Business in Romania

Traditionally a desirable destination for its extraordinary landscape and rich history, today, Romania is quickly becoming a landing place for new and established businesses seeking to tap into the country’s growing economy. However, like all countries, Romania has its own unique challenges and considerations when it comes to doing business, and entrepreneurs and executives alike will be well-served to educate themselves on Romania’s legislative environment and business culture before developing partnerships or leasing space in the country.

10 Key Considerations for Doing Business in Romania

1. Romania Recently Joined the European Union (EU)

Romania joined the European Union (EU) in 2007 – relatively recently in terms of economic and geopolitical standards. While this has led to some standardization of Romania’s laws with the rest of Europe, legislative compliance continues to be a top issue for foreign nationals and companies seeking to do business in Romania. In fact, according to one recent survey of foreign companies doing business in Romania, the top three challenges they face all have to do with legislative barriers:

  • Frequent changes in Romanian legislation
  • Lack of support from national authorities
  • Difficulty implementing arcane (and often inconsistent) legislative requirements

In addition, although Romania is a member of the EU, it is among the minority of member states that fall outside of the Eurozone and have not adopted the euro. The Romanian currency is the leu, which has remained relatively stable in recent years.

2. Employment and Independent Contractor Taxes

Among Romania’s unique legislative challenges is a tax rate of 55 percent that applies to both employees and independent contractors. Independent contractors who qualify can seek to avoid this tax by applying for special service provider status; though, once again, it is not unusual to run into challenges during the process.

In addition, all foreign nationals who earn income in Romania must obtain a fiscal registration number, and in most cases they will need to obtain both work and residency permits.

3. US-Romanian Trade is Booming, But Be Wary of Import/Export Controls

According to data from the U.S. Department of Commerce, bilateral trade between the United States and Romania grew by roughly a quarter from 2013 to 2014. Initial projections show an additional modest increase in 2015. For every dollar worth of goods imported to Romania from the United States, two dollars’ worth are exported from Romania to the US. Once the final numbers are in, total Romanian exports to the US are expected to top $2.1 billion in 2015.

Of course, both Romania and the US (and other countries around the globe) have strict import and export restrictions that require careful consideration when setting up a new business overseas. EU data and privacy legislation may impact your Romanian business operations, as well. Depending upon the nature of your business and the products (or data) that you intend to import or export, satisfying these restrictions could be among the bigger hurdles you face in getting up and running.

4. Business Entity Structuring

Romanian law currently recognizes five types of domestic business entities:

  • Limited liability company (societate cu raspundere limitata (SRL))
  • Joint stock company (societate pe actiuni (SA))
  • General partnership (societate in nume colectiv (SNC))
  • Limited partnership (societate in comandita simpla (SCS))
  • Limited partnership on shares (societate in comandita pe actiuni (SCA))

Subject to the general legislative caveats noted above, forming a domestic business entity in Romania is a relatively straightforward process. The initial capital contribution requirements are generally minimal, you can form a limited liability company with a single member, and both Romanian and foreign citizens can serve as administrators (board members).

A sixth option for foreign businesses seeking to do business in Romania is to open a branch office or subsidiary. Branches in Romania must be registered, have a general manager appointed by the parent company, and limit their activities to those of the parent.

5. Protecting Your Intellectual Property

While Romania recognizes rights in trademarks, patents, copyrights, and designs, Romanian intellectual property law currently remains largely un-harmonized with that of the United States and the rest of the EU. Registrations are administered by the State Office for Inventions and Trademarks, and companies with current or potential intellectual property interests in Romania (which will be virtually all companies doing business in the country) should get started early on taking the steps necessary to secure exclusive rights.

6. Consumer Protections and Product Labeling

For product-based businesses, compliance with European Union standards regarding products and packaging is mandatory. In addition, all labels for consumer products must:

  • Clearly identify the country of origin, manufacturer, and importer
  • Include an expiration date
  • Include a product description
  • Be written in Romanian

Similar to other countries, legislation in Romania imposes a variety of industry-specific requirements – not only with regard to product labeling, but with regard to licensing, compliance, and other matters as well. Although unlikely, in order to avoid investing in a business venture that will simply not be viable in Romania due to legislative burdens, US citizens and others seeking to go into business in Romania will be well-advised to research the statutory landscape as a first step toward evaluating the commercial opportunity.

7. Bureaucratic Navigation and Diplomacy

As stated by one foreign ministry, Romania “is still governed by a great deal of bureaucracy. Personal relationships are crucial if one wishes to cut through the red tape. Many businesses involve overlapping local bureaucracies. This makes conducting business a time-consuming process, which requires perseverance.”

8. Romanian Business Culture and Local Customs

Generally speaking, business dealings in Romania tend to be much more formal than in the United States. Seniority garners significant respect, and small talk (if any) is usually kept to a minimum. The handshake is a standard greeting and eye contact is normal, if not expected, and use of formal greetings (“Domnul” for men and “Doamna” for women) is common in business-related introductions.

9. Additional Tax Considerations

In addition to the employee and independent contractor taxes discussed above, businesses in Romania are potentially subject to a number of other taxes, as well. There is a standard corporate tax rate of 16 percent (with a reduced three percent tax rate for qualifying “micro-companies”); and, depending upon the nature and specific location of the business, varying value-added taxes (VAT), excise taxes, and local taxes may apply to its products and facilities, as well.

10. Protecting Your International Assets and Preparing to Relocate (Yourself or Employees) Overseas

Finally, if you are a US citizen and you are preparing to relocate to Romania, or if you anticipate predominantly staying in the US as you build a business or open a branch office overseas, there are a number of other planning considerations you should keep in mind. What should you do to protect your overseas assets? How will your estate plan be affected by your relocation or overseas holdings? These are just two of the important questions all entrepreneurs, business owners, and business executives should answer before they put their assets at risk with a new venture.

Jiah Kim & Associates | International Business, Asset Protection, and Estate Planning Attorneys

If you are considering an entrepreneurial or business expansion opportunity in Romania and would like to speak with an attorney, contact Jiah Kim & Associates for a confidential consultation. Call (646) 389-5065 to schedule an appointment, or request an appointment online today.

This blog post is written for educational and general information purposes only, and does not constitute specific legal advice. You understand that there is no attorney-client relationship between you and the blog publisher. This blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

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