Repatriation of Profits from Romania

Profit repatriation of non-resident companies conducting their activity in Romania is possible and the dominant regulation mostly establishing the legal framework is provided by the National Bank of Romania. We shall explain below all other important features related to this rather intricate topic.

Foreign investors in Romania do have the alternative of repatriation of profits and the transferred items must follow certain regulations related to exchange control. The authority which administers these types of directives is represented by the Romanian National Bank. Earnings, either from dividends or profits, can be transferred if the taxation obligations are being met according to stipulations. A 16% withholding tax is to be paid for dividends according to Romanian regulations but this rate can be modified as a consequence of a tax treaty or a directive of parent-subsidiary origins with EU implications. A Romanian company pays dividends to another legal entity, resident in another EU state, or to a permanent company representing a corporation located in another EU member state, following the 16%-tax regulations. These dividends may be subject to exemption if a resident company derives them either from another company in an EU member state or another legal entity being a resident, and if the case involves another company, non-EU one, that has participated together with Romania to a treaty convention, on the fundamental condition that the Romanian company owns the minimum of 10% of the distributing company shares for a continuous time frame of two years.  

The general rule states that non-resident entities must pay this 16% withholding tax on earnings obtained in Romania covering the following attributes: all profits obtained through services performed in here, including management, royalties, revenues determined through termination of a resident legal entity, and as mentioned above, dividends. So business activities performed by foreign investors in Romania generate profits which can be transferred in the country of origin. We shall take several examples in order to concisely illustrate several basic rules concerning the repatriation of profits. An EU-member-state company operates in Romania through an establishment which acts as a subsidiary. The object of activity concerns public constructions. In this case the parent company may receive profits from the subsidiary taken into account that there is a chance for exemption if the EU parent company holds at least 10% of the shares belonging to the subsidiary for two uninterrupted years.

If the supposed EU company decides to operate in Romania using a structure with branch functions then profits gained here can be distributed without paying any dividend taxes because earnings cannot be considered as dividends. This same scenario applies for an EU company operating directly in Romania. The withholding tax regime was amended starting with the 1^st of January 2014 which means that exemptions applying to dividends are limited only to situations when these dividends are remunerated to affiliated legal entities incorporated in other EU states. Before these changes, the exemption regime could be considered as well for companies with an affiliation status originating from the European Free Trade Association perimeter. Understanding all legal aspects dictating these procedures directly contribute to optimal capital dynamism within a company’s natural development. Our team strongly encourages foreign investors to seek professional help, able to point out all possible vulnerabilities, unexpected alternatives and best options a company may have through its activities conducted in Romania. 

VAT on real estate transactions in Romania

For any real estate investor it becomes mandatory to understand the standard terms and conditions related to VAT regulations.

Charging VAT on property transactions is subject to exception when dealing with a rental or leasing procedure. This is a case of VAT exemption in Romania but there are some options for the lessor to submit a report to designated authorities in order to apply taxation regulations. For this situation, a standard 24% VAT is to be taken into account. Another case when a standard VAT procedure is not a matter of concern regards the sale of properties others than those defined as new establishments or the land on which the building was built. But it is allowed to apply for taxation if the situation requires it. New buildings sale and building land sale are subject to taxation and a standard percentage of 24% applies in this case. The term “new buildings” also includes establishments which were rehabilitated and the costs of all these adjustments exceed 50% of the entire building value on the market. The VAT rate is modified to 5% if the buildings taken into consideration are intended to serve for seniors or as children homes, as well those which are provided to city halls to be used for social purposes. Starting with February 2013 the usage right over a real property can be assigned as usufruct or superficies right.

A particular instance is represented by the adjustment of input VAT which occurs when the lessor opts for not taxing the fees for rent or the sale transaction. The standard period which applies in this case is of 20 years and it begins with the first day of the year when the acquisition takes place. There are special conditions to be fulfilled in order to conclude these procedures. The transfer of assets which is generally involved when transferring a business is not considered as taxable only if the beneficiary is a taxable person and the transferred asset can be nominated as an independent unit.

VAT on property transactions in Romania - refunds

VAT returns are also a specific matter that deserves to be brought into discussion. The Romanian VAT registered entities will have their requests processed within 45 days since submission but this term can be extended to 90 days provided that some supplementary audits are to be performed by authorities. On special conditions, for those entities that manage to be labeled as particular cases (such as those with a clean tax record) procedures can be accelerated. For companies which are incorporated within EU perimeter, the reimbursement procedures are administered through the 9^th Directive. Requests will be submitted to authorities in the state where the company was registered and thereafter transferred to Romanian authorities. The 13^th Directive controls VAT reimbursements for non-EU entities. As details above state it, the VAT on real estate transactions in Romania is of 24% for new buildings and building land, taking into consideration as well all exceptions mentioned in this article. For any further information related to this topic, you can contact our lawyers.

What types of companies you can set up in Italy

Italy is an important destination for foreign investors who want to develop a business in manufacturing, agriculture and tourism, some of the most attractive economy fields in this country, well-known for its great potential and the incentives offered by the authorities for performing exports.

Foreign investors can benefit of investment loans at a reduced interest rate and deductions from taxable income granted for those who have a big amount as investment capital, more then it’s required by law.

When an entrepreneur thinks of opening a company in Italy, firstly he has to decide what type of firm is more appropriate for his goal.

The main types of companies an entrepreneur can set up in Italy are the following:

- limited liability company (Societa a Responsabilita Limitata) is recommended for investors who are interested in small and medium businesses and don’t want to invest a big amount for share capital. They need to deposit minimum 10,000 EUR for the share capital;

- joint stock company (Societa per Azioni) is suitable for important business and investment and it’s required a minimum 120,000 EUR share capital. At the registration of the joint stock company, it’s necessary to pay 30,000 EUR, if the firm has two or many share holders, and the total amount in case there is only one shareholder.

- general partnership is formed of two or many entities and for this type of firm no minimum share is mandatory. All the members of the partnership have full liability and they do business on behalf of the same company.

- Limited partnership is similar to general partnership, but in this case at least one of the members should have limited liability and other one is general, with full liability.

- Partnership limited by shares is a firm in which there are at least two partners and one of them will have limited liability and another one is a general member. The partners have no minimum capital share to pay at the registration of the new company.

If you need more information about registration of a company in Italy and assistance throughout the whole procedure of setting up a firm, you can contact our local specialists in company formation

Why invest in Switzerland?

Switzerland has one of the most rich, modern and stable economies in Europe and in the world. It has one of the smallest taxation fees of all developed countries. Its neutral status has helped retain its economic stability and the very low inflation rate ensures that the Swiss franc is one of the world's strongest currencies. Employees have one of the highest salaries per capita from Europe and therefore Switzerland's quality of life is rated among the best in the world.

In addition to all these, it provides investors with the opportunity of very generous interest rates and therefore convincing them to invest in the country.

Investments in Switzerland

Switzerland is an open gateway to European, African and Middle-Eastern markets, due to its strategic location. Its geographical location in central Europe offers the opportunity for an easy access to over 30 countries by car.

Switzerland offers well-developed infrastructures, as well as a competitive business environment. The Swiss market is a good testing ground for the introduction of new high technology and spends the most capital in the world in IT. Switzerland is also one of the world’s most advanced countries in research and development. Last, but not least, tourism is a key economic sector, generating 6% of the Swiss gross domestic product.

In 2002, Switzerland was ranked 15th in the World Economic Forum’s Global Competitive Index, but by 2009, it climbed up the list to the first position.

Swiss Business Hubs

The Swiss Government created the Swiss “one-stop-shop” in order to attract entrepreneurs interested in doing business in various countries around the world and for foreign entrepreneurs interested in bringing their business to Switzerland. The group can help arrange initial contacts, find specific providers and manufacturers, and also find other useful information faster.

Workforce

Switzerland is very open to foreigners and has a diverse population. 22% of the whole population is made up from residential and temporary foreign workers which make for a high educated multilingual employment force. It also provides the employers with the choice of four languages besides English and these are German, French, Italian and Romansh. They are highly productive and create high-quality products and services. The majority of Swiss managers have more international experience than average.

Taxes

Switzerland presents one of the friendliest tax systems in the world. Many tax incentives are offered on both federal as well as cantonal level in Switzerland, in order to attract companies to establish operations and invest in their jurisdictions. In some cantons new investors can profit for a period of up to ten years of taxes free business.  This possibility, of being able to benefit from partial or full corporate income tax breaks for up to 10 years is also possible at a federal level.

However, tax breaks are available for investment projects that meet certain requirements, for example creation of new jobs or non-competition with existing businesses. When it comes to cantonal level, business incentives are generally granted in connection with the creation of at least 10 to 20 new local jobs. The Government also offers subsidized loans up to 25% of financing packages in order to encourage infrastructural investment in tourist facilities, communications and training facilities.

Social Benefits

Switzerland is one of the top 10 wealthiest countries in the world but it can be expensive to live in. However, the social benefits by far manage to outweigh the costs:  the public transportation system is very good and it offers the best health care system in the world

It is viewed as one of the most appropriate countries to raise healthy, multilingual children due to its excellent education system, at the state school and academic level, also providing dual vocational training system. Children raised in Switzerland are provided with the opportunity to attend world-renowned universities, technical institutes or valuable R&D institutions.

The Swiss have a great respect for personal privacy and have no prejudice against wealthy people. The residents enjoy great political stability not being exposed to war since 1515. The country offers the highest personal safety in Europe and social harmony. Switzerland remains the country with the highest quality of living according to a governmental survey, and it also has no official religious state.

Stable economy

Switzerland became perfect destination for investors due to its bank secrecy and monetary security policies. Strategically located on the continent of Europe, Switzerland has an accessible and first-rate infrastructure network for international trades. Its stability is also provided by the agreements signed with the European Union that offer a similar business environment as inside the EU.

The Swiss franc has been rightfully viewed as a refuge through the years due to its stability over times. It was the currency of choice in the 1970s for Americans looking to escape rampant inflation because few other asset classes offered this much protection. Also nowadays, in a prolonged period of on-again off-again crisis, the Alpine country’s currency is viewed as one of the world's most popular safe-haven investment destinations.

Therefore judging from its political neutrality to its banking secrecy, the country has reputation for protecting valuables. But if adding strong economy, low national debt, low inflation, currency and price stability, low unemployment, efficient capital markets and a highly professional international banking system, Switzerland becomes a safe and appealing investment destination in its own right. 

Foreign Investment and Protection of Intellectual Property Rights in Romania

Developing a solid business also involves some specific terms regarding the functions of the intellectual property apparatus. For every foreign investor coming to Romania becomes highly authoritative to understand the pertinence of such legal framework.

The importance of becoming fully aware of all direct effects of steady implementation of intellectual property regime, when developing any type of business, represents a key aspect for reaching optimal profits. Even if considered a secondary matter and generally seen as not such an important factor able to affect the overall coherent business development project, the protection of intellectual property rights is in fact strongly influencing the investment sector. As we are constantly providing legal assistance to investors in various fields we managed to technically grasp all subtle meanings of IPR area for sectors which directly rely on applying the intellectual property concepts (technology-active domains) but also for some different economic divisions such as brewing industry. Probably the most talked-about topic, at this level, relates to investors’ tendency to focus on projects involving distribution, ignoring the local production field if questions in connection to IPR functions are not properly handled and, most important, effectively answered. Our lawyers gathered the most significant law tools regulating this sector adding as well several factual cases exhibiting the relevance of accurately implementing the intellectual property notions.

In terms of copyrighting, the legal background regulating judicial principles in Romania is represented by Law 8/1996 which was constantly improved since present requirements for protective measures, in this respect, become more and more stringent as dictated by rapid development of various technological sectors. This particular legal framework covers issues related to scientific and artistic topics reaching as well notions particular for more specific areas such as the IT, architecture or audiovisual domain. Concepts regarding the trademarks registration and functions are handled by Law 84/1998. Protection of trademarks, in Romania, is regulated as well through the 1894 Madrid Agreement and stipulations within the Community Trademark System. Concepts regarding the registration of drawings and models and their protection are monitored through Law 129/1992. In our country, these are protected for a period of ten years and this term can be extended. Law 64/1991 covers matters concerning the registration procedures and functions of patents. The patent certificate is provided through the State Office for Inventions and Trademarks (OSIM). All these legal frames of reference are frequently amended, as mentioned before, according to newly identified practicalities of this particular sector.

The legal background regulating matters of IPR becomes much more approachable when illustrated through common cases that explain the necessity for a solid juridical milieu. Quite a common situation is described by the importance of designing a highly functional legal basis for patent license agreements including different types of commercial agreements related to IPR concepts. Protection of trademarks and also infringement cases in this area are frequently encountered issues for a large range of domains considering the importance of a brand name and logo and the huge impact on the market. The fair use, the ownership of various technological products, the influence of internet capability on violating various intellectual property rights – all these are items which are repeatedly debated in legal matters. Another important fact concerning this sector regards certain vulnerabilities introduced by the disorientation of owners who fail to register their inventions, creations or other artistic approaches. For certain industries such as the IT area, pharmaceutical field, petroleum industry, etc, understating the proper use of the legal framework becomes fundamental, especially when involving research projects developed for identifying new technologies. Our main focus lies on the continuous effort to increase IPR awareness for our clients in order to request legal counseling whenever a situation requires such a fact. The IP department within our law firm is able to deliver solutions for an impressive variety of legal matters regarding intellectual property concepts. 

The Romanian Real Estate Market in 2014

Representing an important investment area, the real estate market went through major transformations imposing new strategies for both developers and investors. At the end of 2013, even still callous, the overall result was positive providing a valuable reinforcement for business approaches in this domain.

The real estate market progressively recovered during 2013 announcing positive results for a 2014 which cannot be defined as excessive but rather looking cautious and premeditated. Transactions in this area are expected to gradually increase providing notable opportunities for the commercial real estate sector. In this perimeter, the office segment seems to be the most engaging unit. Another aspect which is frequently brought into debate concerns the risk appetite which provides sometimes an opportunity for business initiative more venturesome and, in other situations, identifies the most secure alternative which might not guarantee a large profit but it is undoubtedly regarded as entirely reliable. For 2014, the Romanian office segment continues the upward trend of last year since large BPO companies decided to extend their businesses in Romania. As stated in a recent report, not only outsourcing companies announced their intention to extend operations in our country but IT corporations as well, mainly convinced by high performance employees. The overall offer for office spaces to be provided in 2014 covers an average of 120,000 sq m and some developers might postpone deadlines because of an unexpected increase of transactions signed by companies interested to extend their business. As expected, most important projects announced for 2014 are located in Bucharest: Green Gate (30,000 sq m), AFI Business Park (24,000 sq m) and City Offices (25,000 sq m).

Apart from the office segment, supermarkets and hypermarkets intend to expand indicating for developers a clear demand in the retail park-type approaches which comes with a unique format: a relatively short execution period and lower execution costs. Operators in the supermarket/hypermarket field are determined to broaden their activities creating an important niche for developers concerned with the almost motionless overall perspective of the real estate market during the last economic crisis.  Another area which proves highly dynamic is the one representing industrial and logistics projects. A particular characteristic for 2013 was the increasing demand for production spaces. This promising tendency was particularly animated by initiatives coming from the automotive industry. The US based Lear Corporation which is a global automotive supplier signed a lease agreement for 12,000 sq m within Solo Industrial Park. This appears to be one of the most important contracts in Romania for this sector, in 2013. An approximate evaluation performed at the end of 2013 indicates an average of 1,8 million sq m designed for industrial use. Interests for new retail space came from franchisees willing to expand their operations. This particular movement seems to be generally influenced by the positive response obtained through profits coming from shopping centers and galleries. For 2014, analysts predict as well a dynamic evolution in non-core fields such as smaller office buildings or even distressed retail centers. The general attitude expressed towards the real estate investment in Romania, for 2014, focuses on conservative movements, evaluating all risks and generating initiatives in areas showing major potential. Developers and investors are interested in securing their approaches avoiding perimeters which involve risky speculative actions.

Investments in Romania's automotive industry

The automotive industry was clearly refreshened in 2013 and foreign investors identified ways of either extending their businesses or beginning new projects. We indicate below several of the most prominent approaches to be taken into consideration as valid examples of successful initiatives.

Considered for a while a sensitive industry area, the automotive domain began to forcefully extend in our country. Romania becomes more and more engaging for auto components manufacturers who decide to open and expand their businesses within this perimeter. Their registered demands continuously improve allowing new investments and delivering lucrative opportunities in this respect. The beginning of 2013 brought a turnover increase rate of almost 4% and this definitely positive evolution was as well confirmed by the decision of several important international market participants to invest in Romania’s potential. We shall list below most significant investment approaches notable for the automotive industry in our country pointing out as well each specific field that was considered advantageous by each investor. The Polish-Dutch solution provider Bianor introduces the injection moulding techniques used to offer an alternative for the automotive industry in order to manufacture plastic components for cars reducing fuel consumption. This production site was opened in Ploiesti on July, 2013, and the investor described the overall approached as a homogenous strategy to experiment the Central and Eastern Europe market.

After opening a new steering wheel facility in 2013, the USA based company TRW, announced a new project in Roman. The supplier of automotive components and systems decided to extend their investment through an airbag factory which will be located in Roman. Their factory in Timisoara remains their largest project providing as well airbags and steering wheels. In November, 2013, Lear Corporation announced the opening of the automotive seating plant in Iasi. Their choice was strongly supported by the fact that the town of Iasi was seen as an important center active in the textile industry. In November, 2013, Continental, the German automotive supplier, launched a new research and development facility in Timisoara. The EUR 20-million investments are also complemented by the extension of the factory in Timisoara. Last year another German automotive system manufacturer, Kirchhoff Automotive, opened a new plant in Craiova.

The economic forecasts for the foreign automotive companies in Romania are generally optimistic. The automotive sector for investments focusing on car components manufacturing continues to improve and successfully delivers resources for an increasing number of business entities interested in exploring possibilities in Romania. In July 2013, Daimler announced the opening of the assembly plant providing automatic transmissions for Mercedes-Benz. The new project is located in Sebes and will probably provide 250 jobs for the area. In 2013, the Italian producer Vimercati SPA opened in Bacau a new unit delivering mecatronic parts to other automotive companies such as BMW, Fiat or Iveco. Our main purpose, through this brief presentation, is to provide convincing and successful examples of foreign investors clearly estimating the true potential of this country and obviously determined to build their approaches in a highly lucrative manner. Investments in Romania's automotive industry are to be understood as solid alternatives for various business concepts and our team, through its professional experts, offers legal counseling and additional assistance to all companies interested to initiate and develop a project of this type. Our lawyers will provide complex analyses evaluating the approach and indicating all suitable auxiliary options. 

Start an outsourcing company in Romania

Outsourcing is a major strategy which is taken into consideration by powerful corporations around the world. Romania delivers resources for a large range of domains representing the shared service centers and the business process outsourcing.

The outsourcing field became a preferred alternative for a large number of companies and Romania gradually developed solid strategies to provide multiple options in this area. Even if Central Eastern Europe is already an established market for these types of services, the resources to sustain newly incorporating entities prove inexhaustible. The main reasons behind this fact directly relate to highly skilled labor force which is available in these European countries and Romania is no exception. Besides the language proficiency level which impressively exceeds high standards by far, education covering specific fields provides flawless experts and, most important, always easy adapting to change. Another benefit which is as well taken into consideration by investors concerns the human capital which is at low costs. State incentives for companies investing in Romania are considered as key factors influencing frequently the decision to continue or initiate business activities in our country. Ministry of Public Finance recently announced that seven companies shall receive up to €67 million as state aids for creating 3,151 new jobs, for the next three years. Indeed, as numbers indicate the IT field is the favorite choice but other domains are professionally covered as well. If intending to start an outsourcing company in Romania investors should know that the finance area, administrative services, accounting, collections, procurement, engineering services, legal services, real estate, warranty management or tele-sales are important sectors that successfully accomplish all required functionalities of an outsourced department.

Most prominent benefits when deciding to open a BPO business in Romania strictly refer to reducing costs, cash infusion aspects, saving internal resources for different tasks, raising standards through enlarging perspective on labor quality since world-class workforce is taken into account. Social contributions in Romania refer to social security, unemployment fund, risk fund, medical leave and allowance and health fund. Corporate taxation varies for resident and non-resident companies. Entities that can be defined as resident are to be taxed according to their worldwide income but those companies which are not resident will be taxed for their incomes obtained in Romania. Incomes which are considered as exception from taxation may refer to dividends. Starting January, 1^st, 2014, dividends obtained by a resident company from another resident company (which can be from an EU member state or a non-EU territory sharing a tax treaty with Romania) shall not be taxed provided the beneficiary company possesses at least ten percents of the other company’s shares, for a time interval of a continual one year. The sale of shares and also of real property, by resident and non-resident companies, is considered part of the profit and a 16% tax is applied for such cases. Our team is available for any additional detail and for legal counseling intended to handle any procedure common for incorporating BPO companies in Romania. 

New provisions on asylum system in Romania

The recent amendments brought about through the Ordinance No. 1/2014, published in the Official Gazette on the 27^th of January, 2014, modify and add several terms concerning Law No. 122/2006 on asylum in Romania and also related to the Government Ordinance No. 44/2004 regarding social integration of aliens who previously acquired a form of protection or residence permit granted by the Romanian state, including individuals from the EU member states and from the EAA.

Changes performed include the addition of the definition of terms such as “international protection“referring to the refugee status granted through the subsidiary protection. Important adjustments cover the necessity for establishing a clear function of the responsibilities of the Romanian state providing international protection to aliens with long-term residence permits, issued by another member state, taking into consideration the obligation for initiating procedures to alter terms related to granting international protection. Another aspect covered through these latest changes impacting the asylum system in Romania is connected to Romania’s state obligations to accepting the entrance in our country of citizens who benefit from international protection provided that they were taken out of a member state which issued for them the long-term residence permit. These newly introduced features include as well the addition of references stating that for the case when a request was admitted concerning the transfer of responsibility, for a foreign citizen who was provided a long-term residence permit by a member state, the General Inspectorate for Immigration must request the member state in question to modify the terms regulating procedures for granting international protection. Due to these changes, the new legal support regarding the asylum system in Romania comes to provide supplementary provisions explaining the regime of foreigners requesting international protection in Romania and the status of refugees already benefiting from international protection in our country. It brings new details to provisions regulating procedures for granting, cessation and cancellation of international protection in Romania; it indicates procedures for establishing the member state which has the responsibility to review the asylum request, conditions for granting it, exclusion and cessation of temporary protection.

According to these provisions the residence permit is provided as soon as possible, after the international protection granting, for three years, for persons whose refugee status was acknowledged, or for two years, for persons who were provided the subsidiary protection. After the expiry date a new permit shall be issued. Travel documents must be issued, on demand, for beneficiaries of the international protection regime in Romania for two years, without an extending option. Another document must be provided after expiry date. An entire article was added in order to regulate the situation of vulnerable persons with special needs. This category includes minors, unaccompanied minors, people with disabilities, elderly persons, pregnant women, single parents with minor children, victims of human trafficking, people with mental illnesses, persons who were tortured, raped or involved in other violent instances with severe psychological outcomes. Experts from the General Inspectorate for Immigration will evaluate condition for these people establishing if they fall into this category.

We fully comprehend the vulnerabilities of such cases and our lawyers strictly approach these contexts. Our team delivers any necessary detail related to either asylum conditions in our country or application procedures for Romanian residence permit.