Three laws constitute the main legal framework for businesses in Romania:
- The Company Law governs certain forms of business organisation. The law covers registration procedures and documentation, capital and shares, administration, mergers and liquidation
- The Commercial Register Law stipulates the procedures required to bring an entry into operation and any subsequent changes
- Competition Law stipulates the rules for maintaining a competitive market.
FORMS OF BUSINESS ORGANISATION
The Company law (Law No. 31/1990) stipulates the following types of business organisation:
- 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)
- Branches and subsidiaries of a foreign company.
The most commonly used business organisations are the limited liability company (SRL) and joint stock company (SA).
GENERAL RULES OF REGISTRATION AND CAPITAL
Registration procedures are similar for the SA and SRL. The deed of association must be signed by the shareholders. In the case of an SRL, the subscribed capital must be paid upon submission of the incorporation documents. In the case of an SA, the shareholders have to pay at least 30% of the subscribed capital upon submission of the incorporation documents. The Trade Register provides a registration certificate and a registration code. A separate VAT registration is then required.
During the registration procedure, the company has a limited legal capacity, only for registration purposes. The registration procedure takes between five and seven days from the day when the relevant file was submitted to the Trade Register.
The minimum capital required for an SRL is RON 200 (about 50 EUR) divided into shares, with at least RON 10 for each share. The minimum capital required for an SA is the equivalent of RON 90,000 (25000 EUR) divided into shares, with at least RON 0.1 for each share.
CORPORATE INCOME TAX
The following entities are liable for corporate income tax:
- Romanian companies
- Foreign companies doing business in Romania through a permanent establishment
- Foreign companies and non-resident individuals doing business in Romania through ajoint venture
- Foreign companies which obtain revenues from real estate transactions or from transactions with shares of a Romanian company
- Romanian individuals who form joint ventures with Romanian companies, for revenues derived in or outside Romania.
- The standard corporate income tax is 16%.
VALUE ADDED TAX (VAT)
The standard VAT rate is 24%. There is a reduced VAT rate of 9% for foods, restaurant services and catering without alchoolic drinks, medicines, books, bread and bakery products, newspapers and periodicals, accommodation in hotels or in places with a similar function, cinema tickets, admission fees at museums and the supply of prostheses and orthopaedic products, with another reduced VAT rate of 5% for the creation of private houses (maximum 120 squar metres) and social buildings as part of the social policy. From July 2012, the exemption limit for VAT amounted to RON 220,000.
As of 2013, it is mandatory to apply the VAT scheme upon collection for companies which have a turnover of less than RON 2,250,000 in the previous year.
The reverse charge mechanism applied to certain cereals and technical plants will be effective until 31 May 2014.
The transfer of business (total or partial) is outside the scope of VAT.