Do you plan on setting up a business as EU citizen living in Romania? Are you interested in relocating to Romania and setting up your own company here and gaining your own living from its revenues?
There are many entrepreneurs from other EU countries who are interested in Romania as a business investing environment. They either relocate to Romania for completely other reasons and want to transfer their business affairs here as well, or move here solely for the purpose of business investment. No matter your situation, there are certain basic things you may need to know for successfully setting up and running a company in Romania, and that you should know to mitigate any potential risks.
Of course, a smooth startup doesn’t guarantee the success of your business idea. Lots of people have various business ideas that may or may not grow into real business plans, as well as the potential to be successful. However, the difference between those who make a good profit and those who are not is that the latter do not research and plan in advance, and when they face some problems, they give up.
In this article, we will highlight those basic facts you need to know about opening and running a business in Romania as EU national, and will bring them out to light, so you can have a smooth start. So, here is what you must know about setting up a business as EU citizen.
How to register a business in Romania
For setting up a business as EU citizen in Romania it is essential first to have the right “business vehicle” in place. One that can fit to your investment needs and to the specific business activities you plan to carry out. The most common type of Romanian company you can use for running almost any type of business is the limited liability company (in Romanian: “societate cu răspundere limitată” or even the simpler acronym: “SRL”). The limited liability company is the most flexible type of entity under which you can manage a business in Romania, and which also offers legal safeguards in case of any issues such as: employee litigations, tax litigations, insolvency, bankruptcy, etc.
The main advantages of a limited liability company compared to other types are:
Incorporating a company will also offer you the opportunity to get financing, to hire the necessary professionals, and to conclude business partnerships. Plus, let’s not forget that you can easily and effortlessly collaborate with suppliers and customers through a business entity.
The entire process of setting up a Romanian limited liability company implies several mandatory steps, such as:
All these steps finish with the registration of the company to the Romanian Trade Register Office. This is the institution that operates under the Chamber of Commerce and Industry. This public institution approves the registration of all businesses in Romania and gathers data on all businesses that have been registered at the national level.
Professional assistance may be required during every stage of the company setup process, so you can avoid any red tape or procedural obstacles which could imply significant delay. If the company registration process goes smoothly, it should take around 1 to 2 weeks until you get the final company registration approval issued by the authorities.
The good news is that, if you have EU citizenship, you will not need to apply for any immigration approval or residency permit for investment purposes before entering and staying in Romania. Also, you do not need to fulfill certain minimum capital criterion, nor employment requirements to be able to obtain the long-term immigration registration. So, setting up a business as EU citizen in Romania is not a complicated process either from an immigration perspective.
Immigration registration as EU national
As mentioned above, setting up a business as EU citizen in Romania does not require any special approvals from an immigration perspective. In practice, this means that the setup of the Romanian company for you as individual shareholder is the same as for any other Romanian individual.
Of course, unless there are foreign shareholders (from outside the EU member states) in the future company. In such case, if the foreign individual (having non-EU citizenship) also wants to obtain a right of stay in Romania, the immigration process gets complicated, as the conditions for registering the right of stay for investment purposes as non-EU national are significantly different.
As EU citizen, you can travel to and live in Romania without any restrictions for up to 90 days of presence. If you need to extend your stay for over 90 days, you must register your residency with the local Immigration Office. The registration of the residency can be done either for the official purpose of business investment, or just by proving you have your own financial means of living in the country. Depending on which one you choose, different conditions apply or documents must be prepared for the registration file. Here are in short the most important for each of the alternatives:
In both of the cases, the immigration registration must be done with the Romanian Immigration Office where you register your address in Romania (i.e. if you reside in Bucharest, you must do the registration with the Bucharest Immigration Office, while if you reside for example in Cluj, you must register with the Immigration Office of Cluj county).
The registration application can be initially done online, on the Romanian Immigration Office’s platform, here. But it can be validated only after you also pay a visit to the local Immigration Office, where you will also be fingerprinted and photographed.
Once the application is done, you will be issued a residency registration certificate by the Immigration Office within maximum 48 hours. The registration certificate is generally valid for 5 years. This residency certificate attests your right to stay on the Romanian territory as EU national.
Tax registration of the company
From a tax perspective, once the company is finally registered and authorized by the Romanian Trade Register, the latter also notifies electronically the Romanian Tax Office on the newly incorporated company details. As soon as the tax authorities receive the information, it registers the company for tax reporting purposes.
Nevertheless, the company also bears an obligation for tax registration to the local Romanian tax office. The registration must be done within a deadline of 30 days as of the company’s official incorporation date, by submitting a special tax form (form 010), together with the company’s incorporation documents such as: shareholders agreement, registration certificate issued by the Trade Register Office, etc.
The tax identification number of the company is what entrepreneurs use to declare any company tax obligations to the tax authorities. This is a numerical code that you will get once your business is being registered.
Once the tax registration is done, you can start issuing invoices for the services/products you sell. The tax identification number of the company must always be specified on all invoices you issue, together with the other identification elements, such as: full name of the company, address of the company, company registration number at the Romanian Trade Register, bank account details.
Any newly registered Romanian company isn’t subject to VAT. A startup is actually by default a non-VAT collector. In practice, this means that any invoices the company issues will not reflect any VAT. In the same time, any VAT that the company pays to its suppliers will be a final cost for the company, same as for any individual.
The company will become automatically subject to VAT once it exceeds the annual revenue threshold of 300,000 RON. If the company does not generate a minimum revenue of 300,000 RON you can still register it for VAT purposes optionally.
When registering for VAT, you must provide certain documentation in addition to the application form, such as:
- Certificate from the Romanian Trade Register Office detailing the company’s information;
- Articles of Association;
- Documentation that demonstrates that the company will carry out taxable transactions in this country.
For year 2020, the VAT standard rate is 19%. There are also reduced VAT rates applicable for certain types of services or products, of 9%, and 5% respectively.
What are the reasons that make Romania so attractive for foreign entrepreneurs?
Well, there are many great advantages that this country offers to anyone who is planning to invest here. Let’s take a look at the reasons why foreign entrepreneurs choose this location for setting up their business.
- This country is a member of the EU and NATO as well; This highly increases credibility in the European business environment;
- Excellent geographical position for import and export;
- Opening to the Black Sea and very easy and quick access to Asia and the Middle East;
- Significant foreign investments thanks to the economic potential, specialized workforce, and sales market;
- Concluded agreements with lots of states on avoiding double taxation;
- Inexpensive, but highly educated labor, compared to many other countries in the region – e.g. Hungary, Poland, Czech Republic, etc.;