Why invest in Romania?

Investors are always keen to find new opportunities for great investments. So why should they consider Romania as one of their choices? In 2013, Romania registered a 22.3 percent increase in direct foreign investment, according to data released by the National Bank of Romania. The amount of capital invested in the first 11 months of 2013 totalled some 2.4 billion EURO, even though the economic climate was not one of the friendliest at the time. 

Some of Romania's industries are very attractive, not only for foreign investors but also for local ones. The top 3 industries worth considering are agriculture, energy and tourism, these industries are mentioned by most of the studies and also recommended by embassies and chambers of commerce. 

One example of investment for the energy industry is the 91 million euro investment announced by E.ON on April 8th, 2014 for this year in order to upgrade its gas and electricity distribution networks. 

Real estate ownership 

Starting January 2014 , the acquisition of land in Romania and owning buildings has been liberalised for foreign citizens and legal entities under the same conditions and terms as Romanian citizens and legal entities. The conditions for the agricultural land require compliance of a pre-emption right. The new Civil Code states that the authentic form of the sale-purchase agreement does not suffice for ensuring ownership right over real estate. This implies that it is mandatory the transfer of registration with the relevant land book of ownership. This means the ownership right will be transferred when the inscription in the Real Estate Register is made. 

Corporate legal framework 

The most commonly types of companies used in Romania are limited liability companies (LLCs) and joint stock companies (JSCs). The same corporate tax applies to both types – a rate of 16%. The payments of profits for shareholders are being treated as dividents so they may be subject to specific taxation. 

The LLCs and JSCs offer a higher degree of protection for shareholders regarding the liability perspective. The LLC has the advantage of a very low share capital requirements (approximately 45 EURO) as opposed to the JSC – the minimum is about 20.000 EURO. More so, the LLC is governed by a simpler corporate structure, involving a less costs and a lighter operating burden. 

Energy 

The Law no. 220/2008 regarding the promotion of renewable energy projects was created in order to support small projects and it provides opportunities for selling the energy produced at regulated fares, this case implies that the investor no longer benefits from green certificates. The producers accredited after January 1st, 2014 there will be a number of green certificates reduced out of the initial number of green certificates. For the projects already accredited, the E-RES target for the 2014 that benefit from the green certificates scheme was established at 11.1% by the ANRE. 

Labour 

In Romania, investors may find skilled workforce for competitive prices (the average gross salary is 510 EURO/month, while the minimum gross salary is 190 EURO/month). There is also regulated a trial period for employees (it is not considered mandatory), the law provides up to 120 calendar days of trial period. During this time, the employer may fire the employee without any notice and motive. The contributions for social security system vary from 27.75% to 38.45% for the employer (it depends on the working conditions), while the employee's contribution is 32.5%. 

Other incentives 

The Government Emergency Ordinance no. 102/2013 (active from January 1st, 2014) states that the dividends received by holding companies, the revenues obtained by the holding companies and the capital gains acquired by the holding companies from the sales of shares in their subsidiaries are not taxable. Another incentive is offered for deductibility of expenses that are related to development activities and research, there is 5% VAT rate reduced for selling buildings under specific conditions or for the accelerated depreciation of certain assets. The general level of income and profit tax is preserved at 16% and this measure is favourable for new and stable investments.

For further information related to the legal framework for investing in Romania, you may contact our team of lawyers.