary’s income, computed according to the provisions of art. 78 of the Fiscal Code.

According to art. 80 of the Fiscal Code, payers of salaries and salary assimilated income have the obligation to compute and withhold the tax related to the incomes of each month on the date of payment of these incomes, as well as to pay it to the state budget up to and including the 25th of the month following the one for which these revenues are paid.

In accordance with the provisions of art. 81 of the Fiscal Code, payers of salaries and salary assimilated income have the obligation to file a monthly tax return for each income beneficiary, until the monthly deadline i.e., up to and including the 25th of the month following the one for which the taxes are paid.

An individual is considered a tax resident under the following conditions:

• they have a permanent home in Romania, which can be owned or rented or remain in any way available for said person and/or his/her family;
• they have residence in Romania;
• they are present in Romania for a period (or more periods) exceeding a total of 183 days, during any 12 consecutive months, ending in the current calendar year;
• they are a Romanian citizen working abroad, as an official or employee of Romania in a foreign state;
• they have the centre of their vital interests in Romania.

Other elements that are considered when establishing residency in Romania but only together with the elements mentioned above:

According to art. 61 of the Romanian Fiscal Code, the types of income that are taxable in Romania are the following:

• income obtained from independent activities, as defined by art. 67;
• income obtained from intellectual property rights, as defined by art. 70;
• income obtained from salaries and salary assimilated income, as defined by art. 76;
• income obtained from rents, as defined by art. 83;
• income obtained from capital gains, as defined by art. 91;
• income obtained from pensions, as defined by art. 99;
• income obtained from agricultural activities, forestry and fishery, as defined by art. 103;
• income obtained from prizes and gambling, as defined by art. 108;
• income obtained from real estate transactions, as defined by art. 111;
• income obtained from other sources.

The rate of the social security contributions, paid by the employer in Romania is not applicable.

25% is the rate of the social security contributions paid by the employee in Romania in accordance with the provisions of art. 138 of the Fiscal Code.

The employers have the obligation to calculate and withhold the tax related to the social insurance contribution owed by natural person who obtains income from salary and incomes assimilated to salary.

The rate of the health insurance contributions, paid by the employer in Romania is not applicable.

10% is the rate of the health insurance in accordance with the provision of art. 158 of the Fiscal Code.

The employers have the obligation to calculate and withhold the tax related to the health insurance contribution owed by natural person who obtains income from salary and incomes assimilated to salary.