Practical information for incorporating a company in Romania
Romania presents an enticing landscape for investment, characterized by low corporate taxes, affordable labor and living costs, and a European-centric mindset among its populace. However, some Romanian peculiarities are sometimes surprising for foreign persons. Below are some key considerations related to establishing a company in Romania.
Potential risks linked to how the provision of services is documented
Services have often been used as pretexts for fraud aimed at reducing corporate income tax and/or VAT. As a result, not just Romanian legislation but also tax authorities adopt a restrictive approach to their treatment in practice. Accordingly, caution is advised when documenting invoices for services. Key aspects to consider are detailed below.
Relevant practical aspects of setting up superficies rights for wind farms
The construction of a wind farm in Romania first requires the securing of the land necessary for this purpose. While the classic approach in this respect is to buy the land in question, in the case of wind farms many investors prefer to secure the land by setting up so-called superficies rights (drepturi de superficie). The superficies right enables its beneficiary to erect his own construction on another person's land. This actually leads to the separation of the ownership of the land from that of the construction. There are important practical aspects and challenges to be considered when drafting superficies agreements.
Protection of whistleblowers in Romania: finally implemented correctly
Even before countries like Germany, where the whistleblower law failed in the federal council (Bundesrat) in February 2023, Romania managed to implement the EU Whistleblowing Directive.
The new collective labor law: renewed need for change due to procedural aspects
On 25.12.2022, the new Law No. 367/ 2022 on Social Dialogue (Social Dialogue Law, "SDL" for short) entered into force. This law has changed Romania's collective labor law. Despite a long legislative process, several problems were identified shortly after the SDG came into force. The following article is a description of the procedural problems that arose due to the lack of coordination with the Labor Code and their solution, which already required law draft amendments.
Basic rules of conduct (Do's & Dont's) around insolvency
According to Law No. 85/2014, Romanian insolvency exists when the existing liquidity of the company is insufficient to pay the debts as they fall due. This means that in Romania, insolvency is confirmed on the basis of a cash flow test. Nevertheless, not all ups and downs in the cash flow of a company lead to its insolvency. Below we briefly analyze when to file a petition to open insolvency and what basic rules must be observed before and after the opening of insolvency proceedings.
Granting and tax treatment of vouchers for employees
The goal of promoting employees and retaining them in the medium and long term is as known as it is important to all employers. In Romania, there is the possibility of granting additional benefits to the salary in the form of vouchers for this purpose.
Attention, waste! Waste management regime tightened
The new year starts with a stricter regime of waste management. Not only have new cases been introduced that trigger penalties – including criminal liability for the fulfillment of certain offenses, but the sanctions have also been tightened, so that companies and individuals face much higher fines. At the same time, by replacing some terms, the extension of certain obligations related to waste management was achieved.
Retention obligation – A desire for simplification
With the turn of the year, there are traditionally new changes in the area of taxes and accounting. This year, they concern, among other things, the obligation to keep documents. The Accounting Law (Law 81/ 1991) obliges all companies operating in Romania that fall within its scope to keep accounting records and evidence documents based on which entries are made for certain periods of time. While the minimum retention obligation was usually 10 years until January 15th, 2023, on the basis of Law 36/ 2023, published in the Official Gazette on 15th of January 2023, this has now been reduced to 5 years.
Flood of new regulations in Romanian labor law
At the end of the past year, a considerable number of relevant and fundamental innovations occurred in Romanian labor law. Although a separate article should be devoted to each one, the innovations of the past two months are presented below only in a synopsis.