Doing Business in Romania - Frequently Asked Questions
Q. Can a UK company own 100% of the shares in a Romanian company?
A. If it is a SRL ("regular" limited liability company) and not an SA (a joint stock company similar to a plc) then yes. There is only one exception. If the UK company already owns 100% of the shares in another company anywhere in the world (not just Romania) then there has to be a minority shareholder in the Romanian company. This can be as little as one share.
Q. Can a UK company or UK individual directly own land in Romania?
A. A Romanian company owned by a UK company or UK individual can own land. A UK individual can own land directly but there are certain restrictions that apply eg to the type of land in question. Note that buildings may be generally owned directly by UK companies or individuals.
Q. How easy is it to set up a Romanian company (SRL)?
A. It is more complicated that setting up a UK company, and takes more time. The problem is not so much the time it takes to form the company once all of the necessary papers have been filed with the Romanian authorities (usually two to three weeks) but the time it takes to get all of the necessary papers together and get them translated into Romanian.
Q. Is it true that you need business accommodation in Romania in order to set up a company?
A. Broadly yes. You need to be able to prove that you have an address in Romania and that at that address you have space exclusively available for the company that you intend to register. A nameplate at a lawyer's address is not sufficient.
Q. Are labour laws tough in Romania?
A. It depends which way you look at it. Generally employment contracts are required by law to be for an indefinite period. Dismissing an employee is difficult, particularly on the grounds of misconduct, but like the UK the laws require firm evidence of such misconduct and evidence that the procedures have been followed – very much like the UK.
Q. So can I use fixed term labour contracts instead?
A. Only to a limited extent. There is a cap on the length of the contract and there are rules to prevent you from entering into a series of successive short term contracts.
Q. What are the tax rates in Romania?
A. As of 1 July 2013 the rates are 16% on company profits, 16% flat rate on personal income and VAT is 24%. Social security payments (both employee and employer) may rise to a combined level of 40%.
Q. Can I get my company profits out of Romania easily?
A. Yes if you declare a dividend, and all of the appropriate documents are produced (accounts, dividend declaration and so on). Be aware that there is no concept of "interim dividends", and so you generally can only pay a dividend once a year.
Q. Can I fund my company with debt?
A. Yes, but you require loan agreements, and if the loan is for more than one year the agreement has to be notified to the National Bank of Romania. Note that there are restrictions under commercial law regarding the ratio of equity to debt (to ensure that companies are "correctly" capitalized, and there are restrictions on the tax deductibility of interest paid by a Romanian company to a related party.
Q. Is it true that if I supply services from the UK that the Romanian customer has to withhold 16% tax from the payment?
A. Yes, but if you produce a document from HMRC stating that the UK company is tax resident in the UK before your invoice is settled, then the tax generally is zero. Be careful however because certain types of technical services, and sale of drawings and documents might end up with a 10% tax. Consult advisers before you enter into a contract!
Q. If I have a dispute with a Romanian customer, can I litigate in Court?
A. Yes. Views are mixed about the efficiency and competence of the Romanian courts. Generally it is best to avoid in the first place the possibility of litigation. For example, if you are supplying product insist on full payment before the goods are delivered (unless the customer has an established record of payment with you and you are happy to supply on credit).