The creation of a Romanian company implies a thorough analysis of a number of issues before actually commencing the company formation procedures. We have listed below a series of issues which in our view are vital to be taken into consideration. Of course we look forward to receive more suggestions from the visitors of our blog or of our main website www.RomanianLawOffice.com.
Selecting the type of Romanian entity that is right for the investor
The main types of entities are:
- The Romanian Limited Liability Company (SRL) with natural persons as shareholders. This type of company has min. share capital of 200 lei and can have a single shareholder.
- The Romanian SRL company with a foreign company as sole or main shareholder. This is the structure mostly preferred by foreign companies expanding to Romania. This entity is a Romanian Subsidiary (FILIALA). It has the same characteristics as the regular LLC and the same minimum capital of 200 lei.
- The Romanian Branch (SUCURSALA) does not have its own legal personality and is basically an extension of the parent company in Romania.
Estimating the on-going costs for the maintenance of the Romanian Company
Maintenance and good standing of a Romanian Company does not imply important costs. The investor should consider the fees for a registered office, the appointment of a Romanian accountant. There is no longer a minimum tax to be paid yearly to the Romanian State, therefore if a company has no profit, then it doesn’t need to pay anything to the State.
Romanian Corporate Tax, Dividend Tax and Employee Taxes
Romania has flat corporate tax of 16% and a flat 16% dividend tax (if other treaties do not apply). Taxes paid by the employer for the employee are estimated to be around 40% of the salary.
Creating the best shareholding structure for tax minimization and company activity
The foreign investor should base his strategy in this sense on the location of the shareholders of the future Romanian company. For instance Romania has special regulations for dividend tax charged on non-resident shareholders located in another European Union Country. If the shareholders are not located in the EU, then it would firstly be best to verify whether Romania has concluded a Tax Treaty with the respective country in order to avoid double taxation. (Romania has actually signed treaties with many countries for this purpose).
A foreign investor should also take into account that Romania has recently adopted a regulation that allows the government to charge 50% withholding tax for those investors located in countries that have not adopted common transparency treaties with Romania. If your country is non-EU and does not have a signed double taxation treaty with Romania then you are strongly advised to verify this matter beforehand.