Establishing a company in Romania, especially a Limited Liability Company, also knows as Societate cu Răspundere Limitată (SRL), is an attractive option for foreign investors due to the country’s strategic location, competitive tax system, and growing economy.
As a business lawyer in Oradea, I have assisted numerous international clients in navigating the process of setting up an SRL in Romania. This blog post outlines the key steps and considerations for foreign investors looking to establish a company in Romania.
Why Choose Romania for Your Business?
Romania is a member of the European Union, offering access to a large market of over 500 million consumers. The country boasts a well-educated workforce, competitive operational costs, and a favorable tax regime. Additionally, Romania has been increasingly recognized for its tech sector and manufacturing capabilities, making it an ideal destination for businesses in these industries.
What is an SRL?
A Societate cu Răspundere Limitată (SRL) is the most common form of company in Romania, similar to a Limited Liability Company (LLC) in other jurisdictions. An SRL offers limited liability to its shareholders, meaning that their financial responsibility is limited to the amount of capital they have invested in the company.
Steps to Establish an SRL in Romania
1. Choose a Company Name
The first step in establishing an SRL in Romania is choosing a unique company name. The name must be checked and reserved with the Romanian Trade Registry (Oficiul Național al Registrului Comerțului). It’s advisable to have several alternative names ready in case your first choice is not available.
2. Draft the Articles of Association
The Articles of Association is a key document that outlines the company’s structure, the rights and obligations of shareholders, and the management of the company. This document must include:
- The name and location of the company.
- The object of activity (a clear description of the business activities).
- Details of the shareholders and their contributions.
- The management structure.
3. Deposit the Share Capital
The minimum share capital for an SRL in Romania is 200 RON (approximately 40 EUR). This amount must be deposited into a bank account opened in the name of the company in formation. Although the minimum capital requirement is low, many foreign investors choose to invest more substantial amounts to reflect the seriousness of their business.
Depending on the industry in which the company will operate, we can recommend the appropriate amount of share capital needed to convey credibility to partners and local authorities.
4. Register the Company with the Trade Registry
Once the Articles of Association are drafted and the share capital is deposited, the next step is to register the SRL with the Trade Registry. The registration process involves submitting several documents, including:
- The Articles of Association.
- Proof of the share capital deposit.
- Proof of the company’s headquarters.
- A statement from the directors accepting their roles.
5. Obtain a Fiscal Code and Register for VAT
After the registration is complete, the company will receive a unique registration code (CUI), which also serves as its fiscal code. Depending on your business activities, you may also need to register for VAT. Romania has a standard VAT rate of 19%, with certain goods and services eligible for reduced rates.
Registration for a VAT code is optional until the company reaches an annual revenue of 300,000 RON, at which point the company is required to register for VAT.
6. Obtain Necessary Licenses and Permits
Depending on the nature of your business, you may need to obtain additional licenses or permits from relevant Romanian authorities. For example, businesses in the food industry, construction, or transport may require specific authorizations.
7. Set Up a Bank Account
Once the company is registered, you can open a business bank account. This account will be used for all financial transactions related to the company, including paying taxes, receiving payments from clients, and managing operational expenses.
The bank account can be opened by the person that is named as an administrator of the company, this person can also represent the company in front of other national authorities or business partners.
Understanding the Fiscal Regime in Romania
Romania offers a competitive and straightforward fiscal regime, making it an attractive destination for foreign investors. Here are some key aspects of the Romanian tax system that foreign investors should be aware of:
Corporate Income Tax
The standard corporate income tax rate in Romania is 16%. However, small businesses (with a turnover of up to 500.000 EUR) can opt for a micro-enterprise tax regime, where taxes are based on revenue rather than profit. Under this regime:
- Companies with one or more employees are taxed at a rate of 1% if the annual revenue is under 60.000 euro.
- Companies with one or more employees are taxed at a rate of 3% if the annual revenue exceeds 60.000 euro.
This micro-enterprise tax regime is particularly advantageous for startups and small businesses looking to optimize their tax liabilities during the initial stages of their operations.
Value-Added Tax (VAT)
Romania has a standard VAT rate of 19%, applicable to most goods and services. However, reduced VAT rates of 9% and 5% apply to certain products and services, such as food, medicines, hotel services, and books. Companies must register for VAT if their annual turnover exceeds 300,000 RON (approximately 60,000 EUR).
Dividend Tax
Romania imposes a dividend tax of 8% but this rate can be reduced or eliminated under Romania’s numerous double taxation treaties.
Personal Income Tax
For companies employing foreign staff, it is important to note that Romania has a flat personal income tax rate of 10%, one of the lowest in the EU. This makes Romania an attractive destination for expatriates and foreign professionals.
Minimum wages in Romania
The minimum wage in Romania is 3,700 RON, and for employees working in the construction field, the minimum wage is 4,582 RON
Why Work with a Business Lawyer in Oradea?
Navigating the Romanian legal system and understanding local business practices can be challenging for foreign investors. A business lawyer in Oradea can provide invaluable assistance throughout the company setup process, ensuring compliance with Romanian laws and regulations. Additionally, a local lawyer can offer insights into the Romanian market, helping you make informed decisions and avoid potential pitfalls.
Key Benefits of Working with a Business Lawyer:
- Legal Expertise: Ensure all legal requirements are met.
- Local Knowledge: Understand the nuances of the Romanian market.
- Time-Saving: Streamline the company setup process.
- Risk Mitigation: Identify and mitigate potential legal risks.
Conclusion
Setting up an SRL in Romania is a straightforward process, but it requires careful attention to legal and regulatory details. By working with a business lawyer in Oradea, foreign investors can navigate the process with confidence, ensuring that their business is established on a solid legal foundation. Whether you are starting a new venture or expanding an existing business into Romania, the right legal guidance is crucial for long-term success.
If you are considering establishing a company in Romania, contact us today for professional legal assistance tailored to your needs. As your trusted partner in business law, we are here to help you every step of the way.
This article „This article does not constitute legal advice and does not entail the liability of the author.”