How To Start A Business In Romania

Romania is known for being home to medieval fortresses and Dracula himself, as well as the impressive Carpathian mountains. It’s leading industries include the car and machinery manufacturing sector, as well as its chemical goods sector. These, among others, are characteristics that make Romania and attractive destination for starting a business.

However, there are specific factors to consider before setting up new business ventures there. These include the country’s economic state, legal and regulatory requirements for businesses as well as taxation policies applicable to businesses and the labour laws.

Romania presents many opportunities for entrepreneurs, but it is essential to prepare thoroughly.

 

Economic Overview

 

Romania, know to be a nation of high-income status, is currently facing challenges due to the war in Ukraine and high inflation influencing consumer spending. According to the World Bank, Romania’s GDP decreased to 2.1% in 2023.

Inflation has become a major concern for Romania as the European Commission forecasts inflation to reach 6.9% in 2024.

Despite these challenges, there is hope on the horizon. Private consumption is expected to increase slightly due to rising disposable incomes which is driven by an increase in by minimum wages and pensions. Additionally, EU-funded investments are also anticipated to boost the economy.

 

Legal And Regulatory Framework

 

Romania has made a significant effort to simplify the business registration process, making it convenient for businesses to make their mark there. Businesses can register online at the Romanian Trade Register, which reduces processing times. This platform makes the registration process more transparent and accessible for local and foreign investors.

Entrepreneurs can choose from a variety of business entity structures, such as limited liability companies and sole proprietorship.

Entrepreneurs will typically need to provide basic information like the company name, registered office address, articles of association, and details of the shareholders or directors along with their identity document. A capital contribution might also be required.

The business registration process in Romania is usually quite timely, with completion often taking a few days, provided all documentation is in order.Following successful registration, businesses may need additional permits and licenses which is industry dependant.

 

 

Taxation And Financial Management

 

Romania has a flat corporate income tax rate of 16% for resident companies and foreign companies that operate through a permanent establishment (Dentons). This competitive rate may be ideal for entrepreneurs who want to avoid the heavy tax burden.

The standard VAT rate of Romania is currently 19%, although reduced rates apply to specific services and goods. Businesses must register for VAT if their annual turnover exceeds a specific threshold set by the Romanian tax authorities.

Romania offers a unique feature for smaller businesses which is the micro-tax regime. This entails a significantly lower tax rate (either 1% or 3%) on turnover for companies that meet certain criteria, such as having limited annual revenue and employee numbers according to Finevolution Poland. This regime can be a major advantage for startups.

Romania also has a digital tax filing system which simplifies the process for businesses and startups. Consulting a taz advisor is still recommended for personal guidance on tax obligations and compliance requirements.

 

Hiring And Managing Employees

 

Written employment contract are mandatory in Romania and must outline job details, salary, days off, and termination clauses. They must also adhere to the Romanian Labour Code, which sets the minimum standards for employee rights and benefits.

The standard work week in Romania is 40 hours, and working days may have a maximum of 8 hours. There are regulations pertaining to overtime work and it is compensated with additional pay or time off. Employees are entitled to paid vacations, public holidays, and sick leave as regulated by law.

Employers must compensate employees with a mandatory minimum wage monthly salary and they are also responsible for contributing to a social security system that covers pensions, healthcare, and unemployment benefits. Employers with more than 20 employees must also provide training for their workforce annually.

Notice periods and severance pay vary depending on the reason for termination of employees and is outlined in the Labour Code. Romanian companies may also be inspected by labour authorities to ensure compliance with regulations.

In conclusion, Romania is an attractive destination for entrepreneurs thanks to its strong manufacturing sector and supportive legal frameworks, although it is crucial to understand the economic challenges and remain compliant with tax and labour laws.

Entrepreneurs must be considerate of these factors to establish a successful venture in Romania. With adequate preparation, Romania is a promising environment for business growth and innovation.