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Romania – a market with strategic location, vast potential and well-educated workforce, offers numerous possibilities for foreign investors who are thinking about entering the European market or expanding their business in the region.
The IT industry, being one of the largest and most profitable industries in Romania, benefits from attractive investment incentives. For instance, employees working in IT&C companies have an income tax rate of 0%. Moreover, local tax exemptions apply for investors setting up manufacturing locations or offices in industrial, scientific or technological parks.
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:
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).
The main document, needed for incorporating a company, is the ”Articles of Incorporation”. This document must contain the following aspects:
The incorporation procedure of the Romanian company consists mainly in:
The registration of a company is mandatory in Romania:
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.
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 25th 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:
it is set-up under the Romanian law, or
it has its legal seat in Romania, or
its place of effective management is in Romania.
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.
Real estate tax
Any type of local or regional income tax
Any other type of taxes not mentioned above
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.
Employing a person under the age of 15 is strictly prohibited in Romania. In addition, work in difficult or dangerous conditions cannot be performed by persons under the age of 18.
In Romania, the individual employment contracts can be classified according to several criteria, as follows:
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.
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:
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.
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).
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.
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.
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:
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:
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:
Other elements that are considered when establishing residency in Romania but only together with the elements mentioned above:
vehicle registered in Romania;
driver’s license issued by the Romanian authorities;
passport issued by the Romanian authorities;
the person is insured by the social insurance system in Romania throughout the period in which he/she stays abroad;
the person is insured by the social health insurance system in Romania throughout the period he/she stays abroad.
According to art. 61 of the Romanian Fiscal Code, the types of income that are taxable in Romania are the following:
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.