Romania

Business Passport
2019 Edition

1
 Contents

1 Country overview
Geographical overview
5
5
Population and language 5
Economy overview 5
Political and legal environment 7
Reforms and economic development 9
EU funding and government incentives for enterprises 12

2 Business overview
Types of business 19
18

Labor force and employment regulations 21

Work regulations for foreigners 24
Entrepreneurship 26
Intellectual and industrial property 27
Competition legislation 28
Environmental legislation 29

3 Financial Services
Banking 31
31

Capital Markets 37
Insurance&Private pensions 40

4 Energy 44
Oil & Gas 45
Power and Utilities 50

5 Accounting, auditing and reporting

Accounting and financial reporting
55
55
Main bookkeeping and document submission requirements 57
Auditing 59

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6 Taxation in Romania
Corporate taxes at a glance
Profits tax
61
61
61
Withholding taxes 72
Value added tax (VAT) 74
Customs duties 82
Excise duty 84
Local taxes 85
Stamp duty 87
Individual taxation 87
Tax Procedure Code 93
Tax sanctions 97

7 Outsourcing Market in Romania

Where SSCs nest and what they're doing
Current and future workforce
99
99
100
Office space 101
Brief conclusion 101

8 EY in Romania 102

9 Appendix 106

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1 Country
overview

4
Moldova airview
1.1. Geographical overview
Romania is located west of the Black Sea in Southeast
Europe and has an area of approximately 238,391 sq km.
Moldova and Ukraine border Romania on its east and
north, while Hungary and Serbia border Romania on its
west and Bulgaria borders its south. The country is broadly
divided into three regions: the central and northwestern
region, comprising Transylvania, Crișana, and Banat and
encompassing the Carpathian Mountains; the southern
region, comprising the Wallachian Plain with the river
Danube forming the country's southern border; and the
eastern region, comprising the Moldovian Plain. Bucharest
is the capital city, with a population of 1.9 million. Other
large cities include Iasi, Cluj-Napoca, Timisoara, Constanta,
Craiova, Galati and Brasov. Romania has a continental
European climate with warm summers and cold winters.
1.2. Population and language
Romania has an average density of 81.96 inhabitants
per sq km and a population of 19.53 million (according
to the latest available data, 2018), 88.9% of whom are
ethnic Romanians. Minorities include Hungarian (6.5%),
Roma (3.3%), German (0.2%) and Ukrainian (0.2%).
Romanian is the common language used throughout the
country. In the northwest and central regions, Hungarian
and German languages are also spoken. Under the
Constitution, ethnic minorities are allowed to use their
mother tongue in certain circumstances (e.g. in court).
1.3. Economy overview
In the last few years, the Romanian fiscal environment saw
a lot of improvements, which ranks Romania on the 52th
place in the World Bank's "Doing Business 2019" index.
However, transparency and predictability of the regulatory
framework could be further improved and this remains a
top priority for the authorities. Although inefficiencies in
public administration still represent a burden on business,
they have been lowered by the actions taken in the recent
years.
Addressing corruption and fraud in public procurement
is a constant preoccupation of the relevant state bodies
and positive results are now showing. Moreover, the civil
society is more and more aware about these topics and
the voice of the citizens is heard loud and clear when
necessary.
Romania works on developing the infrastructure. Every
year the motorways network is constantly expanded,
although the pace could be significantly improved. The
development of Romania's infrastructure is also supported
by the availability of the EU structural funds.
Ease of doing business measured as distance to
frontier
Latvia (19) 79.59
Poland (33) 76.59
Czech Republic (35) 76.1

Slovak Republic (42) 75.17

Romania (52) 72.3

Hungary (53) 72.28

Bulgaria (59) 71.24

66 68 70 72 74 76 78 80 82

Source: World Bank Doing Business 2019, Distance to frontier score

captures the gap between an economy's current performance and the
best practice across the entire sample of indicators across 10 Doing
Business indicator sets. Higher distance to frontier scores show absolute
better ease of doing business (as the frontier is set at 100 percentage
points), while lower scores show absolute poorer ease of doing business
(the worst performance is set at 0 percentage points).

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The progress with the promotion of competition in

energy markets contributes to a more efficient energy
infrastructure. Broadband coverage is high and the
strong internet infrastructure allows high speed data
transfer and positions Romania in the top 5 countries
worldwide for broadband internet connection1.
In this environment, entrepreneurship rises and one
can now see industry sector leaders being domestic
entrepreneurial companies with 10-20 years of
activity in average. Romania is one of the most
attractive markets in Europe for IT investment and
outsourcing, with a highly skilled and diversified
workforce and competitive prices. Romania's IT sector
has seen continuous growth over the past decade and
stands at 5.1% of GDP in 2017.
The Romanian capital market is under development
despite some important steps were made to solve
this problem in the last period. Big companies start
to identify it as a source of finance and an alternative
market exists to small and medium enterprises (SMEs)
– the AeRO secondary market.

1  - After Singapore, Iceland, Hong Kong and South Korea, according

to Ookla (Global leader in internet testing, data and analysis), May
2019

How Romania ranks in the World Bank Doing Business 2019 by topic

1
1
22 17
22

43 44 49
52
64
64

85
Rank

106 111

127

148

169

190
Starting a Registering Getting Protecting Paying Trading Across Enforcing Resolving
business Property Credit Minority Investors Taxes Borders Contracts Insolvency

Source: World Bank Doing Business 2019, the ranks show how Romania is positioned by topic in the ease of doing business compared to other 190
measured countries

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1.4. Political and legal
environment
Romania is a republic and its present Constitution was
adopted by Parliament on 21 November 1991.
It was subsequently amended and ratified by legislation,
and the present form is effective since 29 October 2003.
The Romanian Constitution guarantees a multi-party
system, a free-market economy and protection of human
rights. Legislative power is vested in a bicameral Parliament
made up of a lower house (Chamber of Deputies) and an
upper house (Senate). Parliamentary elections are held
every four years, while presidential elections are held every
five years. Being part of the European Union (EU), Romania
also holds 33 seats in the European Parliament.
The President is elected by direct vote and has powers
limited by the Constitution. The President is required to:
• Nominate the Prime Minister following consultation
with the majority party
• Promulgate laws passed by Parliament
• Cooperate with the National Security Council on
relevant issues.
Romania Business Passport 2019
The Sucevita Monastery - Suceava County
Under the Constitution, private property is guaranteed
and protected by the Romanian state. Foreign nationals
and stateless persons may obtain ownership right for land
under conditions resulting from Romania's accession to the
EU or by virtue of domestic laws and other international
treaties to which Romania is a party.
All statutory provisions of civil, commercial, criminal,
administrative and tax matters are enacted by Parliament.
International treaties are binding only if ratified by
Parliament.
Since signing the association treaty with the EU in 1993,
Romania has adopted several regulations issued by EU
bodies in domestic legislation. In 1994, Romania ratified
the European Convention for the Protection of Human
Rights and Fundamental Freedoms and agreed to enforce
its provisions, including the right of individual petition
and recognized the competence of the European Court
of Human Rights. Any Romanian citizen may bring a case
against the Romanian state before the European Court,
whose rulings are binding upon the state.
Romania has enacted several legislations necessary for
instituting and strengthening a free market, including laws
concerning dispute resolution and related procedures. The
concept of arbitration is also quite popular.
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 Romania Business Passport 2019
The Sucevita Monastery - Suceava County
As an EU member state, Romania has to directly apply
certain EU regulations without the need to have them
adopted in the domestic legislation.
Courts are divided into civil and criminal and organized
at the national, county, and local levels. The High Court
of Cassation and Justice is the highest judicial forum in
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Romania. Unlike the US Supreme Court, the Romanian
High Court cannot exercise judicial review, adjudicating
on the conformity of laws with the Constitution and other
regulations of Parliament. This competence is attributed
to the Constitutional Court. Romania has traditionally used
the civil system of law where judicial precedence does not
constitute a recognized source of law.
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1.5. Reforms and economic development

Type of economy
After the fall of the communism, Romania's authorities committed to a series
of reforms to modernize the country in order to become member of NATO and
European Union. Country's geo-strategic position, at the crossroads of many
historical trade routes, should be exploited more in the coming future once the
large infrastructure projects will be finalized. Constanta port, one of the largest
on the Black Sea, links to the North Sea by a new navigation route through the
Rhine-Maine-Danube Channel.
Being the ninth largest country of the EU and with a population of roughly
19.6 million citizens, Romania has one of the most diversified landscape, with
mountains, hills and plains, being equally distributed on its 238,391 square
kilometres, offering many opportunities for tourism activities. Also, the Danube
river, the second largest river of Europe, flows into the Black Sea, forming the
Danube Delta, which is the second-largest and best-preserved delta in Europe.
Romania is still largely an agricultural country, as this sector accounts for roughly
20% of GDP, 35% of employment and 10% of external trade. Some 10% of the
Romanian economy is agrarian, with around one in five Romanians owning a
small farm.
Additionally, Romania has a long tradition in exploiting natural resources, mainly
oil&gas, being the largest oil producer until the Second World War and the first
country which refined crude oil. Romania remains a significant oil producer in
the region, due to the offshore exploitation of natural gas resources, especially
from Neptun Deep block in the Black Sea that should assure the continuation
of the sector's performance. However, the recent taxes introduced via the
emergency ordinance in December 2018 (including a 2% tax on turnover for
companies acting in energy sector and a cap on gas prices) don't provide the
necessary prerequisites for multi-billion investments required by exploration
and exploitation of offshore perimeters in the Black Sea. Furthermore, the lack
of fiscal predictability has determined investors to take a step back from further
developments in the Black Sea.
The start of 2019 marked the beginning of Romania's six-month Presidency of
the European Union, being its first mandate. Romania is in close coordination
with the Trio EU Presidencies of Finland (July-December 2019) and Croatia
(January-June 2020).

The Sucevita Monastery

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General economic trends unemployment, wage increases and rebounding inflation,

as a result of the pro-cyclical fiscal policy undertaken in
Romania's economy had undergone many structural
the past years. On the negative side, the strong domestic
changes to meet the criteria of a market economy, and a
demand triggered a surge in imports of goods and services,
considerable progress has been made on its way to reduce
deteriorating the current account deficit. Traditionally,
the gap between the living standards of its citizens towards
after the fall of communist regime, Romania is a net
the level encountered in developed European economies.
importer (except in 2013 when the exports reported an
Following positive economic growth rates between
outstanding annual performance of +10% and had a
2005-2018 (except for 2009-2010 when the economy
positive contribution to the economic growth rate).
contracted), Romania's 2017 GDP per capita (in purchasing
power standards) is equivalent of 63% of EU27 average Economy's growth is set to slowdown in the foreseeable
GDP per capita, up from the 35% level recorded in 2005. future (2019-2022), as fiscal easing puts pressure
on government revenues and is expected to generate
Economic growth was among the fastest in the EU, with
inflationary pressures, while the economy runs closely to
GDP growth rates of 7.0% y-o-y in 2017 and 4.1% y-o-y
its potential.
estimated for 2018, driven mainly by consumption boost,
while investments performance was rather poor and net The table below illustrates the main economic indicators
exports had negative contribution. Household spending and the estimation until 2022.
was the main driver of economy's growth due to the falling

Main macroeconomic indicators

  2017 2018 2019 2020 2021 2022

Gross Domestic Product 7.0 4.1 5.5 5.7 5.0 5.0
Industry 8.3 4.1 5.4 4.6 4.3 4.5
Agriculture 14.6 10 1.9 1.1 1.1 1.1
Constructions -0.9 -5.6 7.2 7.7 7.1 7.1
Services 6.9 3.6 5.8 6.4 5.5 5.4
Final consumption 8.6 4.5 5.9 5.7 4.9 4.8
Household actual individual consumption 9.0 3.7 6.1 6.0 5.2 5.2
Government's actual collective consumption 5.2 12 4.5 4.0 2.5 2.4
Export of goods and services 10.0 5.4 6.9 7.1 7.0 7.0
Import of goods and services 11.3 9.1 7.8 7.9 7.8 7.8
Source: National Prognosis Commission (NCP), National Institute of Statistics

Structural changes of the economy in the past two
decades resulted in the advance of services, which became
dominant in GDP formation. Government's measures taken
to support IT&C, showed their results in the past three
years, with IT&C performance being one of the strongest
among subsectors.
Industry contribution to GDP growth increased in the past
years, mostly as a result of a strong rebound of Europe
economic activity, with Manufacturing (i.e. machinery
and transport equipment, automotive, manufacture of
electrical equipment, computer, electronic and optical
products) bringing the highest positive influence.
The lack of investments in agriculture infrastructure (i.e.
irrigation system) increases the influence of the weather
on agriculture production evolution and the unexploited
business opportunities in this sector.
2  - According to The National Bank of Romania
Foreign direct investment
Sectors that attracted foreign investments in past years
include the manufacturing industry (mainly oil processing,
chemical products, automotive, machinery and transport
equipment, metallurgy), construction & real estate
transactions, financial intermediation & insurance,
and professional, scientific, technical and administrative
activities. A deepening of the supply chain in machinery
and transport is expected to raise technology and
innovation-related investments in the future.
The FDI net flow in 2018 registered EUR 4.9 billion,
following an upward trend over the last years. Among
the largest investing countries in Romania are: The
Netherlands (25.9%), Germany (12.8%), Austria (12.6%),
Italy (6.2%) and France (6.2%)2.
Regional and international trade agreements
and associations
Romania has signed the General Agreement for Tariffs and
Trade (GATT), the World Trade Organization (WTO), the
European Free Trade Agreement (EFTA) and the Central
European Free Trade Agreement (CEFTA). Furthermore,
Romania has entered more than 80 agreements for the

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avoidance of double taxation and the prevention of tax In 2018, imports increased by 9.6%, outpacing the
evasion on income and capital. Romania is also a member exports' dynamics of 8.1%, resulting in a negative trade
of the International Monetary Fund, the World Bank (i.e. the balance of EUR 15.1 billion, compared to a deficit of EUR
International Bank for Reconstruction and Development 13 billion recorded in the previous year. Thus, the current
and the International Finance Corporation) and the account deficit widened to 4.5% of GDP in 2018, from a
European Bank for Reconstruction and Development (EBRD). 3.2% level in 2017.
As an EU member state, Romania adheres to the bloc's On both exports and imports side, machinery and transport
Common Commercial Policy and accepts the European equipment are the main traded category of goods, while EU
Commission as a collective negotiating body for countries are the main trading partners.
important international trade-related matters, particularly For 2018, at EU level the main export/import countries for
negotiations within the WTO. It also complies with the Romania are presented in the following table:
anti-dumping and anti-subsidy measures adopted by
the Community and does not adopt any trade defence
Exports Imports
measures or instruments against other EU member states.
Germany 23.0% Germany 20.5%
Major trading partners and leading imports Italy 11.4% Italy 9.4%
and exports France 7.1% Hungary 6.9%

Imports and exports Hungary 4.9% Poland 5.6%

Great Britain 4.3% France 5.1%
The boost of the private consumption is the main culprit of
the deterioration of the trade balance in the past two years, Source: National Institute of Statistics, EY Research
causing the trade deficit to widen through robust imports.

The Sucevita Monastery - Suceava County

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Takeaways
• Private consumption is expected to remain the driver of
economic growth in the next years, although it is seen
to slow down given the inflation upward trend, as well
the fiscal and external imbalances
• Inflation has fallen back inside the target range, but is
expected to swing around the upper end of the interval
mainly due to the following factors: GDP growth, higher
purchasing power, price recoveries for commodities,
reduced VAT impact cooling off, etc
• In the foreseeable future, domestic currency is
expected to remain relatively stable versus the hard
currencies, with EUR/RON FX rates to hover around
4.7
• Pro-cyclical policies promoted by the Government will
put pressure on budget's balance, leading to widening
fiscal deficits in the upcoming years
• Domestic demand is expected to put additional
pressure on the trade balance and hence on the current
account deficit
• Recovery of the inflation might trigger a tighter
monetary policy, leading slowly to higher interest rates
• Still low absorption rate of EU funds. Despite the higher
fund allocation to Romania in 2021-2027, the low fund
absorption is expected to have little effect on the GDP
growth outlook
• Labour market is seen to tighten further, influenced,
among others, by the ongoing migration of working-
age population, negative demographic trends,
mismatch between labour supply and demand, low
labour force participation, high underemployment,
pressure on nominal wages
• Stability of the banking sector, with a good solvability
and liquidity ratios, but low financial intermediation as
compared with average EU level.
The Sucevita Monastery - Suceava County
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1.6. EU funding and government
incentives for enterprises
Romania and the European Union
Romania has been a member of the European Union since
1 January 2007, benefiting from financial support made
available under EU policies in two subsequent programming
periods, namely 2007-2013 and 2014-2020. In the period
2007-2013, European funds were divided according
to three policies: the agricultural policy represented by
the European Agricultural Fund for Rural Development
(EAFRD), the fisheries and maritime policy represented by
the European Maritime and Fisheries Fund (EMFF) and the
structural policy represented by the Structural Funds which
include the European Regional Development Fund (ERDF),
European Social Fund (ESF) and the Cohesion Fund (CF).
For the period 2014-2020, all these funds are part of the
European Structural and Investment Funds (ESIF) that bring
together the three policies.
Romania has been allocated EUR 30.72 billion from ESIF
over the period 2014-2020 to be invested in various areas,
from creating jobs and growth, to promoting innovation as
well as protecting the environment and supporting social
inclusion.
The European funds implemented in Romania through
eight national and regional programmes that correspond to
11 thematical objectives (TO) are:
• TO 1 "Strengthening research, technological
development and innovation" aims the improvement
of R&D by focusing on the business's needs and on the
new technological challenges
• TO 2 "Enhancing access to, and use and quality of
information and communication technologies" has the
objective to develop actions in the digital environment
such as e-government instruments for citizens
• TO 3 "Enhancing the competitiveness of SMEs, the
agricultural sector and the fisheries and aquaculture
sector" aims to increase the competitiveness of SMEs
and the labour productivity of SMEs
• TO 4 "Supporting the shift towards a low-carbon
economy in all sectors" supports the improvement of
the urban common transport and the improvement of
the energetic efficiency of the buildings
• TO 5 "Promoting climate change adaptation,
risk prevention and management" aims a better
coordination in case of emergency
• TO 6 "Preserving and protecting the environment and
promoting resource efficiency" has the objective to
increase the protection of the biodiversity, to promote
the waste management plans and to improve the air
quality
• TO 7 "Promoting sustainable transport and removing
bottlenecks in key network infrastructures" supports
the improvement of Romania's transport system and a
better connectivity between its regions
• TO 8 "Promoting sustainable and quality employment
and supporting labour mobility" aims the improvement
of the labour market and a sustainable integration of
the NEETs (Not in Employment, Education or Training)
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• TO 9 "Promoting social inclusion and, combating
poverty and any discrimination" propose a reduction
of persons that are at the risk of poverty and social
exclusion
• TO 10 "Investing in education, training and vocational
training for skills and lifelong learning" aims to increase
the quality of the educational facilities and to increase
the participation rate of disadvantage population in
educational structures
• TO 11 "Enhancing institutional capacity of public
authorities and stakeholders and an efficient public
administration" has the objective to reform the human
resources in health and educational systems.
infrastructure, sustainable urban transport, environment,
and energy and risk prevention. The main focus lies on
removing the main transport bottlenecks and developing
sustainable, efficient and green transport modes in the
country including the development of the TEN-T and the
subway network. Another strong focus relates to measures
to increase energy efficiency and protect natural resources.
It also includes investments in environment infrastructure
and risk prevention.
The Sucevita Monastery - Suceava County

Operational Programs for Romania in

2014-2020
The ESI Funds were allocated to eight Operational
Programs prepared by the Romanian Government and
approved by the European Commission in 2015:
1) Competitiveness Operational Program (EUR 1.33
billion from European Regional Development Fund)
Competitiveness Operational Program is focusing on
strengthening research, development and innovation
(RDI), supporting economic competitiveness and the
development of business, as well as enhancing access
to information and communication technologies (ICT),
for a competitive digital economy. The main direction of
investment in RDI is to build a more compact and modern
R&D environment that focuses on the businesses' needs.
It will boost private investments in RDI, develop centers
of excellence, strengthen the links between businesses
and research institutions and stimulate the creation of
networks and clusters for developing new products and
services. In the area of ICT, the program covers four main
areas for development: a) e-government, interoperability,
cyber-security, cloud computing and social networks,
b) use of ICT in education, health, social inclusion and 4) Regional Operational Program (EUR 6.7 billion from
culture, c) e-commerce, clusters and developing innovation European Regional Development Fund)
through ICT, and d) further deployment of the broadband
Regional Operational Program aims at promoting smart
infrastructure for the whole country.
sustainable and inclusive growth in all Regions in Romania.
2) Human Capital Operational Program (EUR 4.32 Among others, the following priorities will be funded:
billion from European Social Fund and Youth Investment supporting transfer of technology and innovation take
Initiative) up by SMEs in areas for smart specialization; enhancing
Human Capital Operational Program represents an SMEs' competitiveness focusing on Romania's high-growth
important source of investment in employment, education economic sector; promoting the low-carbon economy
and social inclusion, with a focus on youth, Roma and through investments in energy efficiency in buildings,
rural population. The activities envisaged for young people public lighting and sustainable multimodal urban mobility;
under the Youth Guarantee scheme include support to set supporting sustainable integrated urban development and
up companies, as well as incentives for employers to create regeneration of deprived urban areas.
jobs and apprenticeships programs. Integrated measures 5) Administrative Capacity Operational Program (EUR
will help disadvantaged people, including Roma, to access 0.55 billion from European Social Fund)
the labour market, by improving their skills and supporting
entrepreneurship and social enterprises, among other Administrative Capacity Operational Program has the
actions. objective to improve the efficiency, the transparency
and the accessibility of Romania's public administration
3) Large Infrastructure Operational Program (EUR 9.41 and judicial system. To attain this objective, investment
billion from European Regional Development Fund and will address the following priorities: strengthening the
Cohesion Fund) key functions of public administration and improving
Large Infrastructure Operational Program addresses the administrative capacity to perform such functions;
the development challenges in the field of transport improving the functioning of the judicial system; enhancing

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the decision-making in local public administration

and judiciary, by introducing common standards and
practices and quality management systems, with a view to
improving the services provided to citizens and businesses;
and setting up a preventive framework both in public
administration and in the judicial system to address ethics
and integrity challenges.
6) Technical Assistance Operational Program (EUR 0.21
billion from European Regional Development Fund)
Technical Assistance Operational Program is covering
support for the management of European Structural
and Investment Funds. These operational programs
are managed by the Ministry of European Funds (Large
Infrastructure, Human Capital, Competitiveness and
Technical Assistance Programs) and the Ministry for
Regional Development and Public Administration (Regional
Development and Administrative Capacity Programs).
7) Romanian National Rural Development Program (EUR
8.1 billion from European Agricultural Fund for Rural
Development)
Romanian National Rural Development Program supports
the strategic development of the rural area through the
following objectives: restructuring and increasing the
viability of agricultural holdings; sustainable management
of natural resources and combating climate change
and diversification of economic activities, job creation,
improvement of infrastructure and services for improving
the quality of life in rural areas.
8) The Fisheries and Maritime Affairs Operational
Program (EUR 0.17 billion)
The Fisheries and Maritime Affairs Operational Program,
financed by the European Maritime and Fisheries Fund
(EMFF), aims the development of sectors that are linked
to the maritime transport, the conservation of the
biodiversity and the protection of the environment.
Other programs include Territorial Cooperation Programs
(EUR 0.45 billion) and Operational Program Aid to the
Most Deprived (EUR 0.44 billion).
Moreover, at the beginning of 2016, the European
Investment Bank Group has concluded an agreement with Furthermore, in 2017 the European Investment Bank
the Government of Romania and the European Commission Group lent EUR 1 billion to co-finance with European
for the implementation of an SME Initiative in Romania. Structural and Investment Funds priority transport
It is expected that about EUR 0.5 billion of new SME infrastructure projects to be implemented across Romania
financing will be provided under this Initiative. Romania during the 2014-2020 EU programming period.
is contributing EUR 0.1 billion from its European In 2018, Romania drafted the Integrated National Plan for
Structural and Investment Funds, which will be Energy and Climate Change, an obligation for all Member
leveraged with commercial lending through a risk-sharing States, which includes the elaboration of strategies in
mechanism. This will result in more SMEs benefiting the two sectors in the period 2021-2030. This National
from European resources on advantageous terms, plan aims to support the local energetic communities
such as reduced interest rates and improved collateral with grants in agriculture, in the public transport and in
requirements. renovation in buildings.

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Implementation of EU assistance in 2014-2020
As of February 2018 , the current absorption rate
3
(amounts declared to the European Commission) is
11.81% while the actual absorption rate (amounts
reimbursed by the European Commission) is 10.07%.
State Aid Schemes
We refer below to the state aid scheme stimulating
investments with major impact on the economy
(Government Decision 807/2014) which provide grant
given by the Romanian state budget and certain local tax
exemptions. Thus, this Romanian national grant and local
tax exemptions represent a major opportunity for investors
from various sectors.
3  - For the following 2014-2020 ESI funds: ERDF, CF, ESF, EAFRD, EMFF
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The Sucevita Monastery - Suceava County
Main eligibility criteria for applying for this state aid
scheme under Government Decision 807/2014 are:
• The investment has to have at least a total value, value
added tax (VAT) excluded, of RON 4.5 million (the
equivalent of approximately EUR 1 million)
• The investment has to be started within maximum 4
months since the financing agreement approving the
grant is issued by the Ministry of Public Finance
• The investment must prove its economic efficiency
and sustainability during implementation period and
5 years after its finalization according to the business
plan.
Eligible costs based on which the state aid is computed
are the costs (VAT excluded) related to production or
acquisition of tangible and intangible assets, as well as
the rental costs and costs with execution of constructions
(within certain threshold) for buildings related to the initial
investment.
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 The application file for this scheme can be submitted
during the financing calls announced by the Romanian
authorities.
Financing agreements may be issued until 31 December
2020, the state aid payments being performed during
2015–2023.
State aid schemes are applicable to almost all economic
sectors, with certain exceptions specifically provided by
each scheme
The investment cannot be started before the submission of
the request for the financing agreement with the Ministry
of Public Finance.
The "de minimis" aid scheme for investments in
industrial parks and the regional state aid scheme for
supporting initial investments carried out in industrial
parks
These are state aid schemes designed to encourage
companies to set-up initial investments in industrial parks.
Incentive granted under this state aid schemes consists
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of, inter-alia: exemption from payment of building tax and
land tax; exemption from the payment of taxes due to local
authorities for the issuance of urban planning certificates,
construction authorizations and/or authorizations for
demolition of buildings for lands and buildings which are
part of the industrial park infrastructure (industrial park);
other facilities which can be granted, according to the law,
by local public administration authorities.
For the "de minimis" state aid scheme the level of the
grant is capped to EUR 200,000 and to EUR 100,000 for
companies involved in road transportation services.
The eligible costs based on which the state aid is computed
are the costs related to the initial investment (i.e. expenses
with the acquisition/construction of tangible and intangible
assets).
The schemes are managed by the relevant local authority
where the industrial park is located and the Ministry of
Agriculture and Rural Development and the National
Agency for Cadastre and Land Registration.

Start-up Nation – the programme for the creation
of SMEs
The objective of the programme is to stimulate the creation
SMEs, improve the economic performance of start-ups,
increase the potential to access financing and facilitating
this process. The expected results of the programme
are the increase in the number of SMEs, increase the
number of jobs generated for the economy, increase the
digitalization of new enterprise through the acquisition
of new, innovative technologies.
Startup Nation programme is regulated by Emergency
Government Ordinance 10/2017 whereby each year,
a total of 10,000 beneficiaries (SMEs) will be awarded
the maximum amount of RON 200,000 per beneficiary,
representing 100% of eligible expenditures.
The programme is managed by the Ministry for Business,
Commerce and Entrepreneurship.
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Romania Business Passport 2019
COUNTRY
OVERVIEW
The Sucevita Monastery - Suceava County
Tax incentives
Romania offers a highly competitive taxation scheme
relative to many of its European peers. Since January
2005, the amended Tax Code has applied a flat tax rate of
16% on income and corporate profits, one of the lowest tax
rates in Europe. Also, other favourable tax provisions are
included in the Romanian tax legislation, as presented at
the relevant sections, in respect of:
• Corporate Income Tax, as detailed at 6.2. Profits Tax
section:
• "Tax depreciation activities"
• "Incentives for research and development (R&D)
activities"
• "Tax exemption of reinvested profits"
• Income Tax exemption for employees working in the IT
field or performing research and development activities
- as detailed at section "Categories of income subject
to taxation".
17
2 Business
overview

Sibiu airview
2.1. Types of business
There are no specific investment approvals required for
setting up a business in Romania.
The procedure requires fulfilling certain legal formalities
such as performing the registration with the Romanian
Trade Registry and the tax authorities. In addition,
running a business in certain sectors such as insurance/
reinsurance, banking, financial investment services, etc.
may require that particular authorizations are obtained
prior to commencing the actual activity.
2.1.1. Limited Liability Company (SRL)
The share capital of an SRL must be of at least RON 200
(approximately EUR 42, calculated at an exchange rate
of RON 4.74/EUR), divided into shares with a minimum
face value of RON 10 each. A SRL may be incorporated
by a minimum of one shareholder and a maximum of fifty
shareholders.
These shareholders may include individuals and/or legal
entities. There is no distinction between companies
operating with or without foreign share capital.
A person, either natural or legal person, cannot be the
sole shareholder of more than one SRL. If a person
intends to incorporate several companies in the form of a
SRL, it is necessary for a minimum of one share to be held
by another person or entity. Moreover, a SRL cannot have,
as sole shareholder, another limited liability company that
is also owned by a single shareholder.
The shareholders' liability is limited to the amount
subscribed in the company's share capital.
A SRL is managed by one or more directors (in Romanian,
"administratori") appointed through the company's
Articles of Association or by resolution of the General
Meeting of Shareholders. Directors may be granted full
or limited powers and they may be Romanian or foreign
nationals. The directors in a SRL are mandated to take
all actions required in order to carry out the company's
business. However, major decisions are left for the
approval of the General Meeting of Shareholders.
Joint Stock Company (SA)
The minimum statutory capital of a joint stock company is
RON 90,000 (approximately EUR 18,987 calculated at an
exchange rate of RON 4.74/EUR). Shares, which may be
registered or in bearer form, must be held by a minimum
of two shareholders, individuals and/or legal entities
(there is no maximum limit), and can be open to either
public or private participation. Unlike SRLs, SAs may issue
bonds.
Two options have been provided for administration of joint
stock companies: the one-tier system and the two-tier
system.
One-tier system – the company is managed by one or
several directors, always in an odd number, organized as a
Board. The Board can assign management of the company
to one or several managers (in Romanian, "directori"). For
those companies whose financial statements are subject
to auditing, the minimum number of directors is three.
Two-tier system – the management of the company
is ensured by a Management Board (in Romanian,
"directorat") and a Supervisory Board with the following
duties:
• The Management Board carries out the activities
and management of the company reports to the
Supervisory Board
• The Supervisory Board exerts permanent control over
the Management Board and reports to the General
Meeting of Shareholders
• Managers and other members of the Management
Board and the Supervisory Board may not conclude a
labour agreement with the company; a management
agreement is required instead.
2.1.2. Representative Office
A representative office is usually set up by foreign
companies in Romania to carry out non-commercial
activities on behalf of the parent company, in accordance
with the authorization issued in this respect.
In order to register a representative office, company
officials should apply to the Ministry of Business
Environment, Commerce and Entrepreneurship and pay
an annual fee of RON equivalent of USD 1,200 for the
authorization.
Upon authorization, the representative office must be also
registered with the competent tax authority and pay an
annual income tax of the RON 18,000.
19
2
Romania Business Passport 2019
BUSINESS
OVERVIEW
2.1.3. Branch of a foreign company
A branch of a foreign company does not have its own legal
personality or share capital. Being a unit of the parent
company, branch activities cannot exceed the scope of
activity of the parent company.
2.1.4. Partnership
Partnership as a legal form is seldom used in Romania. The
three kinds of partnerships provided by law that lead to
the creation of an entity with legal personality are:
• General partnership (in Romanian, "societate în nume
colectiv")
• Limited partnership (in Romanian, "societate în
comandită simplă")
• Partnership limited by shares (in Romanian, "societate
în comandită pe acţiuni").
The partners in all three types of partnerships have
unlimited liability and are jointly liable with respect to
the obligations of the partnership. The creditors of the
partnership must first act against the partnership in order
to claim the execution of its obligations and, only to the
extent the partnership does not comply with its obligations
within 15 days, they may act against the partners.
The minimum share capital is stipulated only for a
partnership limited by shares (approximately EUR 18,987
calculated at an exchange rate of 4.74 RON/EUR). No
share capital requirements are provided for the other forms
of partnerships.
2.1.5. Consortium
Domestic legislation allows for the conclusion of a joint
venture agreement (in Romanian, "contract de asociere în
participaţie"). Under this agreement, parties act together
for the accomplishment of a common business goal.
This form of doing business in Romania does not create a
legal entity. The third party has no right towards the joint-
venture and undertakes obligations only in relation to the
co-contracting member of the consortium.
2.1.6. Economic Interest Group (EIG)
An EIG is an association of two or more individuals or
companies set up for a definite period for the purpose of
facilitating the businesses carried out by its members and
of improving the performance of such businesses. An EIG is
allowed a maximum of 20 members.
Bucharest, Romania - Palace of the National Military Circle
A key feature of EIGs is the unlimited joint liability of its
members for the obligations of the EIG (unless otherwise
provided under the agreement signed with the third party)
and the fact that it may not, directly or indirectly, own
shares in one of its member companies or be a member in
another EIG. An EIG is not allowed to issue shares, bonds,
or other negotiable instruments. EIGs are regulated by
Law 161/2003 regarding certain measures to ensure
transparency in exercising public dignities, public duties
and in the business environment, as well as for preventing
and sanctioning corruption.
2.1.7. European Economic Interest Group (EEIG)
An EEIG is similar to an EIG. It can be set up in any EU
member state and may function in Romania through
subsidiaries, branches, representative offices or other
non-legal entities provided these comply with domestic
legislation. The subsidiaries and branches of an EEIG are
subject to the same registration procedure as EIGs.
EEIGs are governed by the provisions of Council Regulation
(EEC) 2137 of 25 July 1985 on the European Economic
Interest Grouping (EEIG) and Law 161/2003.
2.1.8. Societas Europaea (SE)
A company may be set up within EU territory in the form
of an European public limited-liability company (SE) on
the conditions and in the manner laid down in the EC
Regulation 2157/2001 on the Statute for an European
company (SE). An SE shall be regarded as a public limited-
liability company governed by the law of the Member State
in which it has its registered office.
The capital of an SE shall be expressed in euro and may not
be less than EUR 120,000 which makes SEs only suitable
for large companies. The name of an SE shall be preceded
or followed by the abbreviation SE.
SE shall comprise: (a) a general meeting of shareholders
and (b) either a supervisory organ and a management
organ (two-tier system) or an administrative organ (one-tier
system) depending on the form adopted in the statutes.
2.1.9. Entities commonly used by foreign investors
Limited liability companies are the most popular
vehicles for business in Romania because of their simple
administrative requirements, greater flexibility compared
to other types of companies and low capital requirement.
However, joint stock companies remain an attractive option
for investors which plan to list their companies on the stock
exchange.

2.2. Labour force and employment
regulations
Employment regulations and the employer-employee
relationship are governed by the Labor Code (Law
53/2003, subsequently amended).
Labour market in Romania
In 2018, the employment ratio of the Romanian population
(between 20 and 64 years old) was of 69.9%, with a
difference of 0.1% in comparison with the national
target set-up for European Strategy 2020 and in the first
quarter of 2019, the employment rate of the working age
population registered a value of 64.2%.
Labour costs
Romania has some of the lowest labor costs in EU. As
of 1 January 2019, the gross minimum base salary to
be paid at the national level is of RON 2,080 per month
(approximately EUR 438, considering an exchange rate of
RON 4.74/EUR). This amount does not include allowances
or other incentives.
The value of the gross minimum base salary to be paid
at the national level is calculated for a normal working
schedule on average of 167.333 hours, per month,
representing RON 12.43 per hour.
By way of exception, for the employees hired on positions
which require higher education, with a seniority of at least
one year as high educated employee, the gross minimum
base salary to be paid at the national level, not including
allowances or other incentives, is of RON 2,350 per month,
for the same working schedule.
2
Romania Business Passport 2019
BUSINESS
OVERVIEW
Biertan Citadel - Alba Iulia
Labour market challenges
Romania benefits from a multilingual workforce
with qualified professionals in high growth areas like
IT&engineering and financial services.
The challenges faced though by employers across all
sectors are fundamentally threefold:
• Control the employment related costs: with a salary
inflation of 5% per annum for the last years, combined
with constant changes in taxation, the topic stays high
on any executive agenda
• Attract and retain more/better quality of educated/
trained workforce: staff turnover is high across all
industry sectors, in some cases (e.g. Retail, BPO/SSC)
reaching even 50% per annum. With an average staff
turnover of 15%, retention of all staff categories is a
challenge
• Staff productivity/Human Capital Return of Investment:
in spite of the low employment costs, overall staff
productivity as compared to the other EU countries
is in the lower median, mainly due to lack of process
automation and low staff engagement rates.
Applicability
The Labour Code covers Romanian employees with
employment contracts, who perform activities in
Romania or abroad for a Romanian employer (unless the
legal framework in the country where the employment
agreement is carried out is more favorable), as well as
foreign individuals with employment contracts who perform
activities for a Romanian employer in Romania.
21
 Romania Business Passport 2019
Working relationship
Types of employment contracts
The law stipulates individual employment contracts for an
indefinite period as the common method of employment. In
addition, other forms of permitted employment are:
• Fix-term individual employment contract
• Temporary employment
• Part-time employment
• Flexible working arrangements (homebased work or
telework).
Special clauses in the employment contract
Before or upon the conclusion of a new or amending
an existing employment contract, the employer has the
obligation to inform the employee with respect to the
essential clauses that it plans to include in the employment
contract or to amend (e.g. working place, working time,
salary, leave period, evaluation criteria, the position and
the job description, trial period).
Along with the general terms, an individual employment
contract may also include special clauses such as:
• Non-compete clause – this clause obliges the
employee not to perform, after the termination of the
employment contract, for himself/herself or for others,
any activities considered as being in competition
with the ones performed by him/her for the former
employer, in exchange of a monthly compensation
to be paid by the employer during the non-compete
period.
The non-compete clause can only be effective if the
individual employment contract expressly provides for the
following:
• The activities an employee is forbidden to undertake at
the end of the contract
22
Cluj Napoca City Center
• The amount of the monthly compensation
• The period for which the clause will be in effect
(maximum two years as of the date the employment
contract ends)
• The third parties for which the employee is forbidden to
undertake activities
• The geographical area where the employee can be
considered as competing with the employer.
The Labor Code provides that the non-compete
compensation has to be negotiated and amounts to at least
50% of the gross average salary income of the employee
for the last six months before the end of the employment
contract.
In case of breach of the non-compete clause, an employee
can be obliged to return the compensation and pay
damages for the prejudice suffered by the employer.
• Mobility clause – the parties may agree that,
considering the particularities of the work performed,
the employee will not carry out his/her duties under
the employment agreement, in a fixed location, in
exchange for additional allowances in cash or in kind to
be determined under the employment contract
• Confidentiality clause – the parties may agree not
to disclose any information obtained during the
employment relation for the entire duration of the
employment contract and after its termination.
The party in breach of this obligation is liable to pay
damages to the other party.
General Registry of Employees ("REVISAL")
The most relevant information included in each labour
contract concluded in Romania has to be recorded in a
special electronic recording system named the General
Registry of Employees (REVISAL).

Government Decision 905/2017 regarding the General
Registry of Employees regulates the methodology for setting
up the REVISAL, as well as the method of filing it in, by:
• Individuals or private legal entities
• Institutions/public authorities/other legal entities
that employ individuals based on an individual labour
agreement
• REVISAL must be prepared in electronic format and
submitted on-line on the Labour Inspection portal.
The following essential elements of the employment
contracts must be submitted in REVISAL:
• Identification data of the employer
• Identification data of all employees: name, surname,
personal identification code
• Employment date
• The date when the employee is posted and the date
when the posting ends (with special requirements
for transnational posting of employees as defined by
Law 16/2017 regarding the posting of workers in the
framework of the transnational provision of services
and posting of employees in a state which is not a
member of the European Union or of the European
Economic Area)
• Position according to the Classification of Professions
in Romania (COR)
• The monthly gross salary
• Type of individual employment contract
• The termination date of the individual employment
contract as well as the legal ground for termination.
Failure to fill in REVISAL and submit the relevant
information to the competent authority within the legal
deadlines may be assessed as minor offence and be subject
to various fines.
Working hours and paid holidays
The normal working time consists in 8 hours per day and
40 hours per week for full-time employment.
Maximum working time per week cannot exceed 48 hours,
including overtime.
As per the law, overtime has to be compensated with
paid leave granted within the 60 days following the
performance of overtime or, if this is not possible, with
a minimum 75% overtime allowance applied to the base
salary. The standard working week is Monday to Friday.
Employees are entitled to a weekly rest of 48 consecutive
hours, usually on Saturdays and Sundays.
2
Romania Business Passport 2019
BUSINESS
OVERVIEW
In addition to statutory holidays, employees are entitled
to an annual paid leave equal to a minimum of 20 working
days.
Work security and healthcare
The employer is required to take necessary measures for
the security and well-being of employees. The employer is
also required to ensure employees have access to regular
medical check-ups.
Professional training
Employers have to ensure that all their employees take
part in professional training programs, as follows: (i)
at least once every 2 years, if they have at least 21
employees and (ii) at least once every 3 years, if they have
less than 21 employees.
The employer having more than 20 employees is required
to ensure adequate professional training for employees
on a continuous basis by setting up an annual training
schedule by consulting with the trade union or with the
representatives of the employees. The annual training
schedule should be attached in the form of an addendum
to the collective employment contract concluded at the
company level.
The employee may take part in professional training
programs, either following his/her own initiative or at
the employer's initiative. The specific way in which the
professional training will be organized, the parties' rights
and obligations, the period of professional training as well
as any other aspects concerning the professional training,
including the contractual obligations of the employee
towards the employer that has undertaken the costs of
the professional training are to be established by mutual
agreement of the parties under an addendum to the
individual labour agreement.
Employees' representation
Whenever an employer has over 20 employees and no
representative trade unions, the interests of its employees
may be promoted and defended by representatives of the
employees elected for this purpose. The representatives
of the employees are to be elected within the general
assembly of employees with the vote of at least half of the
total number of employees.
Biertan Village - Transylvania
23
2
Romania Business Passport 2019
BUSINESS
OVERVIEW
Saint Michael's Church - Cluj-Napoca
Termination of employment contracts
Individual employment contracts can be terminated by
operation of law in certain cases (e.g. upon the death of the
employee, in case the employer is subject to dissolution,
on the expiry date of the term for which individual labour
agreement was concluded), by mutual consent of the
parties, or by either party to the employment contract by
dismissal or resignation.
Dismissals may occur for reasons related to the employee
(e.g. professional inadequacy, as a disciplinary sanction)
or not related to the employee (e.g. job cancellations).
As a general rule, employers must grant the dismissed
employees a prior notice of minimum 20 business days. A
prior notice of maximum 20 business days (45 business
days for management positions) is also provided in case of
resignation.
2.3. Work regulations for
foreigners
Romanian visa regime
Romanian legislation allows two main categories of visas
for foreigners, i.e. short-term and long-term visa, with
single or multiple entries.
Both visa categories allow foreign citizens to stay in
Romania for a period or several periods not exceeding
24
90 days within 180 days preceding their entry/exit on
Romanian territory. While the short-term visa cannot be
extended, the long-term visa may be extended by applying
for a residency permit with Romanian authorities.
Under the immigration law, foreign citizens can obtain
in certain cases (i.e. frequent business trips) short-term
multiple entries visas, valid for a period of up to 5 years.
Visas are obtained with Romania's diplomatic missions or
consulates while abroad and prior to the individual's arrival
to Romania. The main documents foreign nationals must
submit to obtain a Romanian long-term visa are:
• Medical insurance for the visa period
• Proof of accommodation in Romania
• Means of support in Romania
• Proof of police clearance issued by the authorities in
the home country
• Documents supporting their purpose of stay in
Romania.
Citizens of European Union (EU) and European Economic
Area (EEA) member states (i.e. Norway, Liechtenstein and
Iceland) and Switzerland have no immigration restriction
to travel to Romania and can enter the country by using
either:
• Passports or
• Identity cards issued by relevant authorities from the
home country.
Citizens of certain states (e.g. United States of America,
Canada, Japan) may also enter Romania without visa.
Special conditions are stipulated by current immigration
legislation regarding certain categories of foreign nationals
who are visa restricted (originated in high-risk immigration
countries).
Registration certificates
EU/EEA/Swiss individuals staying in Romania more than 3
consecutive months should obtain a Romanian registration
certificate.
Residency permits
According to the Romanian immigration law, foreign
nationals staying in Romania for more than 90 days within
180 days preceding their entry/exit on Romanian territory
should apply for a Romanian residency permit.
Romanian residency permits are usually issued for 1 year
validity, with the possibility of subsequent extensions. In
certain cases, the residency permit can be issued directly
with a longer validity (i.e. 2 years up to 5 years).
Residency permits issued for secondment purposes cannot
be extended beyond 1 year (except where the secondment
is from EU/EEA/Switzerland located companies and where
the secondment is intra-corporate). In case of regular
secondments, foreign nationals should change their
purpose of stay to continue to stay on Romanian territory.
Foreign individuals seconded from EU/EEA/Switzerland
can extend their stay in Romania for secondment purposes
as long as their residency documents from EU/EEA/
Switzerland are valid.

In case of intra-corporate secondments, the immigration
documents are issued up to 3 years validity in case of
professional specialists and up to 1 year for trainees.
Provided that certain conditions are met, foreign
individuals can obtain permanent residency permits.
Work authorizations
The EU citizens and their family members (irrespective
of their citizenship) carrying out activities in Romania as
secondees or local employees are not required to obtain
Romanian work authorizations.
Non-EU/EEA/Swiss individuals should obtain work
authorizations in order to work in Romania, either as
secondees or local employees.
According to the current Romanian legislation, non-EU/
EAA/Swiss nationals seconded by companies located
in EU/EEA/Switzerland are exempt from obtaining a
work authorization in this respect; however, they should
establish their legal residence on Romanian territory by
obtaining a residency permit.
There is the obligation either for the home or host
company, as the case might be, to notify the Labour
authorities in respect of foreign individuals seconded to
Romania.
In case of local employment structures, the immigration
legislation provides for two main types of work
authorizations, respectively for: permanent workers and
highly-skilled workers.
In case of secondment structures, the following work
authorizations can be obtained: for intra-corporate
secondees and for regular secondees.
Foreign nationals appointed as managers of Romanian
branches/subsidiaries/representative offices of foreign
companies, as well as those appointed directors (in
Romanian, "administratori") of Romanian companies,
may apply for a residence permit in such capacities
without obtaining a work authorization and only if certain
conditions are fulfilled.
2
Romania Business Passport 2019
BUSINESS
OVERVIEW
Expatriate tax registration
Foreign nationals assigned to perform activities in Romania
are obliged to register for tax purposes within 30 days of
the first day of assignment if certain conditions are met.
Non-resident individuals are taxed in Romania, for the
income generated from dependent activities, as of
their first day of presence in Romania, irrespective of
the number of days spent in the country. However, the
provisions of the Double Tax Treaties entered into by
Romania should prevail over the domestic legislation.
In order for the treaty's provisions to be claimed, the
individuals should be able to provide to the Romanian tax
authorities their residency certificate and its Romanian
translation.
If a Double Tax Treaty is not concluded between Romania
and the country where the individual in question is
tax resident, or for any reasons its provisions cannot
be sustained, then the non-resident individual would
become taxable herein as of his/her first day of Romanian
activities.
The individuals are personally liable to compute, declare,
and pay the income tax by the 25th of the month following
the one the income is earned. Failure to meet this deadline
triggers fines and late payment penalties.
Also, the Romanian company at the premises where the
secondees carry out activities has the obligation to notify
the tax authorities about the start/end of the individual's
assignment to Romania within 30 days since the event
occurred. This obligation is applicable for both long and
short-term assignments.
If a foreign individual has a local employment contract, the
obligation to compute, withhold, and pay the income tax
stays with the Romanian employer.
Alba Carolina Citadel - Alba Iulia
25
 Romania Business Passport 2019
Cluj-Napoca city
2.4. Entrepreneurship
Entrepreneurship is becoming a major force in the
Romanian economy, in line with the worldwide trend of
increased entrepreneurial activity in emerging countries.
The major challenge for Romanian entrepreneurs is to keep
up with these rapid developments happening worldwide. In
the same time, these trends are a challenge for Romanian
public institutions. The regulatory issues, red tape, lack
of fiscal predictability are the most pressing aspects for
Romanian SMEs, compared with issues like growing the
client base, which is the most important challenge for
SMEs in the EU.
Entrepreneurship is more dynamic than ever in Romania
and new initiatives around entrepreneurship are
announced every week: hubs, pitching or networking
events, as well as transactions involving Romanian
technology start-ups. The most important development
on the Romanian entrepreneurship scene seen in the
last years, in April 2019, is the Series D (financing totals
USD 568 million at a post-money valuation of USD 7
billion). The first Romanian unicorn is the fastest growing
enterprise software company in history, expected to give
a new boost to the Romanian entrepreneurial scene,
attracting new VC investors and interest from young IT
talents
To support Romanian entrepreneurship, a program for
small and medium-sized enterprises was implemented
by the Ministry for Business Environment, Commerce
and Entrepreneurship called Start-up Nation. The main
objective of the Program is to stimulate the establishment
and development of small and medium enterprises and
to improve their economic performance, create new
jobs, disadvantaged people, unemployed and graduates,
increase investment in innovative new technologies. Until
now only one edition has been held - Romania Start-up
Nation 2017. In 2018, the Program was reloaded, being
very well received among young Romanian entrepreneurs.
If the momentum is maintained, the Romanian business
environment will develop rapidly, due also to the mentality
shift of the young people more willing to pursue an
entrepreneurial challenge than a career as an employee.
EY Romania carries out a bi-annual study on the state
of Romanian start-ups, The Romanian Start-ups
Barometer, measuring the entrepreneurs' perceptions
on 5 pillars supporting their actions: regulatory aspects
and taxation, access to finance, entrepreneurial culture,
entrepreneurship education and coordinated support.
26
According to the 2019 edition of the study, aspects from
most of the 5 pillars registered the following:
• Less startups believe Romanian education is an
obstacle for entrepreneurs (12% of respondents in
2019 versus 23% in 2017)
• Startup entrepreneurs are planning to access more
governmental funds and microfinancing instruments
in 2019 compared to the previous edition of the
Barometer (28% in 2019 edition versus 15% in 2017
edition)
• In the last year the fiscal and regulatory environment
for entrepreneurship has deteriorated according to the
opinion of the startup leaders (52% in 2019 edition
versus 44% in 2017 edition) and it might be an effect
of last changes occurred in the country
• The number of startup entrepreneurs that receive
mentoring, specific trainings and consultancy services
is on the rise.
Government actions with the greatest impact in
the short term to support entrepreneurs
In view of Romanian start-up entrepreneurs, Top 5
measures that would support short-term business
development are:
• Decrease of tax burden for start-ups
• Easier access to financing
• A simplified tax and regulatory environment
• Better fiscal and regulatory predictability
• Increased focus on entrepreneurial education.
Coordinated support
Coordinated support offered by specialized organizations
such as clubs and associations of entrepreneurs, informal
networks of entrepreneurs, government agencies, business
incubators and accelerators has improved in Romania over
the last years.
"Co-working spaces" and "business hubs" entered the
common vocabulary of start-up entrepreneurs. These
centres organize meetings with potential financiers,
various specialists and entrepreneurs who have managed
to increase their business or to obtain a significant round
of funding.
Most of such centres focus on IT business development
and function as start-up hubs, which gather around
them a community of entrepreneurs that share the same
workspace.
The next step in the hubs' development would be for them
to offer more funding options to the resident start-ups,
which would help them become business accelerators.
 • Cluj Hub • Simplon • The Grape
• Cluj CoWork • Innovation Labs • Fab Lab
• Spherik • Sillicon Forest • Innovation Labs
• Coworking Accelerator thatdevspace
Oradea
Iași
Piatra Neamț
Oradea • Rubik Hub
Cluj-Napoca
• Hub OneZero
• Central Hub • Hub 1317
• Innovation Labs • Alchemy Hub
Timișoara
Sibiu Brașov
• The start up Hub
• Co-work Timișoara
• Innovation Labs • Impact Hub • Mindspace • Orange Fab
• TechHub • Spaces • Innovation Labs • City Hub Constanța
• Talent Garden • 3house • Commons Lounge • Forte Life
• NOD makerspace • Techcelerator • WeLove Digital • Social Hub

Bucharest Constanța

Co-working spaces, business incubators and accelerators in Romania

Source: EY and Impact Hub Research

2.5. Intellectual and industrial
property
Romania is a signatory to major international conventions
and treaties on intellectual property rights. Thus, the main
Romanian legislation enacted in the area of intellectual
and industrial property follows the provisions of European
directives and international treaties. The most important
pieces of legislation enacted to this effect are the
Patents Law (Law 64/1991, as further amended), the
Copyright Law (Law 8/1996), the Law on Trademarks and
Geographical Indications (Law 84/1998), the Industrial
Designs Law (Law 129/1992) and the Semi-conductor
Products Law (Law 16/1995).
The relevant Romanian authority for registration and
protection of patents and trademarks is the State Office for
Inventions and Trademarks (Oficiul de Stat pentru Invenții
și Mărci - OSIM). As a matter of principle, the protection
of patents and trademarks on the Romanian territory is
obtained following the registration procedure in front of
OSIM.
The regulatory body for copyright is the Romanian
Copyright Office (Oficiul Român pentru Drepturi de Autor
- ORDA). There are also private entities such as non-
profit associations incorporated as per the provisions of
the Copyright Law with the approval of ORDA, to ensure
administration and protection of copyrights.
Romanian legislation specifically regulates licensing
agreements and assignment agreements (with regard to
patents, trademarks and copyright). Such agreements
should observe the legal framework established by each
applicable law.
Special attention has been paid to regulate e-business
since 2000. The Electronic Signature Law was enacted in
2001 and republished in 2014 (Law 455/2001), while in
2002 Romania's Parliament approved Law 365/2002 on
electronic commerce.

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2.6. Competition
legislation
Competition law is aimed at safeguarding
competition, in order to ensure that
consumers are provided with fair prices and
a sufficient diversity of goods and services.
Competition law covers the following main
areas: (i) anti-competitive agreements
between undertakings active on a certain
market (cartel); (ii) abuse of dominant
position; and (iii) economic concentrations
(mergers).
The core provisions of EU competition law
are found in the Treaty on the Functioning
of the European Union (TFEU). These
main provisions are further implemented
by means of European regulations and
guidelines and notices issued by the
European Commission.
The European Commission, by its
Directorate General for Competition, is
the European authority in charge with Matei Corvin Monument - Cluj-Napoca
enforcing the provisions of the TFEU at
European level. The EU Commission closely
cooperates with national competition or supply sources etc. The applicable provisions take into
authorities. consideration both horizontal agreements (i.e. agreements
The main legal act regulating competition in Romania is between competitors operating at the same level of the
the Competition Law 21/1996 republished in the Official supply chain) and vertical agreements (i.e. agreements
Gazette 153/29 February 2016, as further amended between undertakings operating at different levels of the
(the Competition Law). The Romanian legislation on supply chain, such as the ones between a manufacturer
competition is well harmonized with the applicable EU and its distributor).
rules. The national competition authority is the Romanian Agreements, decisions and concerted practices which are
Competition Council (in Romanian, "Consiliul Concurenței" exempted from the interdictions provided above, as well as
and hereinafter the RCC). the conditions and criteria for framing these agreements
The Competition Law is enforced by the RCC, in accordance into certain categories are laid down by the Regulations
with an array of instructions and guidelines outlining the of the Council of the European Union or of the European
steps to be followed in the context of certain proceedings Commission on the application of the provisions of art.
(e.g. merger control, investigations). The Romanian 101 paragraph (3) in TFEU, to specific categories of
national legislation on competition law is supplemented by agreements, decisions of associations of undertakings or
European regulations, which are directly applicable at the concerted practices, which apply accordingly.
level of EU member states. The RCC remains responsible
for monitoring the competitive behaviour of businesses Abuse of dominant position
on the Romanian market, collusions between competitors Dominance was previously defined by the ECJ as a
in the Romanian market, potential abuses of market company's possibility to act independently from the
power and the growth of market structures (mergers market behaviour of its customers and competitors.
and acquisitions). Violation of the national or European The EU Commission considers that a company holding
competition law provisions may result in significant less than 40% market share is unlikely to be dominant.
consequences both for the involved company (e.g. fines up This assumption was also included in the Competition
to 10% of the company's turnover on the year preceding Law, according to which an undertaking or a group of
the sanctioning decision, obligation to pay damages and undertakings holding more than 40% market share are
market reputation being affected) and for its managers and considered to be dominant, unless evidence is presented to
employees (who are exposed even to criminal liability). prove otherwise.
Anti-competitive agreements Dominance in itself is not prohibited by competition law
provisions, but any abuse of a dominant position held by
Both the TFEU and the Competition Law forbid anti- one or more undertakings on the Romanian market or on
competitive agreements between undertakings, which are a substantial part of it is prohibited. Such practices may
aimed at, in particular, fixing prices, limiting or controlling consist in: (a) imposing, directly or indirectly, the sale or
production and distribution of goods, partitioning markets purchase prices or of other inequitable trade conditions;

28
(b) limiting production, trade or the technological
development to the detriment of the consumers; (c)
applying unequal terms for equivalent services to trade
partners, thereby placing some of them at a competitive
disadvantage; (d) making the conclusion of contracts subject
to the acceptance by the other partners of supplementary
obligations which, by their nature or according to
commercial usage, have no connection with the object of
these contracts.
Any time the Competition Council applies these provisions,
to the extent the abuse of dominant position may affect the
trade in the member states, it also applies the provisions of
art. 102 of TFEU.

Economic concentration (merger)

Simply put, the concept of "concentration" refers to the
situation where the control in two or several undertakings
comes to be held by the same individual(s) or undertaking(s).
As per the Competition Law, a concentration takes effect
when the long term change of control results from: (a) the
merger of two or more previously independent undertakings
or parts of undertakings; (b) one or more persons, already
holding control over at least one undertaking, or one or
more undertakings acquire either by purchasing securities
or assets, or by contract or other means, the direct or
indirect control over one or several undertakings or parts
thereof. At national level, the approval of the RCC is
required in case of economic concentrations that exceed the
following:
• EUR 10 million, in RON equivalent of aggregate
turnover of the entities involved, and
• EUR 4 million, in RON equivalent of individual turnovers
generated in Romania, by at least two of the entities
involved.
The threshold is assessed based on the exchange rate
published by the National Bank of Romania (NBR) for the
last day of the financial year previous to the transaction.

2.7. Environmental legislation

Environmental protection represents an important
objective both at European and at national levels. The
main institutions responsible for environmental protection
in Romania are the Ministry of Environment and the
Ministry of Waters and Forests, which are the central
regulatory authorities, along with the National Agency for
Environmental Protection (in Romanian, Agenţia Naţională
pentru Protecţia Mediului în România) and the National
Environment Guard (in Romanian, Garda Naţională de
Mediu), which are public institutions subordinated to the
Ministry of Environment and financed from the state budget.

Ancient towerbell built in 15th century - Moldova

 3 Financial
Services

Brasov City
3.1. Banking
3.1.1. Introduction
As of December 2018, the Romanian banking sector was
made up of 34 credit institutions maintaining a moderate
level of market concentration. In addition to banks, in the
financial landscape there are also Non-Bank Financial
Institutions (NBFI), payment institutions and electronic
money institutions that provide an alternative to the
banking system.
On the back of the measures aimed at strengthening
competition between credit institutions, the system
consolidation started in the past years continued in 2018.
As the sector is following new strategies around digital
banking, cost optimization and higher profitability, the
number of bank branches continued its downward trend,
similar to previous years – a number of 215 bank branches
were closed and the number of employees in the market
decreased with 1307 persons.
Credit institutions are looking to diversify their distribution
channels, however the demand for digital banking offerings
has still room to grow among Romanian customers,
especially when compared to other European countries,
as the number of electronic transactions per capita is
8 times smaller in Romania compared with EU average
(ECB statistics). Also, the local financial inclusion is still
low; according to the Global Findex report drawn up by
the World Bank which analysed the level of access to and
usage of banking services in 140 de countries all over the
world, approximate 58% of adults in Romania have a bank
account and only 47.2% have made or received digital
payments. Despite these small local figures, there is a lot of
potential for e-banking, especially within urban areas and
population with higher education. This is evidenced by the
on-going developments in the market in the area of online
account opening, online lending, instant payments, new
and improved mobile banking applications. New entrants
in the market offering digital banking services quickly
achieved a good penetration (Apple Pay; Revolut – over
250,000 users after only one year).
3.1.2. Business regulation
Banking, insurance, securities, and investment fund
activities are subject to special laws, which regulate the
terms of conducting business, authorizing operators on the
market and determining capital limits for carrying out such
activities.
Since 1990, Romania's banking system has undergone
major restructuring. The key elements of this restructuring
process include:
• Enforcing legislation to give NBR the statute of
country's central bank
• Opening up the banking system to private and foreign
banks
• Privatization of state-owned banks and
• Most of the banks currently operating in Romania are
privately owned and belong to foreign shareholders.
The National Bank of Romania
The National Bank of Romania (NBR) is the central bank
of Romania. Its fundamental objective is to ensure and
maintain price stability.
The central bank is the sole institution vested with
licensing and regulatory powers in the banking field, being
responsible for prudential supervision of credit institutions
in order to ensure the smooth functioning and viability of
the banking system.
NBR is the only institution authorized to issue currency, in
the form of banknotes and coins to be used as legal tender
in Romania.
NBR implements and is responsible for monetary and
foreign exchange policies, bank licensing and prudential
supervision, monitoring of payments, issue of domestic
currency and the administration of Romania's international
currency reserves. The NBR collaborates with government
agencies and foreign financial and banking institutions.
NBR can grant loans to banks against collateral, under
certain terms and conditions. It also sets the methods
for performing operations with banks such as opening
accounts, payment systems, clearing, depository and
payment services, mitigating and hedging risk. Operations
with the General Account of Treasury (including
government securities operations) are jointly agreed
upon between the NBR and the Ministry of Finance. NBR
maintains government reserves and is authorized to carry
out operations in gold and foreign assets.
NBR has a board of directors and is headed by four NBR
executives: the governor and three vice-governors (of
whom one is the first vice-governor). Board members are
appointed for a five-year term by the Parliament. Starting
with 1 January 2007, when Romania joined the European
Union, NBR became part of the European System of Central
Banks (ESCB), and the NBR's Governor, member of the
General Council of the European Central Bank (ECB).
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Banking regulations
Government Emergency Ordinance 99/2006, on credit
institutions and capital adequacy (GEO 99/2006) and
NBR Regulation 5/2013 on prudential requirements for
credit institutions, replace the former capital adequacy
and authorization requirements and provide the regulatory
framework, harmonized with the EU norms.
GEO 99/2006 allows financial institutions from Member
States to perform banking services within the EU based
only upon a notification (i.e. without authorization
requirement) made between the central banks of the
relevant countries with the observance of certain limited
documents to be submitted.
The banking services may be performed either (i) directly,
or (ii) through establishment of a branch.
A new set of requirements applicable to capital levels and
maintained by entities operating in this field has been put
forward.
As a first requirement, GEO 99/2006 sets a threshold of
EUR 5 million (payable at RON equivalent) for the minimum
initial capital that credit institutions must maintain in order
for them to receive NBR's authorization. Similarly, credit
cooperatives are required to maintain a minimum level of
capital of at least (RON equivalent) EUR 5 million.
32
Second, EU-based credit institutions may open Romanian
branches without being subject to any minimum
endowment capital requirement, unlike non-EU credit
institutions whose Romanian branches should have
endowment capital of at least the (RON equivalent) EUR 5
million.
Additionally, NBR Regulation 5/2013 on prudential
requirements for credit institutions provides different
thresholds for the minimum initial capital considering the
type of the credit institutions, as follows:
• Banks seated in Romania – RON 37 million
• Mortgage loan banks – RON 25 million
• Saving houses – RON 25 million
• Credit cooperatives – RON 300,000 (though for
a cooperative network it must be at least - RON
equivalent - EUR 10 million).
For the institutions issuing electronic money, Law
127/2011 which regulates the activity of issuing electronic
money, sets a minimum initial capital of (RON equivalent) -
EUR 350,000.
Furthermore, the requirements for the credit institutions
own funds during their activity are set out by the EU
Regulation 575/2013.
NBR notifies the European Banking Authority since
2011 on any authorization granted, so that the credit
institution's name is included in the list of credit institutions
drawn up and updated by the European Banking Authority,
as published on its website.

Timisoara City Center
3.1.3. Market overview
Banking Associations
The Romanian Banking Association (RBA)
The RBA is a legal Romanian entity, set up as a non-profit
professional body and operating in conformity with its legal
statute and the relevant Romanian laws in force, complying
with the provisions of law regarding the business of
banking. Dialogue, collaboration, exchange of experience,
cooperation, common practices across the banking system
are some of the elements which define the activity of the
RBA.
Established in 1991, following the initiative of 14
commercial banks, the Association has 35 members:
credit institutions with privately-owned capital or state
capital and branches or representative of foreign banks.
RBA has as main targets to represent and defend its
members' interests, to promote the principles of banking
policy in domains of general interest for its members, to
promote cooperation among banks and with national and
international institutions and banking associations from
other countries, to train experts in the banking system,
to communicate with the mass media. Moreover, the RBA
agenda includes training programs in fields of interest for
the experts of the banking system, along with participation
to national and international seminars and conferences or
deployment of common projects across the whole banking
system.
The Council of Banking Employers in Romania (CPBR)
CPBR was established as the country's first banking sector
employers' organization on 28 April 2014. CPBR's member
banks are Banca Comercială Română, BRD - Groupe
Societe Generale, Raiffeisen Bank, ING Bank România and
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UniCredit Ţiriac Bank. The banks that currently compose
the CPBR together have about half of total bank assets
in Romania, while employing more than 30% of total
employees in the country's banking sector.
The main objectives of the CPBR are: (i) promote
communication, cooperation and social dialogue with the
authorities of Romania (ii) cooperate with the authorities
to overcome difficulties and obstacles which may exist in
relations with general public, customers, private domestic
and foreign investors; (iii) contribute to increasing levels
of industry standards and financial literacy in Romania;
(iv) contribute to the initiation, preparation and promotion
of new laws or other legislative or regulatory initiatives,
or the modification of those already existing; (v) issue
advisory opinions on proposed laws or other legislative or
regulatory initiatives submitted for review.
Structure of the Romanian banking system
As of December 2018, the Romanian banking system
counted 34 credit institutions, of which 27 Romanian
legal entities and 7 foreign branches, as a result of Banca
Transilvania S.A. concluding its absorption of Bancpost S.A..
According to NBR Annual Report, the structure of credit
institutions and Romanian legal entities in terms of
share capital was as follows: 21 credit institutions with
majority private foreign capital, 4 credit institutions with
majority private domestic capital (Banca Transilvania,
Banca Comercială Feroviară, Banca Română de Credite și
Investiţii, CREDITCOOP) and 2 credit institutions with fully
or majority state-owned capital (CEC Bank and EXIMBANK).
Net Assets
Indicator (2018)
(% of total)
Banks with domestic capital, of which: 25%
• with majority state-owned capital 8.1%
• with majority private capital 16.9%
Banks with majority foreign capital 63.6%
Foreign Bank Branches 11.4%
Total Credit institutions 100%
Source: National Bank of Romania, Annual Report 2018
The Romanian banking system remains highly linked
to the European banking system, as evidenced by the
overwhelming share of foreign capital (banks with majority
foreign capital, including foreign bank branches): 75%
of the aggregated capital of the banking system at the
end of 2018, slightly less than in 2017 when it was 77%,
mostly due to the absorption of Bancpost S.A. by Banca
Transilvania S.A., the latter being the biggest bank with
domestic private capital.
Following Romania's joining the EU and the liberalization
of services market, by the end of May 2019, 299 foreign
institutions notified NBR of their intention to perform
direct banking services on the Romanian territory.
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Main banks As of December 2018, the following indicators were

The Romanian banking system features moderate, but published by NBR:
growing concentration, illustrated by the market shares in
terms of assets held by the top five banks. As of December Indicator (2018) Value
2018, the top five banks held the following shares in total
banking market: 61% of aggregate assets and 68% of Total Net Assets RON 451.2 billion
equity capital, both levels higher than in previous years.
Loans to Deposits Ratio 73.64%
Net Assets
Position Bank Non-performing loans ratio based on EBA
(% of total) 4.96%
definition
1 Banca Transilvania 16.48%
Return on Assets (ROA) 1.55%
2 Banca Comercială Română 15.05%

3 BRD Groupe Societe Generale 11.99% Return on Equity (ROE) 14.58%

4 UniCredit Bank 9.21% Source: National Bank of Romania

5 Raiffeisen Bank 8.88%

6 ING Bank N.V., Amsterdam 8.51% Type of services

7 CEC Bank 6.50% The Romanian banking sector provides a wide range of
services and most of the players are universal banks.
8 Alpha Bank 3.76%
Analysing from the perspective of product lifecycle,
9 OTP Bank 2.45%
loan facilities (mortgage loan, including "First Home
10 Garanti Bank 2.27% Governmental Program", consumer loan, SME & Corporate
Source: National Bank of Romania, Annual Report 2018
financing) are mature, well established products on the
market with still very high potential.
Over the last years, cash-based banking products and
Banking sector indicators
services were in high demand detrimental to electronic
The Romanian banking sector further pursued non- payments and transactions initiated from banking accounts
performing loan resolution by means of loan sale or
balance sheet clean-up, with a positive impact on loan
portfolio quality and overall profitability. In December 2018,
the non-performing loans ratio continued its downward
trend to 4.96%, marking a 20% reduction as compared
to the end of 2017. However, this is still above the EU
banking system average of 3.2% (Q4 2018). On the other
hand, the level of provisions held for non-performing loans
in December 2018 (58.5%) was well above the EU average
of 45.1% (EBA Risk Dashboard Data as of Q4 2018).
For the fourth consecutive year, the stock of domestic
loans continued to rise in 2018, up by 7.9% compared to
the previous year. 2018 was also marked by a significant
growth in private sector loans in local currency (13.4%
year-on-year increase), while foreign currency loans had
tempered the decrease to -1.3%, whereas last year it was
a -8.1% decrease. 67% of the private sector lending were
loans in local currency and 33% foreign currency loans,
the biggest ratio recorded for the local currency loans
since 1996. Additionally, the ratio between loans and
deposits remained steady at 74.80%.
Domestic deposits as a share of total liabilities remained
roughly at the same level as in December 2017 (~64%),
but the overall year-on-year increase of 9% in deposits
was fuelled by both the population and non-financial
companies. Notably, the banks were able to attract
considerably more foreign currency deposits from the
population, translating into 1.6 times change in the net
lending position between banks and the population. As
domestic deposits are going up, with deposits in RON from
non-financial companies being one of the main drivers,
external liabilities, including funding from parent banks,
have been consistently reducing over the past years.

34

in general. But the trend is slowly reversing since the
introduction of specific regulations that prohibit payments
in cash over a certain amount or remove barriers to entry
for FinTechs, and due to technological advance.
Alternatively, the market of non-cash products such as
credit cards and debit cards are becoming more and
more effervescent. The last few years brought significant
changes in the cards market, with more and more credit
institutions offering diverse products, such as credit cards
with fixed, interest-free monthly repayments for purchases
made at a variety of merchants.
Still in the growth phase of the product lifecycle, the online
banking penetration and proportion of digital clients is
much lower than the EU average. Despite the significant
number of smartphone users, mobile banking is even
less used than Internet banking; typically, mobile banking
is used for checking account balance, while Internet
banking is the platform of choice for payments. As the
rate of internet usage continues to grow countrywide, the
usage of digital services in Romania is also likely to grow.
According to the Global Findex report drawn up by the
World Bank for 2018 which analysed the level of access
to and usage of banking services in 140 countries all over
the world, only 8.8% of Romanian adults have used a bank
account to pay utility bills; 19.2% have used the internet
to pay bills or buy something online, 12.3% used a mobile
phone or the internet to access an account and 25.9%
used a debit or credit card to make a purchase.
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3.1.4. Trends
The structural developments in 2018 were marked by the
further consolidation of the Romanian banking system
through mergers, as well as a new entrant on the market:
• The acquisition of Bancpost by Banca Transilvania was
finalized in 2018. This is the second big acquisition
Banca Transilvania undertakes after the Volksbank
Romania takeover, a transaction that helped it climb
from second to first place in the local banks' ranking.
• The acquisition of Piraeus Bank Romania by JC
Flowers, an American private equity fund, also finalised
in 2018, after being approved by the National Bank
of Romania (NBR) and the Romanian Competition
Council. The bank now operates under the name
First Bank. First Bank announced the signing of
an agreement with Bank Leumi le-Israel B.M for
purchasing all the Bank's holdings in its subsidiary
Bank Leumi Romania. The purchase is yet to be
approved by the NBR and the Romanian Competition
Council and is expected to be finalized in 2019.
Likewise, in the phase of awaiting approval by the National
Bank of Romania and the Romanian Competition Council
lies the agreement signed by EximBank (state-owned)
with the National Bank of Greece, for purchasing 99.28%
of the latter's holdings in Banca Românească. Further
to this transaction, EximBank will become active in the
retail banking segment of Romania for the first time, thus
becoming a universal bank.
Historical Bridge - Targu Jiu
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In January 2018, IFRS 9 standards entered into force in

Romania with the financial sector having to adapt to new
requirements in terms of determining credit risk indicators
(PD, LGD) and an improved methodology for calculating
provisions – by shifting to a forward-looking approach
focused on macroeconomic prospects. In Romania,
particularly, the positive outlook of the country's economy
has enabled banks to decrease provision levels throughout
2018, leading to above-average reported profits.
During 2018, financial stability remained robust, with
no severe systemic risks identified by NBR. The main
systemic risks were external (i.e. Brexit and the sovereign
debt situation in the euro area). The end of 2018 was
characterized by an increased local regulatory risk, in
the context of increased uncertainty which followed
the adoption of Government Emergency Ordinance
no. 114/2018. Overall, the Romanian banking sector
maintained its macro-prudential adequacy, with the
solvency and liquidity ratios being within the minimum
regulated requirements. On an aggregate level, the high
capitalization of credit institutions is likely to provide
a cushion for unexpected losses and allows increased
lending. At the same time, the high level of liquid assets
held by the banking sector (especially government
securities) demonstrates its ability to cope with potential
adverse developments in their financing sources, as
revealed by the latest stress testing exercises conducted
by NBR which identified only limited risks for small banks.
Despite credit institutions being the main providers of
funds and liquidity in the financial sector, one of the main
challenges of the Romanian banking sector remains the
low rate of financial intermediation – 26% (domestic credit
to private sector % of GDP– World Bank), the lowest in the
EU. The continuing trend of diminishing banking staff and
the number of branches is likely to have a negative impact
on the already precarious degree of financial inclusion and
intermediation in Romania. Access to banking and financial
services in rural areas will continue to be a challenge, but,
for now, improving operational efficiency seems to be the
focus of banks which have already increased their market
share. Another European Directive expected to be enforced
in 2018 was the revised Payment Service Directive
To reduce the risks related to the high indebtedness of
(PSD2), which allows bank customers to use third-party
low-income individuals, starting with 1 January 2019,
providers to access their accounts at different banks, make
the National Bank of Romania established a maximum
payments and manage their finances. Payment Initiation
level of the total indebtedness of 40 percent for consumer
Service Provider (PISP) and Account Information Service
loans and mortgages. In the case of foreign currency
Provider (AISP) are the new players that the Directive
loans or indexed at a foreign exchange rate given to a
brings to the financial market. The Directive is expected to
person exposed to foreign exchange risk, the maximum
present a significant economic challenge for banks, as they
level of total indebtedness may not exceed 20 percent.
will no longer be competing only against other banks and
Furthermore, starting May 2019, the Romanian Interbank
the payments value chain will fundamentally change, along
Offer Rate (ROBOR) will be replaced by the Reference
with a number of opportunities to offer innovative digital
Index for Consumer Credits (IRCC) for consumer credit
services. Although delayed, the local Law transposing
contracts in RON with variable interest rate.
PSD2 is expected by the end of 2019.
The harmonization of European data privacy laws under
Another significant and strenuous change that banks faced
the EU General Data Protection Regulation (GDPR) is likely
in 2018 was the implementation of the MiFID II legislative
to be another pain-point for banks, as some may be found
framework (transposed locally through Law 126/2018)
to be non-compliant after its enforcement date (25 May
and of the Anti-Money Laundering 4th Directive (although
2018) and might face heavy fines and public scrutiny.
not yet transposed into local legislation) which poses
challenges in terms of dealing with financial crime related
aspects in a timely and efficient manner.

36

3.2. Capital Markets
3.2.1. Introduction
The Romanian capital market is continuing its development
journey started back in 1995 (after almost 50 years of
suspension following the establishment of the communist
regime). At the moment, the Bucharest Stock Exchange
(BSE) is providing financing opportunities for companies
looking to raise funds on the Romanian capital market.
Via the capital market, Romania has seen an increasing
flow of capital in the recent past, coming from retail and
institutional investors, both national and international.
Business regulation
Financial Supervisory Authority (FSA)
In 2013, the FSA was created via Emergency Government
Ordinance 93/2012 regarding the establishment,
organization and functioning of the FSA, as an independent
and autonomous administrative authority, with legal
capacity, which took over all duties and prerogatives of the
National Securities Commission, the Insurance Supervisory
Commission and the Private Pensions System Supervisory
Commission. The Financial Supervisory Authority exercises
authorization, regulation, supervision and control powers
Romania Business Passport 2019
Streets of Sighisoara
over the financial sector, comprising capital markets,
insurance and the private pension funds.
FSA is the only national authority competent to represent
Romania's interests before the International Organization
of Securities Commissions – IOSCO, the European
Securities and Markets Authority – ESMA, the European
Insurance and Occupational Pensions Authority – EIOPA
and the International Association of Insurance Supervisors
– IAIS, being a rightful member of such international
authorities, based on the applicable international
legislation.
Regarding capital markets, FSA main objectives are:
• To ensure the stability, the competitiveness and the
proper operation of the financial instruments markets
• To increase confidence in capital markets and in
financial instrument investments
• To ensure protection of market participants against
unfair, abusive and fraudulent practices
• To promote stability of the insurance activity and to
protect the rights of policy holders
• To ensure the efficient operation of the private pension
system and to protect the interests of the participants
and beneficiaries
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Main regulations:
• The capital market Law 297/2004
• FSA Regulation 1/2006 on issuers and securities
• Emergency Ordinance 93/2012 on the establishment,
organization and operation of the FSA
• Law 113/2013 for the approval of Government
Emergency Ordinance 93/2012 on the establishment,
organization and operation of the FSA
• Law 10/2015 approving Government Emergency
Ordinance 32/2012 on undertakings for collective
investment in transferable securities and investment
management companies and amending, and
supplementing Capital Market Law 297/2004
• Law 24/2017 on issuers of financial instruments and
market operations
• Law 126/2018 on markets in financial instruments.
3.2.2. Market overview
Stock exchanges
BSE has a history tracing back to 1839, when commodities-
trade exchanges were established. Re-established in 1995,
BSE has developed continuously and nowadays it is the
main stock exchange in Romania.
Sibiu Stock Exchange (SIBEX) was founded in 1994 having
commodities intermediation as the main activity. Starting
with 1997, the company focused on the development and
the administration of securities and financial derivatives
markets.
At the end of 2017, the merger by absorption between the
BSE and SIBEX (absorbed company) was officially approved
by the Bucharest Court and starting with January 2018,
the BSE remains the only market operator in Romania.
BSE Regulated market
In 1995, the BSE was the first regulated market established
in Romania. Soon after, in 1996, the RASDAQ market had
been established, as an over-the-counter (OTC) market.
BSE's regulated market offers the following products:
shares and rights (local and international companies),
corporate and municipal bonds, government securities,
structured products and exchange-traded funds (ETFs).
In October 2015, RASDAQ market ceased its activity.
Based on the BSE Alternative Trading System, a new
market named AeRO (equities segment of BSE's alternative
trading system) was launched on 25 February 2015. It is
a market designed for the listing of start-ups/early stage
companies and SMEs, to finance their projects, increase
their visibility and contribute to the development of the
business environment. In February 2016, the AeRO market
introduced two new segments – Premium (16 companies)
and Standard (the rest).
Main participants
The main actors involved in the capital market include:
• Market operators: The BSE which operates a regulated
equity market and an ATS, and SIBEX, which operated
an equity spot market, an ATS and a derivatives
market, before absorption
38
• Issuers of securities: entities (private companies,
government) that are aiming to finance their
operations can issue securities (shares and bonds are
the most common) via the capital market
• Financial investment services companies: all securities
trading in Romania is carried out by brokerage
companies called Financial Investment Services
Companies (FISC) licensed by the FSA and established
according to Law 126/2018
• Investment consultants: based on FSA/NBR
authorization, individuals or legal entities can provide
professional investment consultancy services
• Asset management companies and financial
investment companies: the asset management sector
plays an important role nowadays. In the current low
interest rate environment, the trend set over the last 2
years is set to continue, as investors move away from
bank deposits and become increasingly interested in
such investments to capture higher yields.
Capital market indicators
Indicator December 2018
Total Market Capitalization (BVB) EUR 30.66 billion
Average traded value (equities) EUR 9.88 million/day
Market Capitalization of Romanian
EUR 18 billion
companies
BET Index yield (2018 closing year) 7,383.68 points
Number of listed companies at BVB 87
Source: Bucharest Stock Exchange, BSE Annual Report 2018
Compared to December last year, the Bucharest
Stock Exchange (BSE/BVB) registered a total market
capitalization of EUR 30.66 billion, a significant decrease
of 13%. The regulated market of BSE also suffered a 34%
decrease in the number of equity transactions and a 4%
year-on-year decrease in value.
The BET index, which is the main index of the local capital
market, closed with a 4.77% drop in value. The most
significant depreciation was recorded by BET-FI with
-12.63%, followed by BET-BK with -11.63% and BET-XT
with -7.62%. BET-FI is a sectorial index that reflects the
evolution of the investments funds that are traded on the
BVB regulated market, BET-BK was created as a benchmark
for funds managers; BET-XT tracks the price changes of the
25 most traded Romanian companies listed on the BVB.
Until mid-December 2018, the Bucharest Stock Exchange
was performing well compared to the region, however
there was a dramatic downward shift as a result of
legislative projects (i.e. Government Emergency Ordinance
114/2018) which implied additional charges on the
banking, energy and telecommunications sectors and the
modification of Pillar II pensions scheme.

Type of services
The capital market offers following type of services:
• Sale or purchase of securities and other financial
instruments
• Management of portfolio
• Analysis of financial instruments
• Market analysis
• Consultancy/advisory concerning mergers,
acquisitions, capital structure, strategy, financing
• Managing undertakings for collective investment in
transferable securities established in Romania or in
other Member States.
3.2.3. Trends
An increased focus on consumer protection, transparency
and market efficiency continues to be an important trend
for capital markets. To this effect, new and updated
legislation is coming into effect, both domestically and
internationally.
As with the banking sector, the Romanian capital market
and all its players are required to adhere to the updated
MiFID II legislative framework, as of January 2018
(Markets in Financial Instruments Directive). This aims to
strengthen protection for investors in financial instruments
and improve the functioning of financial markets through
increased transparency and efficiency.
The main strategic goal of the BSE has not changed
since 2016 and it remains the upgrade to Emerging
Market status. FTSE Russell published on September 26,
the Annual Country Classification Review, as per which
Romania was maintained on the watchlist of countries
with potential to be reclassified from Frontier Market to
Secondary Emerging Market. Romania was added on the
watchlist in September 2016.
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Furthermore, the BVB Group took important steps in
setting-up a Central Counterparty (CCP) by deciding on the
local CCP solution. The aim is to relaunch the derivatives
market through the implementation and authorization of
the CCP, in line with EU regulation, so that the institution
will be operational in the second half of 2020.
Purcari Wineries Plc. (WINE) got listed on the BSE regulated
market, after the successful completion of the initial public
offering during January 29-February 8, 2018. 49% of
the shares were placed at a price of 19 RON/share, which
raises the value of the market operation at approximately
million RON 186 (EUR 40 million). Purcari Wineries is
one of the leading wine producers in Central and Eastern
Europe, with four wineries in the Republic of Moldova and
in Romania.
Globalworth Real Estate Investment Limited, one of the
leading real estate investment companies in Central and
Eastern Europe, announced the second BSE listing of
corporate bonds issued by the company, with a total value
of EUR 550 million.
Alpha Bank Romania is the first Bank in Romania to issue
covered bonds (EUR 200 million) as part of a Euro 1 billion
direct issuance Global Covered Bond Programme. This
marks a first for the Romanian Capital Markets, as the
bonds will be listed on the Bucharest Stock Exchange. The
issued covered bond has a 5-year tenor, pays a floating
rate coupon and is backed by prime Romanian residential
mortgages.
Another direction for the BVB is enhancing its relationship
with local entrepreneurs, through the inception of the
"Made in Romania" project. The project concluded its
second edition in 2018, after a successful first round in
2017 and aims to provide an ecosystem for the business
environment in Romania, where all participants can meet
and learn from each other, so that the Romanian economy
benefits from sustainable development.
Stavropoleos Church - Bucharest 39
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3.3. Insurance&Private pensions
3.3.1. Introduction
The Romanian insurance&private pensions industry has
seen an important development during the last decade.
As of 1 January 2016, the Solvency II Directive was
implemented increasing capital requirements for insurance
companies, in an effort to better protect consumers.
As with the other industries, technology innovation also
plays an important role in the digital era of financial
services and involves significant transformations for
insurance companies to stay relevant and competitive
within the market.
The insurance market in Romania is characterized by a
high degree of concentration. In 2018, almost 89% of the
total volume of gross premiums written was covered by 10
insurance companies, out of 29 companies, that carried out
insurance/reinsurance activity until 31 December 2018,
a similar situation compared to previous years.
With regard to the Pension System, for Pillar II (privately-
managed compulsory pensions), there were 7.25 million
participants and 0.472 million for Pillar III (voluntary
contributions to pension funds or insurance companies) at
the end of 2018, both Pillars registering a higher number
of participants as compared to the end of 2017.
3.3.2. Business regulation
The FSA exercises authorization, regulation, supervision
and control powers over the financial sector, comprising
capital markets, insurance and the private pension funds.
Main role of FSA in the insurance market is to:
• Promote the stability of the insurance market
• Exercise the powers of authorization, regulation,
supervision and control over commercial insurance
companies operating in, or from Romania
• Supervise the insurance intermediaries and
reinsurance, as well as other activities in connection
therewith, according to insurance and reinsurance
regulation in Romania
• Provide authorization by line of business for companies
complying with all criteria established for sale purposes
• Approve the list of auditors for statutory purposes
• Offer educational programs related to insurance.
Union Square - Timisoara
Insurance regulations
The insurance sector is regulated by Law 236/2018
on the distribution of insurance, Law 237/2015 on the
authorization and supervision of the business of insurance
and reinsurance, Law 132/2017 on compulsory motor
liability insurance for damages caused to third parties by
motor vehicle accidents and trams. The regulating and
supervisory body of the insurance market is also FSA. The
FSA was established in order to ensure a greater efficiency
in the sectorial surveillance activity performed outside the
scope of competence of the NBR.
The legislation allows setting up insurance companies
under any of the following options:
• Romanian legal entities established either as joint stock
companies or as mutual fund companies authorized by
the FSA
• Insurance or reinsurance companies from Member
States that perform insurance or reinsurance activities
in Romania, according to their rights of establishment
and provision of services
• Branches of foreign companies authorized by the FSA
• Subsidiaries of foreign insurance or reinsurance
companies authorized by the FSA
• Insurance or reinsurance companies that adopt the
form of Societas Europaea.
The paid-up share capital of insurance providers cannot be
lower than the following amounts:
a. RON equivalent of EUR 2.5 million for non-life insurers,
including captive insurers
b. RON equivalent of EUR 3.7 million for non-life insurers,
including captive, covering also, in full or in part, risks
included in Classes 10 to 15 listed in Section A of
Annex 1 of the Law 237/2015
c. RON equivalent of EUR 3.7 million for life insurers,
including captive
d. RON equivalent of EUR 6.2 million for composite
insurers
e. RON equivalent of EUR 7.4 million for composite
insurers, covering also, in full or in part, risks included
in Classes 10 to 15 listed in Section A of Annex 1 of the
Law 237/2015
f. RON equivalent of EUR 3.6 million for reinsurers and
g. RON equivalent of EUR 1.2 million for captive
reinsurers.

In accordance with the provisions of Law 260/2008,
the Insurance Pool against Natural Disasters (PAID)
was set up, as an insurance-reinsurance undertaking,
with private capital, formed by the association of
insurance companies for the conclusion of compulsory
home insurance. PAID was established as an insurance
company in November 2009, through the joint effort of
12 insurance companies.
PAD - the policy of insurance against natural disasters
- is a compulsory insurance policy which covers damage
from floods, earthquakes or landslides on dwellings.
Depending on the type of dwelling insured, the PAD
policy may have the following features:
• TYPE A dwelling, with a sum insured of EUR 20,000
and an insurance premium of EUR 20/year
• TYPE B dwelling, with a sum insured of EUR 10,000
and an insurance premium of EUR 10/year.
Due to higher capital and solvency requirements, there was
a decrease of the Romanian insurance market. Currently
(30 December 2018) there are 29 active insurance
companies authorized by the FSA, compared with 2011
when there were 45 companies.
As of 1 January 2016, the implementation of the Solvency
II Directive required insurance companies to align to new
rules and standards. The Directive enhances consumer
protection by introducing prudential financial requirements
(Pillar I) aimed to ensure the guarantee of payments to
owners and/or beneficiaries of insurance policies.
The Solvency II Directive raised capital requirements for
insurance companies, directly linking these with the level
of risks taken by the companies, both from an investment
perspective and in terms of underwritings.
A comparative analysis between the capital requirements
at the end of 2017 and the capital requirements at the end
of 2018, indicates a slight decrease of the Solvency Capital
Requirement (SCR) by RON 5.4 million.
As of December 2018, insurance companies held eligible
own funds to cover capital requirements of RON 5.10
billion, 1% lower than the level registered at the end of
2017.
3.3.3. Market overview
Romanian Insurance Market
The total gross premiums written by insurance companies
and their subsidiaries on the Romanian market was about
RON 10.14 billion, representing a 4.5% year-on-year
increase.
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The growth was generated by both life and non-life
segments, just as the increase between 2016 and 2017.
The general insurance segment registered an increase
of 4.6% compared to 2017, totalling around RON 8.04
billion. The main reason behind this positive movement is
an increase of 9% in the volume of Class A3 land transport
insurance (other than railway) and a 6% increase in the
volume of Class A8 fire and natural disasters insurance,
which represent roughly a quarter for the former and
13% for the latter of the total gross premiums written for
non-life insurance. This movement was countered by a
2% decrease in Class A10 motor insurance (Motor Third
Party Liability), which amounts to 47% of the value of
the total gross premiums written for non-life insurance.
Another notable increase in gross premiums written was
for Class A2 health insurance, totalling a 60% year-on-
year increase, however the value of Class A2 premiums
represents only 2.8% of the total gross premiums written
for non-life insurance.
Life insurance gross premiums recorded a 4.3% increase
compared to 2017 and unlike the European insurance
market, which is dominated by the life insurance segment,
in Romania this segment represents only about 21% of
the gross written premiums, the market being dominated
by general insurance, respectively motor insurance. Total
gross life premiums represent almost 0.24% of GDP
in 2018, below the European average. This is partially
explained by the faster GDP growth of Romania compared
to EU 28 average.
In terms of mandatory insurance policies against natural
disasters (PAD) there is still a very low penetration
evidenced by the number of existing contracts compared
to the number of households. 2018 has seen an increase
of 1% in the number of new contracts for mandatory
insurance policies, a 3% increase in gross written
premiums and a 15% increase in gross indemnities paid.
The voluntary segment of insurance policies against
natural disasters however, although benefitting from a 5%
year-on-year increase in gross written premiums and a
-14% decrease in gross indemnities paid, saw a -13% year-
on-year decrease in the number of new contracts.
Romanian Private Pensions Market
Romania overhauled the old pension system in 2007,
making it mandatory for all working Romanians under 35
to contribute to "Pillar II" private pension schemes, as well
as their state pension "Pillar I". The evolution of the private
pension system in Romania has been a positive one, year
after year bringing a rise in participants and total assets.
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The value of the total assets under management in the
entire private pension system has continued to grow over
the last few years. In December 2018, it reached a total of
RON 49.60 billion (19.4% higher than December 2017),
representing 5.22% of GDP, compared to 4.84% of GDP in
December 2017.
The Romanian private pension system has two
components:
• Mandatory private pensions (Pillar II)
• Voluntary pensions (Pillar III).
Romania's mandatory private pensions system (Pillar II)
is based on the World Bank's multi-pillar model. It is a
fully funded system, based on personal accounts and on
the defined contribution (DC) philosophy. The system was
put in place in 2007, when it became mandatory for all
employees aged under 35 and voluntary for employees
aged 35-45. Participation is only open to employees
paying social security contributions (CAS).
Romania's voluntary private pensions system (Pillar III)
is a fully funded system, based on personal accounts and
on the defined contribution philosophy. The system was
implemented in 2007, when it became voluntary for all
persons earning any type of income. The system is not
occupational. Participation is open to everybody earning
income, from employees to the self-employed.

Main players
According to the available data, as of December 2018, the top insurers based on the total gross written premiums (both
non-life and life insurance) were as follows:

Total Gross* Total Market Share

No Company name
(million RON) (%) Q3 2018
1 CITY INSURANCE S.A. 1,484.6 14.64%
2 ALLIANZ-ŢIRIAC ASIGURĂRI S.A. 1,317.3 12.99%
3 OMNIASIG VIG 1,172.3 11.56%
4 EUROINS ROMÂNIA ASIGURARE REASIGURARE S.A. 1,008 9.94%
5 GROUPAMA ASIGURĂRI S.A. 1,003.9 9.90%

6 ASIROM VIENNA INSURANCE GROUP S.A. 867 8.55%

7 NN ASIGURĂRI DE VIAŢĂ S.A. 770.7 7.60%

8 GENERALI ROMÂNIA ASIGURARE REASIGURARE S.A. 637.8 6.29%
9 BCR ASIGURĂRI DE VIAŢĂ VIENNA INSURANCE GROUP S.A. 365 3.60%
10 UNIQA ASIGURĂRI S.A. 351.9 3.47%

Source: Financial Supervisory Authority, Insurance Market Development in 2018

*Total Gross figures calculated based on the total market shares

Insurance market indicators 3.3.4. Trends

Overall, in 2018, the insurance market registered moderate As a result of new European and local requirements,
growth, while the private pension funds market (Pillars insurance companies are required to quickly adapt to
II and III) had a more significant evolution compared to more restrictive regulations. The impact of the Solvency
December 2017. Both remain highly concentrated markets, II Directive requirements was not too significant. At the
with life insurance and facultative pension schemes lagging end of 2018, all insurance companies operating on the
average EU numbers. Romanian market were in compliance with both the
Solvency Capital Requirement (SCR) and the Minimum
Capital Requirement (MCR), standing at 1.71 and 3.87
Indicator (Q3 2018) Value (RON) respectively.
At the beginning of 2022, another challenge that insurance
Gross Written Premiums (Total) 10,141 million
companies have to take on is the implementation of IFRS 17
Gross Written Premiums (Non-life) 8,042 million
accounting standards, replacing IFRS 4. This will introduce
a single reporting standard for all insurance companies,
Gross Written Premiums (Life insurance) 2,099 million on a global scale. This single "accounting language" will
allow global investors to have a better overview of the
Insurance penetration degree (2018) 1.13% of GDP financial situation and risks faced by insurance companies,
making it easier to compare different insurance companies,
Insurance density (2017) RON 496/capita regardless of the market they operate on. Experts believe
that insurers will face significant costs to implement the
Source: Financial Supervisory Authority, new accounting standard, in particular life insurance
Insurance Market Development in 2018 companies.

42

A notable event on the general insurance market was the
adoption of Law 236/2018 in October 2018, through
which the Insurance Distribution Directive (IDD) measures
were transposed in the Romanian legislation. As a result,
Law 32/2000 on the activity and supervision of insurance
and reinsurance intermediaries was repealed. The aim of
the new legislation is to further harmonize the insurance
market for consumers and through this framework provide
greater transparency in price and costs of insurance
products and also enhance business conduct rules.
The insurance sector will continue to face the downfall of
European legislative changes, after the implementation
of the Packaged Retail Investment and Insurance-Based
Products (PRIIPs) Regulation, in January 2018, the
Insurance Distribution Directive (IDD) in October 2018
and General Data Protection Regulation (GDPR) in May
2018. IDD focuses on enhanced consumer protection,
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with insurance companies and distributors being required
to disclose a number of additional information regarding
the products they offer, while PRIIPs aims to standardize
and improve the information provided to clients regarding
specific insurance products through a Key Information
Document (KID).
To maintain organic growth and consistency in coming
years, successful insurers will need to look for new ways
to attract more customers by investing in their digital
channels and by making better use of the data they
capture to personalize products and services. The use of
intelligent automation to develop self-service platforms
which simplify their external and internal claims processes,
improve underwriting and prevent fraud, are ways in which
insurance companies can grow their customer base, while
also minimizing losses and maximizing profits.
Brasov fortress - Brasov
43
4 Energy

Grand Square - Sibiu

4.1. Oil & Gas
4.1.1. Oil
With a history of over 150 years, Romania's oil industry stands as a strategic national sector. At the regional level,
Romania is the fourth largest oil producer in the EU (6% of total production) and the fifth largest oil producer in Europe
(2%). Its peak oil production was reached in 1977, with an annual production of 14.65 million tons. The BP statistical
Review of World Energy reported that the annual oil production in Romania was approximately 3.6 million tons.
Romania's estimated crude oil reserves are approximately 40 million tons. The estimated depletion period is 12-15 years.
Exploration of Oil and Natural Gas Sources

ROMGAZ

Satu Mare Suceava Botoşani PETROM

Maramureş
OTHER TITLE HOLDERS
Bistrița
Sălaj Năsăud Iaşi COUNTRY’S LIMITS
Bihor
Neamţ NONPERSPECTIVE ZONE
Cluj Mureş

Vaslui
Harghita
Bacău
Arad
Alba

Covasna Galaţi
Timiș Sibiu Vrancea
Hunedoara Braşov

Prahova
Caraș-Severin Argeş Brăila
Gorj Vâlcea Tulcea
Buzău

Dâmboviţa Ialomiţa
Ilfov
Mehedinţi
București Călăraşi
Olt
Dolj
Giurgiu Constanţa

Teleorman

Source: The Romanian Agency of Mineral Resources

Most of the oil resources are located onshore; only 4% are situated in the Black Sea continental plateau. In the past
years, natural factors such as the continuously declining oil reserves and economic factors such as a lack of oil drilling
works and investments have led to a visibly diminishing oil production and, correspondingly, a steady rise in oil imports.
Similarly, the fall in the annual growth rate of GDP has caused a decline in domestic consumption. Currently, there are
432 oil and natural gas fields, with approximately 10,000 oil wells and 4,000 natural gas wells.
In the long run, the solution to counter the depletion of oil reserves is prospective onshore (beyond 3,000 m depth) or
offshore geological exploration (beyond 1,000 m depth).
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Market The first state company established in the oil sector as of

A pivotal role in the Black Sea is played by the Oil Terminal
SA Constanţa. One of the largest terminals in South
Eastern Europe, Oil Terminal operates 24 million tons/year
of crude oil, petroleum, liquid chemical products and raw
materials destined for import/export and transit.
A joint-stock company (state-owned), the terminal has
three large storages, with a total capacity of 1.7 million
cubic meters, transport pipelines and loading capacity in
30 km landfills FF and discharging capacities at railway
platforms to ensure the movement of petroleum products
and chemicals. Oil Terminal is connected to all refineries
in Romania, via a network of oil pipes of over 800 km.
Moreover, it is the sole terminal in Western Black Sea that
has a berth with a draught, allowing the unloading/loading
of ships of maximum 150,000 tdw.
The Crude Oil National Transport System (N.T.S.) is the
ensemble of interconnected major pipelines, providing
the collection of the crude oil from the extraction sites or
import crude and their routing from the sites they have
been delivered by the producers/importers towards the
processing units.
Government Decree 1213/1990, CONPET operates the
3,800 km oil pipeline system that addresses 24 counties,
with an overall transport throughput of about 27.5 million
tons/year.
Acting as concessionaire of the N.T.S., CONPET is legally
bound to provide to all applicants – authorized legal
persons free access to the system's available throughput,
under equal conditions, in a non-discriminatory and
transparent manner.
Based on the type of oil supplied, the transport network
comprises the following subsystems:
• 1,348 km imported crude oil transport – 20.2 million
tons/year throughput and 45,000 mc storage capacity
• 1,540 km domestic crude oil transport – 6.9 million
tons/year throughput and 126,000 mc storage
capacity
• 921 km rich gas and liquid ethane transport – 0.33
million tons/year for rich gas and 0.1 million tons/year
for ethane and overall 633 mc storage capacity.

Romania's Oil Transport System

Source: CONPET

Confronted with a major dependence on one client and a low degree of capacity utilization of the subsystem for imported
crude oil (approximately 30%), CONPET has adopted a long-term development plan to reduce loss prevention and expand
the network. In particular, the Constanta-Pitesti-Pancevo Project seeks to connect the national crude oil pipeline transport
system to the regional system by supplying Pancevo refinery (Serbia) and possibly Bosanski Brod refinery (Bosnia and
Herzegovina). The pipeline will be 760 km, out of which 600 km in Romania.

46

Romania has the highest installed refinery capacity in
Central and Eastern Europe. Out of 10 existing refineries,
the following four currently operational:
• Petrobrazi (OMV Petrom) – installed capacity of 4.5
million tons/year
• Petromidia (Rompetrol) – installed capacity of 5 million
tons/year
• Petrotel (Lukoil) – installed capacity of 2.4 million tons/
year
• Vega (Rompetrol) – installed capacity of 0.4 million
tons/year.
Finally, Romania applies a system of gross royalties for both
oil and gas paid by the titleholders on a quarterly basis.
Royalties' rates range between 3.5%-13.5% for crude oil
and 3.5%-13% for gas with respect to gross production
and reference to prices established by the National Agency
of Mineral Resources (NAMR).
4.1.2. Natural Gas
In terms of annual production (11 bcm) and natural
reserves available (101 bcm), Romania's gas sector is one
of the most notable in Central and Eastern Europe. As a
primary energy source, natural gas covers about 29% of
the national consumption. Nevertheless, Romanian on-
shore natural gas reserves are depleting rapidly – being
sufficient for the next 15-20 years.
Predominantly, the conventional natural gas reserves are
located onshore. In 2012, significant natural gas deposits
were discovered offshore, in the Neptune perimeter of
the Black Sea, with the prospects of increasing the overall
reserves by 42-84 bcm.
On 17 November 2018, the first Romanian "Offshore law"
came into force, which aimed to provide a set of legislative
solutions to adapt the existing regulatory framework to
offshore oil exploration, development and exploitation
projects in the offshore oil perimeters, thereby ensuring
their functionality.
Fortified
Romania Church
Business - Biertan,
Passport 2019Sibiu
The law stipulates aspects such as:
• Romanian tax residency requirements - Petroleum
offshore oil permits have the obligation to ensure
that at least 25% of the average annual number of
employees are Romanian citizens with a tax resident in
Romania
• Selling of the natural gas – 50% of the natural gas
obtained offshore must be sold via the Romanian stock
exchange market
• Taxation of the additional income – a progressive
taxation system (30% to 70%) has been established
applicable to the additional income generated from the
evolution of gas prices.
Government Emergency Ordinance published in 2018
(OUG 114), which implied an additional 2% annual
turnover tax and a price ceiling on the sale of the produced
gas, along with the effects of the Offshore Law, were
criticised by the Oil&Gas industry players interested in the
Romanian offshore reserves, for limiting the investment
potential in this area.
OMV Petrom and ExxonMobil, which hold a concession on
the deep water Neptun Black Sea offshore gas perimeter,
one of the largest EU natural gas deposits, planned to
give the final green light for the start of the exploitation
phase in 2018, after having spent around USD 2 billion to
prepare the production. In light of the recent regulatory
changes, the project was put on hold until more favourable
conditions arise.
Black Sea Oil&Gas, controlled by private equity firm The
Carlyle Group, confirmed, in April 2019, that it received
approval from the Romanian government for the field
development plan (FDP) for the Ana and Doina gas fields,
which signifies the start of production at Midia Shallow
Block, thus becoming the first company to tap the country's
vast offshore resources. As a result of the recent regulatory
changes, the firm later warned it could pull out of another
project, if the regulations remain in their current forms.
47
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Romania's Black Sea offshore gas reserves are estimated
at 200 bcm, according to BP's statistical review, waiting to
be explored.
Market
Since 2001, the gas market entered a restructuring phase,
focused on the liberalization of the gas market, targeting
the unbundling of production, storage, transmission and
distribution activities and the devolution of market power
in the production and import sectors by enhancing the
number of licenses offered to companies.
The current structure of the gas market is as follows:
• Competitive market, which includes:
• Wholesale market: (i) bilateral contracts between
the gas economic operators, (ii) transactions on
centralized markets managed by the operator of the
gas market or the operator of the balancing market,
(iii) other types of transactions or contracts
• R
 etail market: suppliers sell gas to final consumers
based on contracts with negotiated prices
• Regulated market: natural monopoly activities and
related gas supply activities with controlled process set
by the ANRE approved framework agreements.
ANRE is also responsible for end customer awareness
on their energy consumer rights in relation to the other
operators in the electricity market.
In terms of major regulatory changes, the Government
Emergency Ordinance published in 2018 (OUG 114) had
a major impact in all segments of the energy sector. This
directive sparked controversy, as it brought changes that
directly impacted the cash flow of the companies, the most
notable change being the increase of an annual turnover
48
Fortified Church - Biertan, Sibiu
tax, from 0.2% to 2% for most energy companies:
• On the production side, coal-based power generation
capacities and electric and thermal energy
cogeneration plants are exempted from the 2% annual
turnover tax
• On the distribution side, the new regulated rate
of return (RRR) for investments in this sector
(recognizable in the respective tariffs) for the period
2019-2024 increased to 6.9% (up from 5.66% after
the previous modification for the new regulatory
period)
• On the supply side, the suppliers cannot unilaterally
terminate a contract with an end consumer anymore.
Energy must be purchased to satisfy consumer
needs, with priority being given to the customers of
the universal service. For gas supply, they are also
obligated to acquire gas from domestic producers at
a ceiling price of 68RON/MWh (set from 1 May 2019
to 28 February 2022), to serve household customers
and heat producers using cogeneration plants and
thermal power plants serving public consumption. The
obligation to use a mixture of imported and domestic
gas to cover the consumption of non-household
consumers was also repealed.
With respect to the gas market, the regulation should set
the requirements for a liquid trading platform, on which
competitive natural gas prices can be developed. Every
natural gas producer and supplier must close buy-sell
contracts in a transparent and non-discriminatory manner,
on the centralized market and following the regulations
set forth by ANRE (including the minimum quantity gas
established for the respective period as a % of the gas
 4
Romania Business Passport 2019

ENERGY

portfolio).
The current participants in the market are:
• 1 operator of the National Gas Transmission System
• 6 producers (decreased from 7 previous producers)
• 3 underground storage operators (increased from 2
underground storage operators)
• 34 distribution and supply operators to captive
consumers (decreased from 37 distribution and
supply operators to captive consumers)
• 76 suppliers in the wholesale market (increased
from 75 suppliers in the wholesale market)
• 2 market operators.
Covering over 13,000 km of pipelines with a total design
capacity of 30 bcm/year (see figure below), the National
Gas Transmission System (SNTGN) is operated by a
single ENTSOG company - TRANSGAZ.

Based on the Concession Agreement concluded with the National Agency for Mineral Resources (ANRM) and the ANRE
(issued Operating License 1933/2013 valid until 2032), the state-owned technical operator carries the gas transmission
activity. In order to operate the NTS - SNTGN in a natural monopoly, the operator pays every quarter a royalty fee
representing 10% of the revenues from gas transmission.
International gas transmission is carried out in the South-Eastern region of the country, Dobrogea. The three pipelines
(1974, 1998, 2002 totalling 553 km) between Isaccea (Northern Dobrogea) and Negru Vodă (Southern Dobrogea)
cover a 182 km area, part of the Balkan corridor for gas transmission from Russia to Bulgaria, Greece and Turkey. With a
transmission capacity of 27.7 bcm/year, the 1000 mm gas pipeline and 200 mm gas pipelines have three separate entry
points in Ukraine and three different exit points in Bulgaria, not inter-connected.
Romania's Natural Gas Transmission System

Source: Transgaz

49
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Romania Business Passport 2019
ENERGY
SNTGN is connected to its neighbouring countries through
the following key points:
• Mediesul Aurit (Ukraine) – import capacity of 4.0 bcm/
year
• Isaccea (Ukraine) – import capacity of 8.6 bcm/year
• Csanadpalota (Hungary) – reverse flow with an import
capacity of 1.75 bcm/year and an export capacity of
0.087 bcm/year
• Iasi-Ungheni (Moldova) – export capacity of 1.5 bcm/
year.
Given the new projects aimed to diversify gas transmission
from the Caspian region to Central Europe and off-shore
gas sources in the Black Sea, Transgaz aims to construct
a new gas transmission route to ensure the capitalization
of gas volumes on Romanian and European markets and
permanent reverse flow at the Bulgarian and Hungarian
connectors.
In 2016, with the help of the European Union, Transgaz
started the development of the first part of the Bulgaria-
Romania-Hungary-Austria (BRUA) pipeline, a natural gas
pipeline from Podișor, Giurgiu County to Recaș, Timiș
County, part of a larger initiative aimed at enhancing the
gas interconnection between Bulgaria, Romania, Hungary
and Austria. Preparations for the project started in 2016,
and the actual construction phase started in the first
quarter of 2018. The achievement of the first section is
scheduled for the end of 2019.
Romania's Electricity Transmission System
Source: Transelectrica
50
The estimated capacity for the BRUA pipeline is
approximately 1.5 bcm/year for each flow direction.
The pipeline attempts to reduce the region's dependence
on Russian energy and energy imports and provide a new
export route for the future natural gas exploitation in the
Black Sea. The BRUA I pipeline is designed to be linked to
the Giurgiu–Ruse (Bulgaria) and the Arad–Szeged pipelines
(Hungary), while BRUA II is planned to connect the Black
Sea reserves to the main BRUA I artery, connecting
Hungary, Romania and Bulgaria.
As of February 2019, Transgaz has delayed the
development of BRUA II due to reduced contracting
capacity from bidders. Transgaz announced that only 40%
of the BRUA II capacity is reserved, leaving the company
with negative results on the economic tests performed.
4.2. Power and Utilities
4.2.1. Electricity
Romania's Electrical Energy market is extensive, diverse in
its production mix and increasingly interconnected in the
region (see figure below). In November 2014, the Market
Coupling of the day-ahead electricity markets of Romania,
Hungary, the Czech Republic and the Slovak Republic
was launched in order to increase trading and capacity
allocation efficiency, security of supply and liquidity and
to lower price volatility. Romania is now part of the Price
Coupling of Regions solution, a key step towards the full
integration of the European electricity market.
 4
Romania Business Passport 2019

ENERGY

Moreover, Romania has the largest installed capacity of
electricity production in Southeast Europe. Throughout the
years, the net installed capacity has increased from 16.8
TW in 2008 to 19.2 TW in January 2019, due mainly to
commissioning of renewable power generating capacities
(more information http://www.transelectrica.ro/web/tel/
productie).
As Romania's transmission and system operator,
Transelectrica oversees the national electricity
transmission grid made of 81 transformer electric
substations, 8 transmission branches and 8,834 km of
overhead lines at 110/220 kV, 400 kV and 750 kV.
The production mix of Romania's electrical energy system
has changed heavily in recent years. In 2018, the structure
of electricity production included the following:

Energy mix Hydro Coal Nuclear Natural gas Wind Photovoltaic Biomass

% 2018 29.06% 24.22% 17.91% 16.64% 10.7% 1.31% 0.09%

Quantity 2018 (TWh) 17.63 14.7 10.87 10.1 6.49 0.75 0.05

% 2012 22.8% 39.7% 20.2% 12.8% 3.5% NA NA

Quantity 2012 (TWh) 12.93 22.51 11.46 7.26 1.98 NA NA

Source: ANRE Reports 2012-2018

Electricity structure by primary sources (delivered by generators with dispatchable units)

SUN LIQUID SOLID

WIND 0,06%
10.70%
24.22%

1.31%

16.64%
0,09%

17.91%
29.06%

GAS

NUCLEAR
HYDRO BIOMASS

Most notably, the most spectacular annual rise was recorded by renewable energy as indicated by the wind power and photovoltaic
increase in the energy mix (figure below).

Energy mix 2011 2012 2013 2014 2015 2016 2017 2018

Wind power 1.9% 3.5% 7.1% 9.2% 11.2% 11.1% 12.4% 10.7%

Photovoltaic power NA NA NA 1.0% 1.2% 1.2% 1.53% 1.31%

Source: ANRE Reports 2011-2018

Market electricity monopoly was unbundled. At present, the

Beginning with 1998, the Romanian electricity market
has experienced a high degree of restructuring, through
which reforms have steadily facilitated liberalization and
increased competition. Following successive government
decisions in 1998 and 2000, the fully-vertically integrated
electricity market is composed of the transport system
operator, an energy market operator (OPCOM), distribution
and supply operators and producers – both private
companies and state-owned production facilities.

51
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Romania Business Passport 2019

ENERGY

• Retail market – also divided into the regulated market (contracts signed between the final customers with the last
resort suppliers, at regulated tariffs) and the competitive market (contracts signed with all the suppliers, including the
last resort ones, at negotiated prices on competitive markets)

100 %
GD 644/2005: 83.5% Full market opening according to GD 638/2007
79 %
90 %

80 %

70 %
GD 1823/2004: 55%
60 %

50 %

40 %
GD 1563/2003: 40%
30 %

20 %

10 %

0%

Jul
Oct
Jan 2019
Jul
Oct
Jan 2007
Apr
Jul
Oct
Jan 2007
Apr
Jan 2004

Jul
Oct
Jan 2007
Apr
Jul
Oct
Jan 2007
Apr
Jul
Oct
Jan 2007
Apr
Jul
Oct
Jan 2007
Apr
Jul
Oct
Jan 2007
Apr
Jul
Oct
Jan 2007
Apr
Jul
Oct
Jan 2007
Apr
Jul
Oct
Jan 2007
Apr
Jul
Oct
Jan 2007
Apr
Jul
Oct
Jan 2007
Apr
Apr
Jul
Oct
Jan 2005
Apr
Jul
Oct
Jan 2006
Apr

Market opening degree as per applicable primary legislation

Consumption (%) of the customers who switched or renegotiated the contract

Electricity Retail Market Opening Degree (January 2004 - January 2019)

Source: ANRE Report, January 2019

At present, the structure of the Romanian electricity market consists of:

• Wholesale market – divided into the competitive market (by the entering of Law 123/2012 into force, all the new
transactions must be the result of participation on the centralized markets). For a visual representation of the
wholesale market structure, please see the figure below.

Centralised market Physical notifications

Day ahead market
of contracts

Offers Transactions Offers Transactions

Offers Delivered electricity on

Market participants Balancing market
BM BRP imbalances

Transactions Offers Transactions

Adjustments to
D-1 schedule
Bilateral
Intraday market
contracts market
Data

Physical notifications

Export Import TSO Metering operator

Physical notifications
BRP
D-n D-1 D D+n

Markets administrated by Opcom SA (The electricity market operator)

Market administrated by CNTEE Transelectrica SA (Balancing market operator)

Source: ANRE Report, November 2018

52

The most significant recent legal change was brought
by the Government Emergency Ordinance 114/2018
with following amendments, which had a few changes in
the electricity sector: the annual tax of 0.2% revenue
for energy players will be increased to 2%, the gas and
energy distributors will have the Internal Rate of Return
set for 6.92% (down from 7.7% in 2018, up from 5.07%
in the beginning of 2019), the clients on the competitive
market will be able to come back to the regulated
market, where the price will also be capped for the next
3 years. There are still talks in the public space regarding
potential subsequent modifications of the Ordinance.
4.2.2. Heat Supply
Thermal energy accounts for more than half of
Romania's energy consumption and records the largest
energy losses. In particular, the heat supply production
for centralized heating system in Bucharest represents
41% of the national production.
The market is composed of two segments:
• Central heat supply systems (SACET) which operate
in large urban areas and ensure the production,
transport, distribution and supply to final consumers
• Decentralized heat supply systems, which include:
• Consumers that have no access to the centralized
heat supply system and rely on firewood for
heating. Most notably, in the rural area, wood
remains the main heating fuel for stoves.
• Consumers that have disconnected from the
central heating system and opted for an individual
heating system. There is a total of approx. 8.5
4
Romania Business Passport 2019
ENERGY
million households, 7.5 million of them being
inhabited: 4.2 million of these are individual
households, while 2.7 million are located in
apartment buildings. Out of all the households,
only 1.2 million are connected to SACET. A third of
all the households are using an individual heating
system, using natural gas or coal fuels, with a low
energy efficiency. Thermal energy consumption
in residential buildings amounts to 250-300 kWh,
double the EU average value. As 75% of the
respective buildings are 40 years old, the heat
loss of the buildings is as high as 40-50% of the
final energy consumption. Moreover, with energy
efficiency building upgrade of 5% of buildings
blocks, utilities prices close to EU average and
a low nominal average income, thermal energy
requires substantial and immediate upgrade.
Energy Strategy
In March 2019, the Romanian Ministry of Energy
published a draft for a new Energy Strategy, subjected to
public consultation. The strategy focuses on the increase
of nuclear energy in the country's energy mix, while
decreasing the contribution of energy from coal. In order
to decrease the need of energy imports, the strategy
focuses on the development of newly-discovered Black
Sea offshore gas deposits.
Sibiu Church
53
5 Accounting,
auditing and
reporting

Transfagarasan road
5.1. Accounting and financial
reporting
The financial reporting and auditing requirements in
Romania are consistent with accounting and financial
reporting matters as covered by EU Directives.
The legislation currently regulating accounting
and financial reporting comprises the Accounting
Law 82/1991 and Minister of Public Finance Order
1802/2014 with its subsequent amendments (MoF)
Order 1802, as well as specific legislation relating to
the application of the International Financial Reporting
Standards (IFRS) to the preparation of financial
statements in Romania (MoF Order 907/2005, MoF
Order 1121/2006, MoF Order 881/2012 and MoF Order
2844/2016).
As exception, entities supervised by certain authorities
(e.g. NBR, FSA), such as banks, non-banking financial
institutions, insurers, insurance brokers, pension funds,
etc. are regulated by specific accounting regulations,
issued by their supervisory bodies.
The Accounting Law indicates the requirements for the
general accounting framework for Romanian entities,
while MoF Order 1802 covers financial reporting and
related accounting requirements.
The provisions of MoF Order 1802 have been prepared
to reflect the new EU Directive in force, namely
Directive 2013/34 on the annual financial statements,
consolidated financial statements and related reports
of certain types of undertakings, superseding Directive
IV for stand-alone financial statements and Directive VII
for consolidated financial statements. The previous MoF
Order 3055/2009 was replaced by MoF Order 1802
from 1 January 2015.
MoF Order 1802 covers entities whose securities are
not admitted to trading on a regulated market, which,
based on certain criteria, may need to prepare either
a full or an abridged set of financial statements (these
statements are the basis for dividend distribution and
are subject to annual approval by the General Meeting
of Shareholders). Entities are now classified into three
categories, according to their size: micro, small and
medium or large entities.
An entity will change the category only if it exceeds
(or no longer exceeds) certain size criteria, for two
consecutive years (the previous and the current year).
Micro-entities are those entities which, at the balance
sheet date, do not exceed at least two of the following
three criteria:
• Turnover (for the period): RON 3 million
• Total assets (at year end): RON 1.5 million
• Average number of employees for the period: 10.
Worth mentioning is that for tax purposes there are
other criteria to categorize a company as a micro-entity
(please refer the tax section of this document).
According to the Order, micro-entities are required to
prepare an abridged set of financial statements designed
specifically for them.
Small entities refer to those entities which do not fit into
the micro-entities category and which do not exceed at
least two of the criteria below:
• Turnover (for the period): RON 35 million
• Total assets (at year end): RON 17.5 million
• Average number of employees for the period: 50.
If an entity fulfils at least two of the three criteria
indicated below it is classified as a medium or large
entity. The criteria for qualification are:
• Turnover (for the period): over RON 35 million
• Total assets (at year end): over RON 17.5 million
• Average number of employees for the period: over 50.
Medium or large entities, as well as public interest
entities, prepare a full set of financial statements.
A full set of financial statements under MoF Order 1802
comprises the following:
• Balance sheet
• Profit and loss statement
• Statement of changes in equity
• Cash-flow statement
• Explanatory notes.
An abridged set of financial statements for small entities
comprises the following:
• Abridged balance sheet
• Profit and loss statement
• Explanatory notes to the simplified financial
statements.
At their own discretion, entities below the size criteria
may prepare a statement of changes in equity and/or
cash-flow statement
 Feldioara fortress - Brasov County

An abridged set of financial statements for micro-entities

comprises the following:
• Abridged balance sheet
• Abridged profit and loss statement
• Abridged explanatory information to the simplified
financial statements.
Consolidated financial statements
Preparation of consolidated financial statements is a
requirement for entities meeting certain criteria and listed
entities. These consolidated financial statements are in
addition to the individual financial statements prepared by
each Romanian entity in a group in accordance with MoF
Order 1802.
Companies reporting under MoF Order 1802 have also
the option to prepare consolidated financial statements in
accordance with IFRS.
In addition to listed entities, consolidated financial
statements should be prepared where at least two out of
the three criteria indicated below are met, based on the
latest annual financial statements:
• Turnover (for the period): over RON 210 million
• Total assets (at year end): over RON 105 million
• Average number of employees for the period: 250.
Groups which do not meet at least two of the criteria
above are classified as small or medium. Large groups are
those which are required to prepare consolidated financial
statements, as above.
An exemption is available, if the group holding company
is part of a larger group in Romania that prepares and
publishes group results, in which the group holding
company and all its subsidiaries are included, given that
there is at least 90% ownership of the group holding
company and the remaining shareholders have approved
not to prepare consolidated financial statements (except for
listed entities).
Small and medium groups are not exempted from preparing
consolidated financial statements, if at least one of the
subsidiaries is a listed entity.
In addition to the consolidated financial statements, an
Administrator's Report is required to be completed along
with an auditors' report.

Preparation of IFRS financial statements

MoF Order 907/2005 required credit institutions to
prepare annual financial statements in accordance with
the IFRS for the year ending 31 December 2006, for
user information purposes (which implies preparation of
consolidated financial statements for credit institutions
which are parents as defined by IAS 27). Further, under
MoF Order 1121/2006, additional requirements for
preparation of financial statements in accordance with the
IFRS were issued covering credit institutions and public
interest entities.
Starting tax year 2012, companies whose securities are
admitted to trading on a regulated market (i.e. listed
entities) are required to apply IFRS for the individual stand-
alone annual financial statements. These companies are no

56

longer required to prepare, in addition, statutory financial
statements in accordance with MoF Order 1802. MoF Order
2844/2016 (replacing MoF 1286/2012) are the relevant
accounting regulations in their case.
The NBR requires credit institutions to issue also
standalone financial statements in accordance with the
IFRS for the years 2009-2011, by restatement of the
statutory financial statements (Order 15/2009) and from
2012 onwards, IFRS will become the only accounting base
for credit institutions (Order 9/2010).
5.2. Main bookkeeping
and document submission
requirements
The following documentation and submission requirements
apply for bookkeeping purposes:
Daily routine
• Petty cash register updated with the payments and the
collections made during the day
• Transactions included in the accounting system
normally on a daily basis in chronological order.
Monthly routine
• Trial balance prepared for the month (though it is
mandatory to be prepared only once a year)
• VAT return submitted and VAT paid (if applicable)
until the 25th of the next month, based on sales and
purchases of the month (the return shall be prepared
on a quarterly basis for small companies)
• Sales and purchases registers
• Daily book (in Romanian, "Registrul Jurnal")
• General ledger (in Romanian, "Cartea Mare")
• Payroll statements and salary related taxes and
contributions computed and returns submitted by the
25th of the next month
5
Romania Business Passport 2019
ACCOUNTING, AUDITING
AND REPORTING
• Intrastat statement (if applicable) submitted to the
National Institute for Statistics by the 15th of the
following month
• VIES statement (if applicable) submitted until 25th of
the next month
• Withholding tax return (if applicable) in case of
revenues paid to non-residents by the 25th of the next
month
• Informative statement regarding sales and acquisitions
on national territory (if applicable) submitted until 30th
of the next month
• As exceptions, the deadline of tax returns due in
December is 20 (instead of 25).
Quarterly routine
• Corporate tax return submitted by the 25th of the
month following the end of the quarter
• VAT return submitted and paid (if applicable) by the
25th of the month following the end of the quarter,
if the company qualifies and chooses quarterly
submission of VAT return.
Semester routine
• Accounting reports prepared in accordance with
MoF Order 1802 and subsequent amendments. This
requirement is applicable only for companies with a
turnover in excess of RON 220,000 in the preceding
tax year.
Annual routine
• Financial statements shall be approved by the Annual
General Assembly, which is required to be held within 5
months from the previous financial reporting year end
(4 months for listed companies)
• Romanian branches of foreign companies are also
required to prepare financial statements in accordance
MoF Order 1802 and submit them to the National
Agency for Tax Administration. Branches of companies
from the European Economic Area are only required to
prepare and submit an annual accounting report
Feldioara fortress - Brasov County
5
Romania Business Passport 2019
ACCOUNTING, AUDITING
AND REPORTING
• Accounts inventory journal
• Corporate income tax return by 25th of March for the
previous year end, for the entities with the fiscal year
equal with the calendar year. For the entities with
the fiscal year different than the calendar year, the
submission deadline is 25th of the third month following
the end of the fiscal year (i.e.: 25th of September for
the fiscal year end date 30th of June)
• Annual tax statement regarding the withholding tax
return in case of revenues paid to non-residents, due by
the last day of January, for the previous year
• Annual informative statement regarding the tax
withheld, the revenues from gambling and the capital
gains/losses, by revenue beneficiaries by the last day
of January of the following year.
58
Other annual financial statements submission
requirements
Under the Accounting Law, all entities are required to
submit the annual financial statements to the National
Agency for Tax Administration, Ministry of Public Finance.
The term for submission is 150 days from the end of the
previous financial year.
Entities regulated by the Financial Supervisory Authority
are required to submit their annual financial statements,
accompanied by the financial auditors' report to the FSA by
30th of April, following the reporting year end.
Credit institutions are regulated by the NBR, to which
they are required to submit their annual audited statutory
financial statements and annual audited financial
statements prepared in accordance with the IFRS.
Insurance and reinsurance brokers regulated by the FSA
are required to submit financial statements accompanied
by the financial auditors' report to the FSA by 30th of April
following the reporting year end.

5.3. Auditing
All entities meeting the criteria for being categorized
as medium and large entities, public interest entities
(including listed companies and financial institutions, fully
or majority state-owned entities, national companies,
autonomous administrations (in Romanian, "Regii
Autonome") are required to have a financial audit. Such
audits are required to be performed by one or more
independent external financial auditors, that are members
of the Romanian Chamber of Financial Auditors (CAFR).
Medium and large entities are defined as being entities
which, at the financial statements' date exceed (for two
consecutive years) the limits of at least two of the following
size criteria:
• Turnover (for the period): over RON 35 million
• Total assets (at year end): over RON 17.5 million
• Average number of employees for the period: over 50.
In addition, there are required to have financial audit
entities which, at the financial statements' date exceed
(for two consecutive years) the limits of at least two of the
following size criteria:
• Turnover (for the period): over RON 32 million
• Total assets (at year end): over RON 16 million
• Average number of employees for the period: over 50.
Entities not included in the above categories, do not require
a financial audit, unless required by other legislation or
regulatory bodies which supervise their operations.
5
Romania Business Passport 2019
ACCOUNTING, AUDITING
AND REPORTING
Feldioara fortress - Brasov County
For SA entities, not audited by an independent external
financial auditor, Company Law 31/1990 requires a report
issued by censors on its financial statements. Such entities
require a minimum of three censors who meet certain
criteria on independence and qualifications.
The applied auditing standards are issued by CAFR and
reflect the International Standards on Auditing (ISA) issued
by the International Federation of Accountants (IFAC).
Under Company Law 31/1990, a company requiring
an audit should make available the auditors' report for
shareholders 15 days before the Annual General Assembly.
Law 162/2017 on the statutory audit of annual financial
statements and annual consolidated financial statements
and on amending other pronouncements, was published
in the Official Journal 548 of 12 July 2017. The statutory
audit is performed by financial auditors or audit firms
approved in Romania under the provisions of this law, who
enrol as members of the Chamber of Financial Auditors
of Romania, according to the law and who register in
the Public Electronic Register. The competent authority
responsible for approving the financial auditors and audit
firms is Public Oversight Authority for the Statutory Audit
Activity (ASPAAS).
59
6 Taxatation
in Romania

Alba Iulia Fortress

6.1. Corporate taxes at a glance 6.2. Profits tax
The Romanian Tax Code came into effect on 1 January
Profits tax rate (%) 16 (a)
2004. The Code has integrated key tax legislation and
Capital gains tax rate (%) 16 (a) provides the basis for a more stable framework of tax
legislation by requiring amendments to follow a specific
Branch tax rate (%) 16 (a) juridical route.
Withholding tax (%) (b) On 10 September 2015, the Romanian Tax Code was
republished, consolidating the various amendments
• Dividends 0/5 (c) brought to it since its first publication in 2004 and also
incorporating new provisions (with effect from 1 January
• Interest 0/16 (d)
2016).
• Royalties 0/16 (d)
Tax year
• Services 16 (e)
In Romania, the tax year is the calendar year.
• Commissions 16
However, taxpayers that have chosen to have a financial
• Entertainment and sports activities 16 year different from the calendar year, also have the
possibility to opt for a tax period in line with the financial
• Proceeds from liquidation 16 (f) year. This option is not available for taxpayers that qualify
as Micro-enterprise income tax payers (see also section
• Branch remittance tax N/A
"Micro-enterprise taxation regime") or taxpayers for which
Personal income tax (%) 10 (g) the specific tax is applicable (see also section "Specific tax
for hotels, restaurants and bars").
Net operating losses (years)
Tax payers
• Carry-back N/A

• Carry-forward (years) 7 (h)
(a) See section profits tax.
(b) The withholding taxes referred to above are levied
on income earned in Romania by non-resident
individuals and legal entities (referred to below as
"non-residents"), income that is not attributable to
a Romanian permanent establishment of the non-
resident income recipient.
(c) See section withholding tax on dividends.
(d) See section withholding tax on interest and
royalties.
(e) Withholding tax generally applies to services
rendered by non-residents in Romania, except for
international transport and services related to such
transport. However, income from management and
consulting services is taxable regardless of whether
these services are rendered in Romania or abroad,
if such income is obtained from a resident, or if it is
a cost of a permanent establishment in Romania.
(f) Withholding tax applies to the proceeds from
liquidation of a Romanian legal entity.
(g) For most types of personal incomes.
(h) See section profits tax on relief for losses.
The following categories are subject to tax in Romania:
• Romanian legal entities (except tax transparent legal
entities for which each member/participant is subject
to tax)
• Romanian permanent establishment(s) of non-resident
legal entities
• Non-resident legal entities having the place of effective
management in Romania
• Non-resident legal entities that derive income from
or in connection with immovable property situated in
Romania, or from the sale/transfer of shares held in a
Romanian legal entity (see also section "Capital gains
tax") and
• Legal entities with registered office in Romania,
incorporated in accordance with the European
legislation
Romanian legal entities, non-resident legal entities having
the place of effective management in Romania as well as
legal entities having their headquarters in Romania but
incorporated as per the European legislation (i.e. European
companies) are subject to tax on their worldwide income.
Associations without corporate status between Romanian
legal entities are taxable in Romania separately, at the level
of each partner. For associations without corporate status
between a Romanian legal entity and foreign entities,
please see section "Withholding tax".
6
Romania Business Passport 2019
TAXATION IN
ROMANIA
Fagaras fortress - Brasov County
Romanian permanent establishment(s) of non-resident
legal entities and non-resident legal entities, that derive
income from or in connection with immovable property
situated in Romania, or from the sale/transfer of shares
held in a Romanian legal entity are subject to tax on their
Romanian-sourced income only.
Permanent establishment (PE)
A PE is defined as a location through which the activity of
a non-resident is wholly or partly carried on, either directly
or through a dependent agent. A permanent establishment
in Romania may be constituted inter-alia by: an office, a
branch, a factory, a mine, land for oil and gas extraction, or
a building site that exists for a period exceeding six months.
Also, a permanent establishment includes the place where
an activity continues using the assets and liabilities of a
Romanian legal entity undergoing a restructuring process
(e.g. merger, spin-off) involving entity/entities from other
member state of the European Union.
The Romanian Tax Code makes a direct reference to
the applicability of the commentaries to Article 5 of the
OECD Model Tax Convention, when assessing whether the
activities carried out by a non-resident in Romania create a
PE or not.
Profits of the non-resident having a Romanian PE would be
taxable in Romania to the extent that they are attributable
to the respective PE (and observing the arm's length
principle for transfers performed between the non-resident
and its Romanian PE).
Romanian legal entities and the Romanian permanent
establishments of foreign legal entities must notify the
relevant tax authorities about any contracts signed with
non-resident legal entities or individuals performing in
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Romania construction and assembly works, surveillance,
consultancy, technical assistance or any other activity
performed in Romania.
Tax rates
The standard profits tax rate is 16%.
Profits tax payable by companies earning revenues from
night bars, nightclubs, discos or casinos including such type
of revenues from an association agreement, is computed at
the standard 16% rate, provided the tax amount is not less
than 5% of the total revenue generated by these activities
(case in which the taxpayer is liable to pay profits tax
computed at 5% of this revenue).
Representative offices in Romania of non-resident legal
entities are taxed on a yearly basis at a lump sum of RON
18,000 (payable in the last day of February of the taxation
year).
Micro-enterprise taxation regime
A newly set-up Romanian company (with certain
exceptions) or an already incorporated Romanian company
meeting certain conditions as of 31 December of the
previous year (as listed below) is considered as a micro-
enterprise income tax payer and is subject to tax on
revenues derived (not subject to 16% profits tax on the
taxable profit):
• The annual income level did not exceed EUR 1,000,000
• The share capital was not held by State/local
authorities and
• It was not undergoing dissolution, followed by
liquidation, registered in the trade registry or courts of
law, as per the law.

The tax rates for the micro-enterprises are as
follows:
• 3% for micro-enterprises having no employees
• 1% for micro-enterprises having 1 or more employees.
Starting with 1 April 2018, the micro-enterprises which
have as subscribed share capital of at least RON 45,000
and has minimum 2 employees will be able to opt, for the
application of the profits tax regime, starting with the
quarter in which the two aforementioned conditions have
been fulfilled, the option being a definitive one.
If, during the year, the condition regarding the annual
income level is not met, the system for taxation of micro-
enterprises should no longer apply and the company would
become liable to pay profits tax from the beginning of the
quarter, when the threshold was exceeded.
Tax on assets for credit institutions
In December 2018, the Emergency Ordinance no.
114/2018 was adopted, which, among other important
amendments related to construction industry, energy
sector, telecommunications, introduced the tax on assets
for credit institutions. The tax on assets is applicable
starting with 1 January 2019 and, in its current form – as
it was significantly amended in March 2019 – represents
0.2% or 0.4% of the value of assets (except certain
specific categories) of credit institutions, depending on
their market share. Reduction of such tax is applicable in
some cases, depending on the increase in the volumes of
loans granted or reduction in the interest margin applied,
or even exemption (e.g. if a credit institution records
accounting losses).
As regards the impact of the Emergency Ordinance no.
114/2018 on the other industries, please refer to Financial
services and Energy sections.
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Specific tax for hotels, restaurants and bars
From 1 January 2017, Romanian companies that
undertake accommodation activities, restaurants/catering
activities and bars/related drink serving activities (based
on having as main or secondary NACE code related to such
activities) and which do not qualify as micro-enterprise tax
payers are subject to a specific tax, instead of profits tax.
The amount of the specific tax due is computed based on
specific formulas that include a fixed amount and other
variables (i.e. depending on location, capacity, area and
seasonality).
Capital gains tax
No separate capital gains tax is payable by resident
entities. Capital gains of non-resident entities from the
sale/rental of immovable property in Romania, from sale/
transfer of shares held in a Romanian legal entity or from
the exploitation of natural resources (including the sale/
transfer of such resources) are taxed at the standard
profits tax rate of 16%.
Dividends
Starting 1 January 2016, the dividend tax rate is 5%.
Romanian legal entities distributing/paying dividends to
their shareholders, Romanian legal entities, must withhold,
declare and pay dividend tax by the 25th of the month
following the distribution/payment of dividend. In case of
dividends distributed, which were not effectively paid by
the end of the tax year, the dividend tax must be paid by
25th of the first month following the tax year end.
Dividends paid by a Romanian legal entity are exempt from
dividend tax in the following cases:
• The recipient of the dividends (a Romanian legal
entity) holds minimum 10% of the share capital of the
Romanian legal entity distributing the dividends for an
uninterrupted period of 1 year ending at the date of
dividend payment and
• Dividends are distributed to voluntary pension
funds or to private pension funds, as well as to
public administration bodies exercising the rights
and obligations arising from the quality of state
shareholder of the respective Romanian legal entity.
For the tax treatment of dividends distributed/paid by
Romanian legal entities to their non-resident shareholders,
please see section "Withholding tax".
Foreign tax relief
Foreign taxes paid may be credited against the profits tax
due in Romania, up to the level of the profits tax that would
have been payable in Romania on that foreign income.
Such credit is also conditioned by the applicability of the
provisions of the double tax treaties concluded between
Romania and the foreign state, as well as documentation
requirements. The tax exemption of the profits realized
by a foreign permanent establishment of a Romanian
legal entity may also be possible, if the tax treaty between
Romania and that foreign country provide for the
exemption as method for eliminating the double taxation.
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Reunification Church - Alba Iulia city
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External tax losses

Tax losses incurred by a permanent
establishment located in a state that is
not a member of the European Union or
of the European Free Trade Association
or with which Romania has not concluded
a convention for the avoidance of double
taxation, are deductible only from the
income obtained by the respective
permanent establishment (separately,
on each income source) in the next 5
consecutive tax years.

Determination of taxable profit

The taxable profit is computed as the
difference between the revenues from all
sources and expenses incurred in a tax year,
less non-taxable revenues and other tax
deductions, plus non-deductible expenses.
Accounting errors have different tax
treatment depending on the way in which
they were booked in the year (through
retained earnings or profits and loss
accounts).
The Romanian Tax Code also provides for
special rules that have to be observed by
taxpayers applying accounting regulations
in accordance with the IFRS.
For the purpose of determining the tax result, taxpayers
must prepare and keep a tax evidence registry.
Non-taxable revenues
• Key revenues which are considered as non-taxable
include, inter-alia:
• Dividends received from a Romanian legal entity
• Dividends received from a foreign legal entity
resident in a country with whom Romania has
concluded a double tax treaty, if the Romanian
legal entity holds minimum 10% of the share
capital of the entity distributing the dividends for an
uninterrupted period of 1 year ending at the date of
dividend payment. In addition, in case of dividends
received from an EU resident entity, the dividends
represent non-taxable revenue in Romania to the
extent that they are not deductible at the level of
the EU resident entity
• Gains in the value of the participation titles held in
other entities, registered further to the increase of
capital in those entities through incorporation of
reserves, profits or issue premiums
• Revenues from the reversal of non-deductible
expenses and of provisions for which no deduction
was allowed
• Non-taxable income expressly provided by specific
regulations
• Revenues from deferred profits tax computed
and recorded by taxpayers that apply accounting
regulations in accordance with the IFRS
• Revenues representing change in the fair value of
real estate investments/biological assets upon the
subsequent evaluation using the fair value model
by taxpayers that apply accounting regulations in
accordance with the IFRS
• Income derived from the valuation/revaluation/
sale/transfer of shares, provided that the taxpayer
is a company (Romanian company or tax resident
in a country with whom Romania has concluded
a double tax treaty) holding for an uninterrupted
period of 1 year at least 10% from the share
capital of the other company (Romanian company
or tax resident in a country with whom Romania
has concluded a double tax treaty)
• Income from the liquidation of a company,
provided that (i) the taxpayer holds for an
uninterrupted period of 1 year at least 10% from
the share capital of the company that is being
liquidated and (ii) that company is a Romanian
company or a company which is tax resident in
a country with whom Romania has concluded a
double tax treaty
• Amounts received further to the refund of the
shareholders' contribution share, within a share
capital reduction.
Deductibility of expenses
Expenses incurred for the purpose of carrying out
economic activities, including those regulated by legal
norms, as well as fees and contributions due to chambers
of commerce and industry, employers' organizations and
trade unions are considered deductible for the profits tax
computation.

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Curtea de Arges Monastery - Arges County

Key expenses which are partially deductible include,

inter-alia:
• Provision expenses and contribution to reserve funds
within specified limits (please see section "Provisions
and reserves")
• Entertainment expenses (and related VAT, if the case)
up to 2% of the accounting profit to which profits tax
and protocol expenses (and related VAT, if the case) are
added
• Social expenses (e.g. birth, death, incurable disease
support, expenses aimed at the proper functioning of
certain units of taxpayers, e.g. kindergartens, canteens,
sports clubs, schools, expenses provided in the collective
labor agreement, as well as gifts in cash or in kind
granted to e.g. underage children, certain employees,
the cost for the supplies for treatment and rest of own
employees and their family, etc.) currently up to 5% of
the total salary fund
• Expenses for meal and vacation vouchers, granted
according to the law
• Perishables and losses resulted from manipulation/
storage, according to the law
• Technological losses included in the taxpayer's own
consumption norm
• Exceeding borrowing costs within specific limits (see
Thin capitalization rules section)
• Depreciation within specific limits (please see section
"Tax depreciation")
• 50% of expenses (except depreciation) related to
vehicles owned or used by the taxpayer which are not
exclusively used for the economic activity and have
a maximum weight of 3,500 kg and not more than 9
seats, including driver seat (except for certain situations
specifically mentioned by the law, for vehicles used
for e.g. paid transportation services, security services,
repairs, sales and procurement activities)
• Expenses for the operation, maintenance or repair,
excluding fuel expenses related to cars used by
management and administrative personnel, limited to
one car per person and observing the 50% deductibility
limitation
• In the case of assigned receivables, the net losses,
representing the difference between the sale price and
the value of sold receivable, are deductible within a limit
of maximum 30% of value of such losses.
Key expenses which are non-deductible include, inter-alia:
• Romanian and foreign profits tax (a tax credit is allowed
for taxes paid in other countries – please see relief
section "Foreign tax") and tax not withheld at source
• Sponsorship expenses (a tax credit is allowed for
sponsorship expenses on meeting certain conditions –
please see section "Sponsorship")
• Late payment interest, penalties, and fines paid to
Romanian or foreign authorities (except certain specific
cases)
• Expenses with inventory or fixed assets that are missing
from stock or that are damaged and are non-imputable,
including the corresponding VAT as applicable
Exceptions are represented by inventory/fixed assets for
which insurance contracts were concluded or that are
expired, quality damaged or damaged further to force
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majeure, the food for human consumption that are Sponsorship

close to expiry, sub-products of animal origin which
Taxpayers paying profits tax incurring sponsorship
are not for human consumption and agrifood products
expenses in accordance with relevant legislation are
that became inappropriate for human or animal
entitled to a tax credit, i.e. deduction from the profits tax
consumption, in certain conditions.
payable of an amount of the sponsorship representing the
• Any expenses made in favor of shareholders or minimum of:
associates other than those generated by payments
for goods provided or services rendered at the market • 0.5% of turnover and
value • 20% of the profits tax liability.
• Insurance premiums that are not related to the If the beneficiaries of the sponsorship are not for profit
taxpayer's assets or its business scope, except for legal entities, the sponsor is entitled to claim tax credit
those relating to rented or leased assets or assets used only if the beneficiaries are registered, at the date when
as collateral for a business-related loan the sponsorship agreement is concluded, in a special
• Expenses with benefits granted to employees by means registry. Sponsorship expenses not claimed as tax credit
may be carried forward for the following 7 consecutive
of equity instruments with share/cash settlements
provided that the benefits are not taxed at individual years.
level Separately, companies subject to micro-enterprise tax
• Expenses related to non-taxable income regime which perform sponsorship actions, in accordance
• Service expenses, including management and with the relevant legislation, to support non-profit
consultancy expenses, rendered by a person located in organizations and cult institutions which are accredited
a country with whom Romania has not concluded a tax suppliers of social services with at least one licensed social
treaty, in case the transactions are deemed as being service, will be able to claim tax credit for the respective
artificial sponsorship expenses up to 20% of the tax on income
• Expenses related to the decrease in the value of fixed derived by the micro-enterprises due for the respective
quarter. Sponsorship expenses not claimed as tax credit
assets/intangible assets upon revaluation
may be carried forward for the following 28 quarters
• Losses recorded when writing off uncollected bad or
(i.e. 7 years).
litigious receivables, for the part that is not covered by
a provision, except for certain cases (e.g. bankruptcy of
the debtor based on a final court decision, liquidation
of the debtor with no successor, conclusion of
insurance contracts, etc.)
• Expenses with taxes and charges due to non-
government organizations or professional associations
related to the business carried on by taxpayers and
which exceed the RON equivalent of EUR 4,000/year
• Expenses with the change of fair value of real estate
investments, in the event that, after a subsequent
evaluation, a decrease in their value is booked by
taxpayers that apply accounting regulations in
accordance with the IFRS
• Expenses recorded in relation to an inactive taxpayer
(with certain exceptions)
• Expenses from the valuation/revaluation of shares, in
case the taxpayer is a company (Romanian company
or tax resident in a country with whom Romania
has concluded a double tax treaty) holding for an
uninterrupted period of 1 year at least 10% from
the share capital of the other company (Romanian
company or tax resident in a country with whom
Romania has concluded a double tax treaty)
• Expenses with interest, recorded as per the accounting
regulations in accordance with the IFRS, in case of
fixed assets/intangible assets/stock acquired based on
deferred payment contracts and
• Expenses with the amortization/depreciation of fixed
assets booked by taxpayers that apply accounting
regulations in accordance with the IFRS, at the
moment of transfer from the category of fixed assets
held for the purpose of sale to the category of fixed
Feldioara fortres - Brasov County
assets held for the purpose of own activity.

66

Provisions and reserves
Under the existing regulations, the following provisions and
reserves are deductible for profits tax purposes:
• Legal reserve, up to 5% of the accounting profits to
which Legal reserve, up to 5% of the accounting profits
to which the profits tax expense is added, until the
reserve fund reaches 20% of the share capital
• Bad debt provisions, in certain limits and if certain
conditions are met
• Provisions for quality performance guarantees granted
to clients, under certain conditions
• Specific provisions created by non-banking financial
institutions registered in the NBR General Register,
payment institutions Romanian legal entities, issuers of
electronic currency Romanian legal entities, as well as
specific provisions created by similar legal entities, as
provided by the laws governing these entities
• Technical reserves set by insurance and reinsurance
companies, as provided by the relevant regulatory
laws, except for the equalization reserve
• Technical provisions set by legal entities, administrators
of voluntary/private pension funds, as per law
• Risk provisions for financial market operations, as
provided by the regulations of FSA
• Provisions for covering the maintenance/repair
expenses for the aircraft fleet, in certain conditions
• Provisions for the closure/post-closure follow-up of
waste storages, in certain conditions
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• Reserves representing part of the expenses required
for the development and modernization of oil and
natural gas production, refining, transportation and
distribution of oil products, set according to the law
• Adjustments for the depreciation of fixed assets, set-up
in case of their destruction by force majeure or for
which insurance contracts were concluded
• Certain adjustments for depreciation of assets/credits/
investments, recorded within NBR regulations, and as
per the accounting regulations in accordance with the
IFRS
• Provisions for the restauration of affected land
mandatory to be set-up by taxpayers authorized to
work in the exploitation of natural deposits and
• Provisions for the decommissioning of oil wells,
installations, annexes and environmental rehabilitation
mandatory to be setup by oil agreement holders who
carry out petroleum operations in maritime areas with
water having depth more than 100 m.
Generally, the reduction or cancellation of any provision
or reserve that was previously deducted has to be
included in the taxable income. However, there are certain
exceptions to this rule related to the taxation of (i) reserves
constituted in connection with the revaluation of fixed
assets performed after 1 January 2004, (ii) the reserves
constituted in connection with the revaluation of intangible
assets performed by taxpayers applying International
Financial Reporting Standards, (iii) the legal reserve in
case of a decrease of share capital and (iv) the reserves
representing tax facilities.
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Reserves from revaluations of fixed assets performed
after 1 January 2004 are taxable for profits tax purposes
proportionally with the deduction of the tax depreciation,
respectively upon the disposal of the revalued fixed assets.
The same applies for the reserves constituted in connection
with the revaluation of intangible assets performed by
taxpayers applying the IFRS.
Thin capitalization rules
Thin capitalization rules applicable to deductibility of
borrowing costs incurred by profits tax payers were
amended starting with 1 January 2018, further to the
transposition into the Romanian Tax Code of the provisions
of the 2016/1164 EU Council Directive laying down the
rules against tax avoidance practices ("ATAD").
As per the Romanian Tax Code currently in force, profits
tax payers can deduct during a fiscal period the exceeding
borrowing costs (the amount by which the borrowing costs
exceed the interest revenues) up to the deductible limit of
the RON equivalent of EUR 1,000,000 (the exchange rate
to be used will be the one from the last day of the fiscal
quarter/year, as the case may be).
Furthermore, the borrowing costs exceeding the above cap
have limited deductibility, in the fiscal period in which they
68
Fagaras fortress - Brasov County
are incurred, up to 30% from the "adjusted EBITDA".
The adjusted EBITDA is computed as:
• total revenues – total expenses – non-taxable revenues
+ profits tax expense + exceeding borrowing costs +
deductible tax depreciation.
In case the basis of calculation is negative or is equal
to zero, the exceeding borrowing costs (over the EUR
1,000,000 cap) is non-deductible in the fiscal period in
which they are incurred and they are carried forward for
an unlimited period of time under the same deduction
conditions. The same rule applies for exceeding borrowing
costs over the second cap.
The non-deductible exceeding borrowing costs carried
forward recorded by entities that cease to exist as a result
of a split or merger may be carried forward by the new
taxpayers or taxpayers that take over the patrimony of the
merged or spun-off entity.
That above rules are applicable also for banks and
non-banking financial entities, as well as in relation to
borrowing costs owed to them.
By way of exception, of the above thin capitalization rules,
the taxpayers who are independent entities, in the sense
that are not part of a consolidated group from a financial
accounting perspective and have no affiliated entities or

permanent establishments, are able to fully deduct the
exceeding borrowing costs, during the fiscal period in
which are incurred. Moreover, certain specific exceptions
where above thin capitalization rules are not applicable are
also provided by the Tax Code.
The above new provisions are applicable to interest
expenses and net foreign exchange losses carried forward
according to the thin capitalization rule from periods prior
to 2018. In case of independent entities, these carried
forward amounts will be fully deductible as at 1 January
2018.
Exit taxation
Starting 1 January 2018, further to the implementation of
ATAD in the Romanian Tax Code, exit taxation rules were
introduced that will be applicable in case of transferred
assets, tax residency and/or economic activity carried
out through a permanent establishment (PE) for which
Romania loses its right to tax.
The exit tax is calculated by applying the tax rate of 16%
to the difference between the market value and the fiscal
value of the transferred assets. There is a mechanism of
rescheduling the payment over a five-year period in case of
transfers in which EU Member States or countries part of
the EEA Agreement are involved.
Exit taxation is applied for the following types of transfers:
• Assets transferred from the permanent establishment
in Romania to its head office or another PE in another
EU Member State or third country, in so far as Romania
no longer has the right to tax the transferred assets
• Transfer of business carried on in Romania through a
PE to another EU Member State or a third country, in
so far as Romania no longer has the right to tax the
transferred assets
• Transfer of the tax residency from Romania to another
EU Member State or third country (with the exception
of assets that remain effectively linked to the PE from
Romania)
• Assets transferred from the head office in Romania to
its PE in another EU Member State or third country,
in so far as Romania no longer has the right to tax the
transferred assets.
Controlled foreign company rules
Starting 1 January 2018, further to the implementation
of ATAD in the Romanian Tax Code, controlled foreign
companies’ rules ("CFC Rules") have entered into force.
Based on the CFC rules, there are included in the tax
computation base of the controlling company, certain
types of non-distributed revenues of the controlled foreign
companies (such as interest, royalties, financial lease
revenues, insurance revenues, etc.) proportionally to the
taxpayer's participation in the controlled entity.
A company is treated as a controlled foreign company of a
profits tax payer, if the following conditions are met at the
same time:
• The taxpayer, by itself or together with its associated
companies, holds more than 50% of the voting rights,
holds directly or indirectly more than 50% of the
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capital of the controlled entity or is entitled to receive
more than 50% of the profits of that entity and
• The actual profits tax paid by the entity or PE on its
profits is less than the difference between the profits
tax that would have been charged on that entity or PE
within the Romanian profits tax system and the actual
profits tax paid on its profits by the entity or PE.
The provisions are applicable also to the PEs from the
EU Member States/third countries, whose profits are not
subject to or are exempt from profits tax in Romania.
Some exceptions to the application of the above provisions
are provided by the Romanian Tax Code.
Tax depreciation
Accounting depreciation is non-deductible for tax purposes
while tax depreciation is considered a deductible item.
Deductibility of tax depreciation for vehicles (except
vehicles used in certain situations specifically mentioned
by the law, e.g. for paid transportation services, security
services, repairs, sales and procurement activities, etc.)
having no more than 9 places from M1 category (as
defined in the relevant regulations) is limited to RON
1,500/month.
Three alternative methods are available for the
computation of tax depreciation, namely:
• Straight-line depreciation
• Digressive depreciation and
• Accelerated depreciation (for equipment and patents).
These methods must be followed consistently.
Buildings and certain intangible assets can be depreciated
only on the straight-line method. Technological equipment,
machines, tools and installations, computers may be
depreciated using any of the three methods. Other fixed
assets may be depreciated using only the straight-line or
digressive method.
Land, goodwill, intangible assets with indefinite useful life,
certain items not used in the economic activity, etc. are not
considered depreciable assets for tax purposes.
From a tax perspective, the law prescribes the concept of
"useful lives", which are provided by Government Decision,
as follows:
Asset Years
Buildings and constructions
(e.g. roads and fences) 8 to 60
Machinery and equipment
2 to 24
Furniture, fittings, and protection systems
2 to 24
Vehicles
3 to 9
Source: EY Research
The useful life for each type of asset is provided as an
interval. Upon commissioning, the taxpayer is allowed to
choose a useful life within such an interval.
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St. Nicholas' Church - Hunedoara County
IT software is depreciated for tax purposes for a period of
3 years.
Patents, licenses, author rights, know-how, manufacturer's
brands, trademarks, as well as other similar industrial
and commercial property rights, development expenses,
considered as intangible assets from an accounting
perspective, acquired client portfolio, are depreciated over
the period provided for their utilization or the contractual
period, as the case may be.
Incorporation expenses recognized as an intangible asset
are depreciated for tax purposes for a period of 5 years.
Special rules are provided for depreciation of expenses
and assets related to exploitation/development of natural
resources (including deep sea oil).
Equipment intended for research and development
activities may be depreciated using the accelerated
depreciation method.
Incentives for research and development (R&D)
activities
Taxpayers may (besides standard profits tax deduction
on R&D project expenses) further decrease the profits
taxable base by 50% of eligible costs for such activities.
Also, the accelerated method of depreciation (i.e. 50% tax
depreciation in the first 12 months of operation) may be
applied for equipment used for the R&D activities.
The eligible R&D activities should be relevant to the
industrial or commercial activity carried out by the
70
taxpayer and they should be carried out either in Romania,
as well as in EU or EEA Member States.
The value derived as a result of the R&D activities may
be either for the taxpayer's own benefit (i.e. by using the
research results in its own activity), as well as through
the sale of the results or exploitation of the intellectual
property rights derived thereof.
The taxpayer can request a certification/expertise
regarding the fulfilment of the conditions for granting
the tax incentives as well as their corresponding value.
The certification/expertise will be performed by the
experts included in the Register of Experts on R&D areas
constituted by the Ministry of Education and Scientific
Research.
Starting with 2017, the taxpayers that carry out
exclusively innovation and R&D activities, as well as related
activities, are exempt, under certain conditions, from CIT
over the first 10 years of activity.
Tax exemption of reinvested profits
The profit reinvested in the production and/or acquisition
of technological equipment used for the purpose of
performing economic activities as well as IT equipment and
the relevant software is exempt from profits tax.
The profits tax exemption is applicable in case of new
technological equipment produced/acquired and put
into use by the company in a certain tax period. There is
a minimum period of retention in the patrimony of the
technological equipment, but this does not exceed 5 years.
Taxpayers benefiting from the tax exemption for reinvested
profit may not use the accelerated depreciation method for
the respective technological equipment.
Leasing contracts
Within a financial lease contract, the lessee is treated as
the owner of the asset from a profits tax perspective while
within an operational lease contract it is the lessor.
Trust contracts
Special rules are provided for trust contracts ("fiducia")
concluded in accordance with the provisions of the
Romanian Civil Code, depending on who is the beneficiary
within such contracts.
Reorganization operations
The below mentioned principles apply in relation to the
following business reorganization operations between
Romanian legal entities: merger, spin-off, in-kind
contribution of a business activity and share exchange.
Each such operation is defined in detail by the Romanian
Tax Code.
• The business reorganization operations mentioned
above should normally be tax neutral: the transfer of
assets and liabilities within a business reorganization
operation is not taxable for the difference between the
market price and the tax value of the respective assets
and liabilities

• The issuance of shares within a business
reorganization does not represent taxable income
• The income derived by a shareholder from the
cancelation of shares held in its subsidiary further
to a business reorganization operation is not taxable
provided that its shareholding is more than 10%
• The distribution of shares is not treated as dividend
payment.
However, certain conditions should be met in order for
such transfers to be treated as tax neutral, inter-alia:
• Tax value of assets/liabilities for the receiver should
equal the tax value of the same items for the transferor
• Tax depreciation for assets should continue in the
same manner as before the transfer
• Transfer of provisions/reserves previously deducted
should be taken over by the receiver in the same
deduction conditions as before the transfer
• In an in-kind contribution of a business activity, the
tax value of the shares received should equal the tax
value of the transferred assets and liabilities before the
reorganization
• In a merger/share exchange, the tax value of shares
received should equal the tax value of the shares held
before the reorganization and
• In a spin-off, the tax value of shares held before the
spin-off should be allocated to the newly issued shares
proportionally with the ratio between the book/market
value of the new shares and book/market value of the
shares held before the spin-off.
Similar principles as described above are also applicable
to cross-border reorganizations, as a result of the
implementation of the Council Directive 2009/133/EC
("the Directive") in the Romanian Tax Code. As such,
cross-border business reorganizations (i.e. mergers, spin-
offs, transfers of assets and exchange of shares) between
Romanian companies and companies from other EU
Member States should be tax neutral, subject to certain
conditions. Anti-abuse provisions are also applicable in this
case.
Historic Bridge - Timisoara
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Relief for losses
Tax losses may be carried forward for the following 7
consecutive years and are not updated for inflation
purposes.
Tax losses recorded by entities that cease to exist as a
result of a split or merger may be carried forward at the
level of the new taxpayers or taxpayers that take over the
patrimony of the merged or spun-off entity. The carry-back
of losses is not permitted.
Tax consolidation
Tax consolidation for profits tax is not permitted
between Romanian legal entities from the same group.
Tax consolidation is only available at the level of more
permanent establishments in Romania of the same
foreign legal entity (the taxable profits of one permanent
establishment may be offset against the tax losses of
another permanent establishment).
Filing tax returns
Profits tax payers are required to file profits tax returns
and pay profits tax quarterly by the date of 25th of the
month following the quarter for which the computation is
made for the first 3 quarters. The final annual tax return
should be filed by the date of 25th of the third month
following the end of the tax year.
As an exception, certain categories of taxpayers are
required to pay profits tax by 25th of February of the
following year.
Legal entities dissolved with liquidation during the
course of the year need to file the final annual profits tax
return and pay the profits tax by the date of submission
of the Financial Statements to the relevant authority
subordinated to the National Agency of Tax Administration
(NATA).
Legal entities dissolved without liquidation during the
course of the year, need to file the final annual profits tax
return and pay the profits tax by the end of the tax period.
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Banks and branches of foreign banks in Romania are
required to pay quarterly profits tax in advance, based on
inflation adjusted past year after the tax results. Taxpayers
applying the system of advance payments are required to
file profits tax returns and pay profits tax quarterly by the
date of 25th of the month following the quarter for which
the computation is made for the first 3 quarters and by
the date of the 25th of the last month of the tax year for
the 4 quarter. The final annual tax return should be filed
by the date of the 25th of the third month following the
end of the tax year. The other profits tax payers have the
option to apply this system of advance payments if certain
conditions are met. Once chosen, the advance reporting
and payment system for the profits tax is mandatory to be
kept for 2 consecutive years.
Taxpayers subject to the micro-enterprise taxation regime
are required to file tax returns and pay the tax quarterly by
the date of the 25th of the month following the quarter for
which the computation is made.
The Romanian companies applying the special tax for
hotels, restaurants and bars are required to declare and
pay the tax half-yearly, by the date of the 25th of the
month, following the end of each semester.
Taxpayers which perform actions of sponsorship and/or
patronage or grant private scholarships, that are subject
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to profits tax or micro-enterprise tax regime, have to
obligation submit to the tax authorities an Informative
Statement regarding the beneficiaries of such actions.
The deadline for submitting this statement is:
• For companies subject to profits tax regime – until the
deadline for submitting the annual profits tax return
• For companies subject to micro-enterprise tax retime –
until the deadline for submitting the tax return for the
fourth quarter or the deadline for submitting the last
quarterly return with the due income tax (for taxpayers
which change the micro-enterprise taxation regime).
6.3. Withholding taxes
Withholding tax ("WHT") is applicable on a number of
payments made by Romanian tax residents to non-resident
recipients.
Types of payments which are subject to withholding tax are
presented in the table below.
Type of payment WHT Rate* (%)
Royalties (see explanations below) 0/16
Interest (see explanations below) 0/16
Commissions 16
Dividends 0/5
Various services ** 16
Gambling income 1
Other types of income (see explanations
16
below)
* For certain types of income, the tax rate is increased to 50% in case
such income is paid to an account from a country with whom Romania did
not conclude a legal instrument for the exchange of information and the
transaction is deemed as artificial.
** Covers all services rendered in Romania (except international
transport) and management and consultancy services rendered
worldwide.
Interest and royalties
Generally, royalty and interest income (including interest
capitalization or interest on current accounts, term
deposits, deposit certificates, etc.) derived by non-
residents is subject to 16% WHT in Romania (or subject to
a tax rate available under a tax treaty, if more favorable).
Furthermore, under Interest & Royalties Directive
implemented in the Romanian tax law, interest and
royalty income derived from Romania by entities resident
in another EU Member State is exempt from Romanian
WHT, provided, inter-alia, that the beneficial owner of the
interest income holds at least 25% of the value/number of
the participation titles in the Romanian company paying
the interest or royalty, for an uninterrupted period of at
least 2 years ending at the moment when the interest or
royalty is paid.

Dividends
Dividends paid to legal entities resident in another EU
Member State are exempt from WHT in Romania, provided
that some conditions are met, including the condition
that the non-resident shareholder owns a minimum 10%
of the share capital of the Romanian legal entity for an
uninterrupted one-year period ending at the date of
dividend payment.
Unless such conditions are met, a 5% WHT rate applies to
dividends paid to non-resident legal entities (or a tax rate
available under a tax treaty, if more favourable).
Other types of income
The following income derived by non-residents is also
subject to WHT in Romania:
• Income from commissions
• Income from sports and entertainment activities
• Remuneration received by foreign legal entities acting
as administrator, founder or member of the Board of a
Romanian legal entity
• Income from independent activities (e.g. doctors,
lawyers, architects, etc.), in certain conditions
• Income from prizes
• Income from liquidation of a Romanian legal entity
or from the reduction of its share capital, other than
income derived from reimbursement of the capital
contribution and
• Income from the transfer of the patrimony from the
fiduciary to the non-resident beneficiary, within a trust
(in Romanian,"fiducie") operation.
Income not subject to WHT
Key types of income derived by non-residents that are not
subject to WHT in Romania, include, inter-alia:
• Interest income from corporate bonds, if the interest
is not paid to a related party and the bonds are
issued based on a prospect approved by the relevant
regulatory authority
• Income derived by non-resident collective placement
bodies without corporate status and other assimilated
entities, recognized as such by the relevant foreign
authority, from the transfer of securities, respectively
shares held, directly or indirectly, in a Romanian legal
entity
Lutheran Cathedral of Saint Mary - Sibiu
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• Income derived on foreign capital markets from
transfer of securities issued by Romanian residents or
shares held in a Romanian legal entity
• Interest on public debt instruments (in local and
foreign currency) and interest related to instruments
issued by the NBR for monetary policy purposes
• Interest/dividends paid to pension funds, as defined
according to the legislation of the EU Member States or
of the of the European Economic Area States provided
that there is in place a legal instrument for exchange of
information purposes
• Income from transactions with derivative instruments
used for carrying out operations for the management
of risks associated to public government debt, income
from trading State bonds and bonds issued by local
authorities (in local and foreign currency, on the
domestic or foreign capital markets), income from
trading securities issued by NBR, etc.
Key types of income derived by non-residents that are not
subject to WHT, but are subject to profits tax or personal
income tax ("PIT") in Romania (as the case may be)
include, inter-alia:
• Income attributable to a Romanian PE
• Income of a legal entity from the sale/rental of
immovable property in Romania, from sale/transfer
of shares held in a Romanian entity or from the
exploitation of natural resources
• Income of a non-resident individual from the rental/
transfer of immovable property in Romania, from the
transfer of shares held in a Romanian entity or from
transfer of securities issued by Romanian residents
• Income from activities performed by artists and
sportsmen.
Filing WHT returns
The tax should be withheld, declared and paid by the
Romanian income payer by the date of the 25th of the
month following the one in which payment was made. In
case of dividends distributed, which were not effectively
paid by the end of the year in which the annual financial
statements were approved, the dividend tax must be paid
by 25th January of the following year.
Moreover, Romanian income payers are required to file,
in electronic form, an annual WHT return until 31th of
January of the following year.
Claiming tax treaties and EU Directives benefits
Romania has an extensive treaty network, with more
than 85 signed agreements for the avoidance of double
taxation, with favorable WHT rates. Please refer to
Appendix 1 for a summary of the WHT rates provided by
the tax treaties where Romania is one of the contracting
parties.
In order to apply the more beneficial provisions of a tax
treaty, the non-resident income beneficiary has to provide
upon payment of the income a certificate of tax residence
issued by the relevant foreign authority, valid for the date
when the income was derived.
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For applying the provisions of the EU Directives, the
income beneficiary tax resident in EU should provide the
Romanian company, in addition to a valid tax residency
certificate, also with an attestation that the conditions
required for the application of the European Union
Directives were cumulatively fulfilled.
The WHT paid in excess may be refunded to the non-
resident beneficiary of income, upon request.
Special attention should be given to "net-of-tax"
arrangements (whereas the WHT is to be borne by the
income payer and not by the beneficiary), as in this case
the applicability of the tax treaty and EU Directives (as
applicable) would need to be analysed on a case by case
basis.
Romanian transparent associations/entities
without corporate status and non-resident
associations/entities
The Romanian tax law provide for new special and rather
complex tax rules, depending on whether the association/
entity is set up according to Romanian or foreign legislation
and on whether the non-resident association/entity is
deemed as tax resident of a foreign country or not.
Representative offices
Representative offices in Romania of non-resident legal
entities are taxed on a yearly basis at a lump sum of RON
18,000 (payable in the last day of February of the taxation
year).
An annual tax statement should be filed until the last day
of February of the tax year.
The representative offices are required to keep accounting
books under Romanian law.
Poenari Fortress - Brasov
6.4. Value added tax (VAT)
Regime
The Romanian VAT system is harmonized with the EU
VAT Directive. Starting January 2016, the Romanian tax
authorities obliged themselves to take into account the
jurisprudence of the European Court of Justice in respect
of VAT and excise duty.
Taxable persons
General
Any person supplying taxable goods or services in the
course of business on a regular basis is considered
a taxable person. The term "business" refers to all
independently carried out activities of producers, traders
and suppliers of services.
Starting with March 2018, taxable persons established in
Romania with an annual turnover exceeding EUR 88,500,
whose RON equivalent is computed at the exchange rate
communicated by NBR on accession date and is rounded to
the following thousand, i.e. RON 300,000, are required to
register for VAT purposes. Persons not meeting the above-
mentioned turnover criterion may also opt to register for
VAT purposes.
The registration may be performed before carrying out any
taxable and/or exempt with right of deduction operations
(by opting for registration or by declaring an envisaged
turnover higher than the registration threshold upon
starting the activity). Persons that were not registered as
VAT payers will have to register within 10 days from the
end of the month, during which the above threshold was
reached or exceeded. A taxable person having the place
of business outside Romania, but established in Romania
via a fixed establishment is required to register for VAT
purposes in Romania (i) before receiving services from
taxable persons established in another Member State for
which he is liable to pay VAT (general B2B rule), (ii) before
supplying services from that fixed establishment to a
beneficiary, taxable person established in another Member
State, for which the beneficiary is required to pay VAT, (iii)
before e.g. performance from that fixed establishment of
activities which are taxable and/or exempt with credit or
intra-Community acquisitions/supplies of goods.

A taxable person who is not established nor VAT registered
in Romania, will be required to register for VAT purposes,
before performing transactions for which it will be the
person liable to pay the VAT such as e.g. intra-Community
acquisitions/supplies of goods, etc.
A taxable person having the place of business in Romania,
who was not required to register for VAT (e.g. hospitals,
insurance companies, etc.) is required to register for
VAT purposes before supplying/receiving services to/
from taxable persons established in other Member States
for which the beneficiary is liable to pay VAT (under the
general B2B rule).
Under certain conditions, VAT groups may be formed
in Romania. However, the VAT groups do not have the
meaning defined by the EU VAT Directive. In Romania,
the members of such a group could only offset their VAT
payable/refundable positions (with impact on the VAT cash
flow).
VAT representative
Taxable persons that are established in the Community (but
outside Romania) liable to pay Romanian VAT (for certain
transactions) and provided they do not give rise to a fixed
establishment in Romania, have to register directly or to
appoint a fiscal representative for VAT purposes to fulfil
their VAT obligations in Romania.
If the person liable to pay tax is a taxable person who is not
established in the Community, such a person is required to
appoint a tax representative as the person liable to pay tax.
In specific cases, if the foreign taxable person is not
registered and not established for VAT purposes, the VAT
liability shifts, in principle, to the Romanian beneficiary of
the supply (under the reverse-charge mechanism).
Intra-Community operators Register
As of January 2017, taxable persons are no longer
required to register in the Intra-Community Operators
Register, as their Romanian VAT ID is valid in VIES by
default.
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Curtea de Arges Monastery - Arges County
Taxable operations
Transactions subject to VAT refer to the supply of goods
and services, imports of goods and intra-Community
acquisitions of goods. To be taxable in Romania, a supply
must cumulatively meet certain requirements (e.g. it is
made by a taxable person for consideration, the place of
the transaction is in Romania, etc.).
Supply of goods
Supply of goods refers to the actual transfer of the right
to dispose as owner of the goods from one person to
another against a consideration, directly or through an
intermediary.
As a rule, a supply of goods has the place of supply where
the goods are located at the moment when the delivery
takes place - with certain exceptions for goods to be
transported, installed, delivered on board of ships, aircraft,
trains, for distance sales and for supplies of natural gas,
electricity, heat and refrigeration.
Supply of services
The term "supply of services" applies to all supplies not
treated as a supply of goods.
The place of supply of services to a taxable person acting
as such is the place where the person receiving the
services has established the place of business. If services
are supplied to a fixed establishment of the taxable person,
located in a place other than the place where he has
established the place of business, the place of supply of
services is the place where the fixed establishment of the
person receiving the services is located (general B2B rule).
The place of supply of services to a non-taxable person
is the place where the supplier has established the
seat of business. If services are supplied from a fixed
establishment of the supplier, located in a place other than
where the person has established the seat of business, the
place of supply of services is the place where that fixed
establishment is situated (general B2C rule).
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There are derogations from the general rule concerning

the place of supply of services (e.g. services in connection
with immovable property, access to cultural, artistic
events, passenger transport, restaurant and catering
services, etc.). Also, Romania implemented the use and
enjoyment rule for certain services supplied to taxable
persons established in non-EU countries (e.g. work on
tangible movable property, local transport of goods and
ancillary services).

Import of goods
Goods brought from outside the Community and
introduced into the EU territory in Romania are considered
to be imports and fall within the scope of VAT, with certain
exceptions (i.e. entry of goods under a qualifying customs
duty suspension procedure).

Intra-Community acquisition of goods

Intra-Community acquisition of goods means the Sucevita Monastery - Suceava County

acquisition of the right to dispose, as owner, of movable,

tangible property that is dispatched or transported to by or
Under the reverse-charge mechanism, the beneficiaries
on behalf of the purchaser or the supplier to a destination
must recognize the related output VAT in their return for
in Romania from another EU member state from which the
the respective month. The input VAT may, as a general
goods are dispatched or transported.
rule, be recovered in the same VAT return to the extent of
the beneficiary's right to deduct VAT.
"Reverse-charge" VAT
In case of taxable intra-Community acquisitions, certain Simplified recording of VAT
acquisitions of goods/services and imports (e.g. if the
For certain supplies such as waste and scrap materials,
postponement certificate is obtained by the taxable
wooden material, CO2 emission certificates, certain
persons registered for VAT purposes performing such
cereals and technical crops, supply of electric energy to
operations), for which the "place of supply" is deemed to
a taxable trader, buildings, building parts and lands if the
be in Romania, the law imposes the application of the so-
transaction is taxable by law or option, investment gold
called VAT "reverse-charge" mechanism by the Romanian
if the transaction is taxable by option, mobile phones,
beneficiary provided certain conditions (which vary for
integrated circuit devices (such as microprocessors and
different operations) are met.
central processing units prior to integration into end user

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76

products), gaming consoles, PC tablets and laptops, a
simplified VAT mechanism is applicable, provided that both
the seller and the purchaser are registered as VAT payers
in Romania.
Under this mechanism, the purchaser has to
simultaneously recognize the related VAT, both as an
output and input VAT in the return of the respective
month, without any cash flow implications (provided the
purchaser has a full right to deduct VAT).
Specific VAT schemes and simplification rules
Romania adopted in the national legislation simplification
rules referring, inter-alia, to:
• Triangulation transactions
• Consignment/call-off-stock
• Multi-party works on movable tangible property within
the Community
• Repairs during the guarantee period
• Returns of goods within the Community
• Also, a series of special VAT schemes are applicable,
such as:
• Special scheme for small undertakings
• Special scheme for travel agents
• Special scheme for second-hand goods
• Special scheme for investment gold
• Special scheme for electronic services,
telecommunication services, broadcasting or
television services rendered by taxable persons not
established in the EU
• Special scheme for electronic services,
telecommunication services, broadcasting or
television services rendered by taxable persons
established in the EU, but in another member state
than the one of consumption
• Special scheme for farmers.
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Chargeable event and chargeability
Under the general rule, the chargeable event and the
chargeability of the VAT occur at the date when the
goods or services are supplied. By way of exception, the
VAT chargeability shall occur at the moment an advance
payment is made, or an invoice is issued before the supply.
Also, other exceptions may apply for specific cases.
Cash-accounting system
Starting January 2013, Romania has implemented the
cash-accounting system, under which the VAT becomes
chargeable at the date when full or partial payment is
received for the supplies performed. The cash-accounting
system is currently optional.
The persons eligible for applying the cash-accounting
system are taxable persons having the seat of business
in Romania, registered for VAT purposes whose turnover
in the previous calendar year did not exceed the RON
2,250,000 cap.
Taxable base
VAT is assessed on the total amount received or to be
received by the supplier as consideration for the supply
of goods or services; this includes taxes, commissions,
packaging, transport and insurance expenses. Certain
elements such as price discounts, interests for late
payment applied after supply date, the value of packaging
that circulates between suppliers and customers, by
exchange, without invoicing, etc. are not included in the
taxable base.
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Tax rates
The following rates apply in Romania:
• 19% standard rate, which is applicable to supplies of
goods and services not subject to VAT exemptions or
to the reduced rate
• 9% reduced rate, which is applicable to the following
supplies:
• Supplies of prostheses and accessories to them,
except for dental prostheses
• Supplies of orthopaedic products
• supplies of medicines for human and veterinarian use
• Food, including beverages, except for alcoholic
beverages intended for human and animal
consumption, live animals and poultry from
domesticated species, seeds, plants and ingredients
used to prepare food, products used to complete or
replace food
• Supply of and water for irrigation in agriculture
• Supply of fertilizers and pesticides used in
agriculture, seeds and other agricultural products
for sowing or planting and the provision of services
such as the ones specifically used in agriculture,
provided by order of the Minister of Public
Finance and the Minister of Agriculture and Rural
Development
• Water supply services and sewage services
• 5% reduced rate, which is applicable to the following
supplies:
• School books, books, newspapers and magazines,
except for those used solely or mainly to advertising
• Admission to e.g. castles, museums, memorial
houses, historical, architectural and archaeological
monuments, botanical gardens and zoological parks,
78
Sibiu city
services of allowing access to fairs, amusement
parks and recreational parks, fairs, exhibitions
cultural events and sport events, cinemas
• Supply of social housing under certain conditions
expressly provided by the Tax Code
• Accommodation provided by hotels and similar
establishments including the letting of camping sites
• Restaurant and catering services, excluding
alcoholic beverages other than beer falling within a
specific CN code
• The right to use sports facilities for the purpose of
practicing sport and physical education
• Transport of persons with trains or historic vehicles
with steam traction on narrow lines for tourism or
leisure purposes
• Transport of persons using cable transport -
facilities-cable car, gondola lift, ski lift - for tourism
or leisure purposes
• Transport of persons with animal-traction vehicles
used for tourism or leisure purposes
• Transport of persons with boats used for tourism or
leisure purposes
• Delivery of high quality food, i.e. authorized
mountain, Eco, traditional products.
Exempt operations
Supplies within the scope of VAT are considered as taxable
operations and exempt operations.
Exempt operations are divided as follows:
• Exempt supplies with credit for input tax (e.g.
exemption for intra-Community supplies of goods
under certain conditions, exports and other similar
supplies, international transportation of passengers,

as well as specific exemptions related to international
traffic of goods, etc.)
• Exempt supplies without credit for input tax (e.g.
healthcare services, educational services, financial and
banking services, supply of immovable property, except
for new buildings, lease and renting of immovable
property with certain exceptions)
• Exemptions for import and intra-Community
acquisitions of goods whose local supplies are
exempted, etc.
The Tax Code provides specific rules on goods benefiting
from special customs regimes. The following transactions
are VAT exempt with credit for input tax:
• Supply of goods placed under a bonded warehouse
customs procedure
• Goods introduced in free zones
• Goods under an inward processing procedure, etc.
Credit for input VAT
General rule
Carrying out taxable supplies allows offsetting output
VAT against input VAT. Exempt supplies do not allow the
recovery of input VAT, except in the case of VAT exempt
supplies with credit, for which input VAT can be recovered.
A taxable person is allowed to deduct input VAT incurred
on the purchases of goods or services, provided that
the goods or services purchased will be used to perform
operations allowing VAT deduction and it holds a correct
invoice. VAT deduction is allowed also based on invoices
sent by electronic means which comply with certain
conditions.
Companies performing both taxable transactions and
exempt transactions without credit shall deduct VAT based
on the direct allocation method and pro rata mechanism.
By exception, for purchases intended for investments,
which are foreseen to be used both for transactions
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allowing VAT deduction and transactions which do not give
rise to VAT deduction right, taxable persons are allowed
to fully deduct input VAT incurred during the investment
process and subsequently adjust the deducted VAT,
observing the rules provided by the Tax Code. By way of
exception from the above rules, a 50% cap shall apply to
the right to deduct the input VAT related to the purchase,
intra-Community acquisition, import, rental or leasing of
motor road vehicles and the tax related to expenses borne
in respect of vehicles owned or used by the taxable person,
provided that such vehicles are not used exclusively for
business purposes, except motor road vehicles having a
maximum authorized weight of more than 3,500 kg and
more than 9 passenger seats, driver's seat included.
However, there are certain exceptions when the VAT is fully
deductible (vehicles used by sales and procurement agents,
used for paid passenger transport including taxi, the ones
used for supply of services against consideration, for
interventions, security and protection, etc.). In case such
vehicles are acquired with the view of further being object
to leasing contracts, a VAT deduction on lease installments
is, in principle, allowed at the level of the lessor.
In case of taxable person applying the cash-accounting
system or performing acquisitions from suppliers applying
the cash-accounting system, the VAT deduction right shall
be postponed until the total or partial payment of the
goods and services supplied is performed to the supplier/
provider.
Refund of VAT
If the input VAT exceeds the output VAT, the recoverable
balance VAT (defined as "negative VAT balance") may be:
• Carried forward to the next period
• Refunded by the tax authorities, based on the option
expressed by the taxpayer in the VAT return. The
option can be exercised only for a negative VAT
balance exceeding RON 5,000.
Alba Iulia fortress
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As of February 2010, VAT returns with a negative VAT
balance with a refund option for a maximum VAT amount
of RON 45,000 are by default assigned a low tax risk.
Also, large taxpayers may decrease the tax risk assigned
to their VAT refund claims from high to low (with some
exceptions) by filing bank guarantee letters for an amount
equal with the negative VAT requested for refund.
For low tax risk claims, VAT refund should be performed
without a tax audit or documentary analysis and in a
shorter period of time. However, in the above-mentioned
cases, the respective taxpayers would be nevertheless
subject to a subsequent VAT audit.
intra-Community acquisitions of goods during the previous
or current calendar year.
Payment and filing requirements
Taxpayers must file VAT returns with the tax authorities
and pay VAT on a monthly basis, specifying the taxable
amount and the tax due. The tax return must be filed and
the respective VAT paid by the date of the 25th of the
following month. In case of taxpayers having the tax period
the calendar quarter, VAT returns should be filed with the
tax authorities and VAT shall be paid by the date of the 25th
of the month following the quarter the VAT return relates to.

A taxable person established in the Community, that is A VAT recapitulative statement should be filed with the
not registered or liable to register for VAT purposes in tax authorities on a monthly basis on or before the 25th
Romania, may request a refund of VAT paid in Romania. day of the following month. In case of taxpayers having
the tax period the calendar quarter, the VAT recapitulative
A taxable person not established in the Community that statement shall be submitted by the 25th of the month
is not registered or liable to register for VAT purposes in following the quarter the recapitulative statement relates
Romania may request the refund of the VAT paid if, under to Such statement should comprise: intra-Community
the laws of its country of establishment, a taxable person supplies of goods exempt from VAT, intra-Community
established in Romania has the same right in that country. acquisitions of goods for which the beneficiary is obliged to
Taxable persons established in or outside the EU can claim pay VAT, and acquisitions as part of operations within the
a VAT refund, if the application refers to a period: triangulation scheme, as well as acquisitions and supplies
• Less than a calendar year but not less than three of intra-Community services based on the general B2B
months; the amount requested for reimbursement rule. Taxpayers are not required to submit nil recapitulative
cannot be less than the RON equivalent of EUR 400 statements.
• Equal to a calendar year or the remaining period Taxpayers should also submit an informative declaration
of a calendar year; the amount requested for of all supplies/acquisitions of goods/services taking place
reimbursement cannot be less than the RON equivalent in Romania to/from other taxable persons registered for
of EUR 50. VAT purposes in Romania. The declaration should be
submitted by the 30th of the following month, In case of
Invoicing taxpayers having the tax period the calendar quarter, the
Documents or messages, both electronic and hard copy VAT informative statement shall be submitted by the 30 of
versions, are accepted by the Romanian authorities as the month following the quarter the informative statement
invoices, if they meet the requirements provided by the relates to. Taxpayers are required to submit nil informative
Romanian Tax Code in respect of content of invoices. declarations.
Moreover, any document that specifically and without
ambiguities modifies or refers to an initial invoice will be
considered as invoice.
If any adjustments of the taxable base are required and
the supplier does not issue the correction invoice, the
beneficiary has to issue a self-invoice so as to adjust
deductible input VAT, by the date of the 15th of the month
following the one during which the events that determined
the adjustments occurred.
Taxable persons supplying goods or services should
generally issue invoices by the date of the 15th of the
month following the one in which the chargeable event
occurs, unless the invoice has already been issued.
Romania has implemented the possibility to use e-invoicing
and e–archiving procedure, self-billing and billing by a third
party in the name and on behalf of the supplier, under
certain specific conditions.
Tax period
The tax period is the calendar month. By way of
derogation, the tax period shall be the calendar quarter,
if the turnover recorded during the previous year by
the taxable person does not exceed the EUR 100,000
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Companies registered for VAT purposes in Romania, having
deliveries of goods to/arrivals of goods from other EU
member states which exceed an annual amount of RON
900,000 are obliged to submit INTRASTAT declarations
on a monthly basis, by the 15th day of the following
month. Taxpayers are required to submit nil INTRASTAT
statements.
Romanian VAT Split Payment mechanism
The Romanian Government published on 31 August 2017,
the Ordinance for the VAT split payment mechanism to
be implemented mandatory by the taxable persons/public
institutions registered for VAT purposes if they fall under
one of the following situations:
• As of 31 December 2017, they had outstanding VAT
liabilities, exceeding RON 15,000 in case of large
taxpayers, RON 10,000 in case of mid-sized taxpayers,
and respectively RON 5,000 for other taxpayers, if
these liabilities were not settled by 31 January 2018
• Starting with 1 January 2018, they have outstanding
VAT liabilities older than 60 working days as of the
due date, exceeding RON 15,000 in case of large
taxpayers, RON 10,000 in case of mid-sized taxpayers,
and respectively RON 5,000 in case of other taxpayers
• Are subject to the provisions of the national legislation
regarding insolvency.
The VAT Split Payment mechanism is optional for all other
VAT registered taxable persons. A tax incentive of 5%
decrease in the profits tax/income tax for microenterprises
will be granted for the entire period during which the VAT
split payment mechanism is optionally applied.
The VAT split payment applies to all taxable supplies of
goods/services performed by the taxable persons applying
mandatory the VAT split payment mechanism (either
mandatory or by option), for which the place of supply is in
Romania (some exceptions are provided: e.g. transactions
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for which the beneficiary is liable to pay VAT through the
reverse-charge mechanism; transactions that may fall
under a VAT special regime).
The continuation of the VAT split payment mechanism is
currently under discussion, as the European Commission
did not approve this mechanism. No decision was reached
so far.
How does the system work?
Each VAT registered taxpayer which applies the VAT split
payment mechanism will have a separate VAT account,
different from the regular bank account (opened either at a
regular bank or at the National Treasury).
For each invoice issued by a supplier applying VAT
split payment mechanism, the buyer will perform two
payments:
• One in the regular bank account, representing the
value of the goods/services. This payment is performed
from the regular bank account of the beneficiary
• One in the VAT account, representing the VAT related
to goods and services. This payment is performed from
the VAT account of the beneficiary.
Exceptions apply to cash payments or through credit/debit
cards or payments performed by persons not required to
pay in the VAT account (e.g. natural individuals). In such
a case, the customer will pay the gross amount (including
VAT) to the supplier's regular bank account, the latter
having the obligation to deposit in cash or to transfer the
corresponding VAT amount from its regular bank account
to its VAT account, within 30 working days since receiving
the payment.
Penalties for not applying the VAT split Payment
Failure to communicate the VAT account to the
beneficiaries triggers a fine between RON 2,000–4,000.
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Also, the Ordinance introduces, inter-alia, penalties if
erroneous payments (e.g. performed in/from other account
than the VAT account) are not corrected within a grace
period of 7 working days, as follows:
• 0.06% per day of delay, if the payment is done within
30 working days since the date of making the incorrect
payment, increasing to 10% of the incorrectly paid
amount if the 30 working days are exceeded
• A 50% penalty (count of incorrectly debited amount)
is imposed if the VAT account is erroneously debited
with amounts not allowed under the law (e.g. cash
withdrawal) and such incorrect use is not rectified
within 30 working days.
6.5. Customs duties
The EU customs regulations are directly applicable in
Romania as from the accession date to the EU (i.e. 1
January 2007).
The persons who perform activities which are regulated
by the customs legislation must register for customs
purposes.
Also, the statute of authorized economic operator may
be granted upon request under certain conditions. The
respective statute concedes certain administrative
incentives to its holder.
Common customs tariff
The specific customs duties payable upon releasing the
goods into free circulation, are established based on the EU
Customs Tariff (adopted for each year by the Commission)
and related preferential tariff measures. There is an online
EU customs tariff database (TARIC) which comprises the
following:
• The combined nomenclature of goods
• The rates and other items of charge normally
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Victory Square - Timisoara
applicable to goods covered by the combined
nomenclature, as regards customs duties and import
charges laid down under the common agricultural
policy, or under the specific arrangements applicable
to certain goods resulting from the processing of
agricultural products
• The preferential tariff measures contained in
agreements which the European Union has concluded
with certain countries or groups of countries and which
provide for the granting of preferential tariff treatment
• Preferential tariff measures adopted unilaterally by the
European Union in respect of certain countries, groups
of countries, or territories
• Autonomous suspensive measures providing for a
reduction in, or relief from, import duties chargeable
on certain goods
• Other tariff measures provided for by other Union
legislation Customs duties are expressed as a
percentage of the customs value of goods. Other taxes,
duties and levies may be required to be paid upon
import in addition to customs duties, such as excise
duty, VAT, etc.
Customs value of goods
Where the goods to be imported in Romania will be subject
to a sale, the customs value should be based generally on
the sale price increased with certain other costs that may
have been incurred for the imported goods (e.g. insurance,
transport, commissions, royalty and license fees).
The cost of e.g. (i) transport and insurance of the imported
goods, and (ii) loading and handling charges associated
with the transport of the imported goods to the place of
entering into the customs territory of the Union shall be
added to the price actually paid or payable by the importer
when declaring the customs value of the goods, to the
extent that they are incurred by the buyer but are not
included in the price actually paid or payable for the goods.

Royalties
Under the customs legislation, a royalty is dutiable if it is
related to the imported goods and is paid as a condition of
their sale. However, starting with 1 June 2016, royalties
and license fees are, in most cases, considered to be paid
as a condition of the sale of the goods and would need to
be included in the customs value.
Customs procedures
As provided by the Union Customs Code, non-EU goods
may be placed under various customs procedures, as
follows:
• Release of goods for free circulation
• Transit
• Customs warehousing
• Inward processing
• Temporary admission
• Outward processing
• Exportation
• Free zone.
The release for free circulation confers non-Union goods,
the status of Union goods. This means that the customs
duties and charges have been paid and, as a result, the
goods may freely move within the territory of the European
Union from a customs perspective.
The specific customs procedures suspending the payment
of the import duties are generally subject to authorization
from the customs authorities.
The transit procedure allows the movement of non-Union
goods from one point to another within the customs EU
territory, without such goods being subject to import
duties and other charges or to commercial policy measures
for a certain period of time. Certain Union goods meant for
export could also be placed under the transit procedure.
A customs warehouse is a place approved by, and under
the supervision of, the customs authorities where goods
may be stored under certain conditions.
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The customs warehousing procedure allows the storage in
a customs warehouse of the following
• non-Union goods, without such goods being subject to
import duties or commercial policy measures
• Union goods, where the specific legislation governing
certain fields provides that their placement in a
customs warehouse attracts the application of
measures normally used for export of such goods
The inward processing procedure allows that non-EU
goods are processed within the EU customs territory
without application of import duties or commercial policy
measures, provided that certain conditions are met.
The temporary admission procedure allows the use in
the customs territory of the EU, with total or partial relief
from import duties and without them being subject to
commercial policy measures, of non-EU goods intended
for re-export without having undergone any change except
normal depreciation due to their use.
The outward processing allows EU goods to be exported
temporarily from the EU customs territory in order to
undergo processing operations and the products resulting
from those operations to be released for free circulation,
with total or partial relief from import duties.
The export allows EU goods to leave the customs territory
and entails the application of exit formalities, including
commercial policy measures.
Free zones are parts of the customs territory of the EU
or premises situated in that territory and separated from
the rest of it in which non-EU goods are considered, for
the purpose of import duties and commercial policy import
measures, as not being on EU customs territory, provided
they are not released for free circulation or placed under
another customs procedure or used or consumed under
conditions other than those provided for in customs
regulations. Romania has currently the following free
zones: Constanta, Braila, Galati, Sulina, Giurgiu and
Curtici–Arad.
Severin City Bridge monument - Mehedinti County
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The above special regimes are grouped together within
four special procedures, namely:
• Transit, including external transit and internal transit
• Storage, including temporary storage, customs
warehousing (public and private warehouses) and free
zone
• Specific use, namely temporary admission and end-use
• Processing, namely inward processing and outward
processing.
Customs regime for individuals
Customs regulations provide for specific customs duty
treatment for the goods belongings of individuals
establishing domicile or residence in the EU, goods
introduced into the EU upon marriage, inherited goods, as
well as goods shipped between individuals.
Goods from the personal luggage of travellers brought
into EU without commercial purposes may be exempt from
customs duty. The customs duties, VAT, and excise duties
exemption can be granted up to a total value of EUR 430/
traveller, for air and sea travellers and up to a total value of
EUR 300/traveller, for other travelers.
For certain goods, such exemption is granted within the
following quantity limits:
• Tobacco products:
• 40 cigarettes
• 100 cigarillos (cigarillos are cigars of a maximum
weight of 3 grams each)
• 50 cigars
• 250 grams smoking tobacco.
Medieval fortress - Alba Iulia
84
Alcohol and alcoholic beverages:
• A total of 1 litter of alcohol and alcoholic beverages
of an alcoholic strength exceeding 22% vol. or un-
denatured ethyl alcohol of 80% vol and over, or
• A total of 2 litters of alcoholic beverages of an alcoholic
strength not exceeding 22% vol.
• A total of 4 litters of still wine, and 16 litters of beer.
The duty exemption mentioned above for tobacco and
alcoholic beverages does not apply for travellers under 17
years.
6.6. Excise duty
Excise duty is a consumption tax payable on certain
categories of products including alcoholic beverages,
energy products (e.g. gasoline, diesel), tobacco products,
electricity and natural gas and certain other items. The tax
is payable on import and release for consumption of locally
produced items on the domestic market and is set as fixed
RON amount per unit or as a percentage of a specified
taxable base.
The excise duties in respect to the main categories of
products are given in RON in the table below:
Category of
Excise duty rates valid for 2018
products
Alcoholic products Up to RON 3,411.15 per hl
Cigarettes RON 483.74/1.000 cigarettes
Car fuel RON 2,243.76 - RON 3,038.54 per ton
Electricity RON 2.44 or Ron 4.89 per MWh
Source: EY Research

Medieval fortress - Alba Iulia
Moreover, non-harmonized excise duties will be applied
for liquids containing nicotine (electronic cigarettes) and
heated tobacco products.
Taxpayers are normally required to submit monthly tax
returns and pay the excise duties for excise products by the
25 of the following month, with certain exceptions. In case
of imported products, the related excise duty, if applicable,
should be, in principle, paid in customs at the time of
releasing the goods for free circulation.
A special supervision and control system is provided for the
production and movement of excise products.
A specific reimbursement procedure for harmonized excise
duties based on tax risk analysis is available for supplies of
certain excise products.
Fiscal warehouse regime
The fiscal warehouse regime allows the production,
transformation and/or storage of products subject to
harmonized excise duties (e.g. beer, wines, other fermented
beverages, intermediary products, ethyl alcohol, tobacco
products, mineral oils) without the payment of related
excise duties. Generally, the fiscal warehouse regime
cannot be used for retail sale of such products.
The Tax Code allows production of electricity and natural
gas outside fiscal warehouses.
Excise duty suspension regime
Under certain conditions, the excise products could be
moved under an excise duty suspension regime within the
territory of the EU. The movement of the excise products
under the suspension duty procedure must be covered
by an electronic accompanying document (an electronic
message from the consignor to the consignee, certified by
the authorities of the Member States involved).
For this purposes, a computerized system for monitoring
movements of the harmonized excise products under
suspension excise duty within the EU, named EMCS (Excise
Movement and Control System) is used.
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6.7. Local taxes
Local taxes in Romania are regulated by the Tax Code.
Local taxes represent a distinct category of taxes set by the
local administration, which are payable by both individuals
and legal entities in Romania.
The local councils may increase local taxes over the level
established within the Tax Code, up to 50%, with a few
exceptions.
Moreover, in case of land for farming that is not cultivated
and in case of land and buildings that are in ruins, the local
administration is entitled to increase the tax rate up to
500% the level from the Tax Code.
The legislation also provides for some exemptions, for
example local councils may grant building and land tax
exemptions to legal entities, provided these are in line with
the state aid legislation.
Building tax
Building tax is payable by owners of buildings located in
Romania, regardless of their residence. The tax is assessed
based on the destination of the building (i.e. residential,
non-residential and mixt use).
The tax rate ranges between 0.08% and 0.2% applicable
to the taxable base, for buildings with residential use and
between 0.2% and 1.3% for buildings with non-residential
(i.e. business) use. As an exception, non-residential
buildings used for agriculture business are taxed with
0.4%, while the building tax due for buildings used for
tourism purposes is 50% reduced, provided that the
building is used for business purposes for maximum 6
months within a year.
In case of non-residential buildings, the taxable base is
represented by:
• The value reflected in a valuation report in case the
building is owned by individuals (unless the building
was acquired or constructed during the last 5 years)
• The value reflected in a valuation report not older than
3 years in case the building is owned by legal entities
(unless other specific cases apply).
The building tax rate applicable is set to 5% for the
buildings held by legal entities that have not been
revaluated during the last 3 years and to 2% for the
buildings held by individuals that have not been revaluated
during the last 5 years.
The tax must be paid annually, in two equal instalments by
31 March and 30 September.
Land tax
Land tax is payable by owners of land. Generally, the tax is
established as a fixed amount per hectare, depending on
the location of the land within certain determined zones,
towns or villages and depending on land use. The tax is
payable annually, in two equal instalments, by 31 March
and 30 September.
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Vehicle tax
Vehicle tax is payable by owners of land/water vehicles,
which should be registered in Romania. The tax depends
on the engine capacity or vehicle characteristics (e.g.
number of axles, suspension system, weight, etc.). Electric
cars benefit of exemption from vehicle tax. In addition,
local administration can grant tax exemption in case of
agriculture vehicles used effectively for farming and 50%
reduction for vehicle tax in case of hybrid cars.
The tax is payable annually, in two equal instalments, by 31
March and 30 September.

Tax for construction authorizations

The tax is established as a percentage on the construction
value and is payable upon obtaining the construction
authorization.

Publicity and advertising tax

Advertising tax is payable by the 10th of each month during Sucevita Monastery - Suceava county
the execution of the contract by the suppliers of publicity
and advertising services rendered in Romania, except for
publicity and advertising services through audio, video and
the print medium. The tax rate is established by the local
Show tax
councils and ranges between 1% and 3%. It is applied to Show tax is payable by individuals and entities for public
the value of the publicity and advertising services. performances at a rate of up to 2% or 5% (depending on
the type of event) of revenues from the sale of tickets or
Users of outdoor advertising must pay an outdoor media
subscriptions. The show tax is payable monthly, in arrears
advertising tax computed as a fixed amount established
by the 10 of the month following the performance.
by the local councils per square meter, depending on the
surface used for advertising. The tax cannot exceed RON Other local taxes
32/square meter, in case the advertising is done at the
The local councils may impose, inter-alia, taxes for
place of business, and RON 23/square meter in case the
temporary use of public places and for admissions to
advertising is done in other places. Such tax should be paid
museums, memorials, or historical, architectural, and
in two equal instalments, by 31 March and 30 September.
archaeological monuments, and also for the ownership or
use of equipment that is held for the purpose of obtaining
income using public infrastructure, as well as fees for
activities with an impact on the environment.

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6.8. Stamp duty
Stamp duty is payable on most judicial claims, issue of
certificates and licenses, and documentary transactions
which require authentication.
There are two types of stamp duty, which include the
following:
• Judicial stamp duty and
• Extra-judicial stamp duty.
Judicial stamp duty is levied on claims and requests filed
with courts and the Ministry of Justice, usually depending
on the value of the claim. Quantifiable claims are taxed
under the regressive tax mechanism. Non-quantifiable
claims are taxed at fixed amount levels. A judicial stamp
duty may also be levied at the transfer of real estate
property under certain circumstances.
In 2013, the Romanian Government adopted
Governmental Emergency Ordinance 80/2013 regulating
the judicial stamp duties and repealing the former Law
146/1997 applicable to the same subject matter. It has
raised the quantum of the judicial stamp duties, but it also
eliminated the judicial stamp, a tax that had to be paid
beside the judicial stamp duty.
Extra-judicial stamp duty is charged by the public
authorities for the issuance of various certifications and
documents such as identity cards, car registrations, etc.
Under certain conditions and cases stipulated by the law,
individuals and legal entities may benefit from exemptions.
6.9. Individual taxation
Romanian citizens domiciled in Romania are considered
Romanian tax residents and are taxed in Romania on
their worldwide income. Foreigners and Romanian
individuals without a Romanian domicile may be subject
to taxation in Romania on worldwide income under certain
circumstances.
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Residence
An individual is considered a Romanian tax resident if he/
she fulfils at least one of the following conditions:
• Individual is domiciled in Romania
• Individual's centre of vital interest is located in
Romania
• Individual is present in Romania for a period or periods
exceeding in aggregate 183 days during any period
of 12 consecutive months ending in the calendar year
concerned
• Individual is a Romanian citizen working abroad as an
employee of the Romanian state.
Taxpayers
Individuals liable to income tax fall into the following two
categories:
• Residents, Romanian individuals domiciled in Romania
for income obtained from any source, both from
Romania and abroad, and residents other than
Romanian individuals domiciled in Romania
• Non-residents, who either:
• Carry out independent activities through a
permanent establishment in Romania, for
the net income attributable to the permanent
establishment, or
• Carry out dependent activities in Romania, for the
net income from such dependent activities, or
• Earn other types of income.
If a non-resident individual fulfils the second or third
condition mentioned in the Residence section above and in
the absence of a tax residency certificate issued by another
state with which Romania has concluded a Double Tax
Treaty, he/she becomes subject to taxation on worldwide
income as of the date when he/she becomes a Romanian
tax resident.
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Old Bridge - Arad the law. Taxable compensation also includes
Individuals who are tax residents in countries that have
signed Double Tax Treaties with Romania may benefit from
a reduced tax rate or a tax exemption under the terms of
the respective treaties. Individuals who are tax residents
in countries that have not entered into a Double Tax Treaty
with Romania may become subject to Romanian taxation
from the first day of presence in Romania.
Categories of income subject to taxation
A flat income tax rate of 10% applies to the following
categories of income:
• Income from independent activities
• Income from intellectual property rights
• Salary income
• Rental income
• Investment income (certain types)
• Pension income
• Prizes
• Agricultural income
• Other income.
The Tax Code provides special tax rates in case of certain
investment income, gambling, and transfer of real estate
from personal patrimony.
Employment income
Taxable compensation includes salaries, benefits in cash or
in kind, bonuses, rewards, temporary disability payments,
holiday premiums and any other income received by
an individual based on an employment agreement/the
document for appointing civil servants, secondment
88
document or a special statute provided by
compensation received by daily or temporary
workers, fees and compensation paid to
directors and managers of legal persons, to
members of the board of directors and General
Shareholders Meeting, to members of the
administration council and to members of the
audit committee.
For employment income, the taxable amount
is determined by deducting the following from
the gross income:
• Mandatory social security contributions
• Personal deductions allowed, if the case
• Monthly trade union contribution
• Contribution to the facultative pension
scheme - Pillar III (up to EUR 400/year)
• Voluntary health insurance and medical
care subscription (cumulatively, up to EUR
400/year).
Under certain conditions, Romanian residents
working abroad may benefit from tax
exemption on salary income.
Also, subject to legal requirements in force, tax
exemption is granted to employees performing
software development activities, research and
development activities construction activities
and certain seasonal activities.
Personal deductions
Romanian individuals domiciled in Romania, as well as
foreigners meeting the residence criteria, are entitled to
personal deductions, which vary depending on the gross
monthly income and the number of dependents, as follows:
• For gross monthly income up to RON 1,950, the
monthly deductions vary between RON 510 for
persons without dependents and RON 1,310 for at
least four dependents
• For gross monthly income between RON 1,951 and
RON 3,600, personal deductions are regressive as
compared to the above and shall be set by order of the
Minister of Finance
• For gross monthly income higher than RON 3,600, no
personal deductions are granted.
Income from independent activities
Income from independent activities includes the following:
• Income from production, commerce and services
• Income from freelancing activities
• The net taxable income from production/commerce/
services/freelancing activities is computed as
gross income less specified deductible expenses
that should fulfil certain conditions. Individuals
authorized as freelancers must keep a Tax Evidence
Registry
• Alternatively, income earned by certain categories
of freelancers who do not have employees is subject
to income tax based on income quota(s), which are
annually established by the Ministry of Finance
 Mountain view

• Income from other independent activities

• Income derived by individuals from rental for tourism
purposes of rooms located in their own homes, with a
capacity of accommodation of more than five rooms is
assessed as income from independent activities and is
subject to tax based on income quotas (fixed amounts
set by the Government) or real system (actual income
recorded based on the single-entry bookkeeping).

Income from other independent activities

The net taxable income from intellectual property rights
is computed either on real system or by deducting a 40%
expense quota from the gross income. An exception is
allowed for the situation where the income received from the
same income payer exceeds 12 minimum national salaries,
where withholding rules apply.
The income tax on intellectual property rights is determined
by applying 10% on the taxable income.

Rental income
Gross rental income consists of amounts in cash or in kind,
stipulated in the rental agreements and related to a tax
year (regardless of the time of effective cashing), as well as
certain expenses borne by the tenant and which, based on
the law, are the landlord's liability.
The taxable amount is determined by deducting a 40%
expense quota from the gross income. Tax on rental income
is determined by applying 10% on the taxable amount. As
an exception, taxpayers may opt for the determination of the
rental income based on single entry bookkeeping.

Investment income
Investment income includes:
• Dividend income
• Interest income
• Gains from transfer of securities and other operations
involving financial instruments
• Income from transfer of financial gold
• Income from liquidation of a legal person.
Dividend income
Dividends are defined as any grant of benefits in cash or
kind, by a legal entity to shareholders or associates, as a
consequence of holding participation titles (with certain
exceptions).
The tax rate on dividends distributed to resident individuals
is 5%. The tax rate is calculated, withheld and paid by the
payer of dividend. The tax should be paid by the 25th of the
month following the dividend payment.
In case of dividends distributed but not paid until the end
of the year, the tax is payable by the 25th of January of the
following year.
The dividend tax is final (i.e. the income is not subject to
regularization).
The withholding tax for non-resident individuals is 5% or a
more favourable rate, if a double tax treaty is applicable.
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Interest income
Taxable income from interest is any income such as: Butchers Guild Hall (Casa Artelor) - Sibiu
• Interest from current account/on-sight deposits
• Interest from on term deposits, saving instruments
and civil contracts
• Interests paid by the issuance company of the loaned
securities, during the loan period.
The tax rate applicable to interest income is 10% and is
calculated, withheld and paid by the payer of interest by
the 25th of the month following the interest payment. The
interest tax represents a final tax.
The withholding tax applied to interest income earned by
non-resident individuals, as per the domestic legislation,
is 10% or a more favourable rate if a double tax treaty is
applicable.
Gains from transfer of securities and other operations
involving financial instruments
As a general rule, the capital gain represents the positive
difference between the sale price and the tax value of
different types of securities, which includes the related
transaction costs, as the case may be.
A capital gain on the disposal of shares obtained as a result
of a stock option plan is defined as the difference between
the sale price and the tax value (preferential acquisition
price), which includes the related transaction costs. For
shares obtained at nil price, the tax value is considered
to be zero.
The "net capital gain" concept refers to the difference
between gains and losses registered during one year (i.e.
positive or negative differences between the sale and tax
value, which includes the related transaction costs).
Income from transfer of financial gold
The gains/losses derived from the operations with financial
gold are determined as the positive/negative difference
between the sales price and the fiscal value, which includes
Income from agricultural activities
the costs related to the transaction.
Taxable income from agricultural activities is determined
Income from transfer of securities, other operations
on income quotas issued by specialized territorial
involving financial instruments and from transfer of
directorates of the Ministry of Agriculture and Rural
financial gold is subject to an annual regularization, which
Development, and shall be approved by the territorial
is performed by applying a 10% tax rate to the annual
general directorates of public finance. Alternatively,
taxable income, less carried forward tax losses (if any)
taxpayers earning income from agricultural activities may
for a period of seven consecutive years.
choose to determine the income based on single entry
bookkeeping. The tax is computed by levying 10% on the
Income from pensions taxable income.
Income from pensions comprises any amount received in
form of pension from funds created from mandatory social Prizes and gambling income
contributions made to a social insurance system, including
the amounts from pension system privately administered Prizes
(Pillar II) and the ones financed from the State Budget. The tax on prizes is 10% and is levied on the net income,
Monthly pension income of up to RON 2,000 is not taxable. representing the balance between gross realized income
The tax is final and is to be determined by levying 10% and the tax free amount (i.e. currently RON 600). As a
on the taxable amount. The tax computed for pension is general rule, the tax is payable by the 25th of the following
withheld on the date of actual payment of the pension and month and the liability to compute, withhold, and pay the
remitted to the state budget by the 25th of the following tax rests with the payer of the income and is final.
month.

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Gambling income
The tax on gambling is also final and is determined by
applying a tax rate of:
• 1% on the net income, not exceeding RON 66,750,
inclusively
• RON 667.5 plus a tax rate of 16% on the net income
that exceeds RON 66,750 and up to RON 445,000
inclusively and
• RON 61,187.5 plus a tax rate of 25% on the net
income that exceeds RON 445,000.
The obligation of computing withholding and paying the
tax rests with the income payer, except for online, remote
gambling and poker festivals whereby the reporting is to be
performed through annual individual tax return.
Taxation of real estate transactions
The real estate transfer tax for buildings and their related
land, as well as land without constructions, which has to be
paid by the taxpayer on the transfer of the property right
or its divisions, is computed as follows:
• Sale amount up to RON 450,000 is tax free and
• For a sale amount over RON 450,000, the tax due
is 3% applicable on sale amount exceeding RON
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450,000.
Income from other sources
Income from other sources includes, inter-alia:
• Insurance premiums borne by a freelancer or any
other entity on behalf of an individual who is not an
employee of the respective freelancer/entity
• Income borne by an individual as a result of
commercial arbitration.
The income tax is withheld at source by the income payer,
the tax being final.
Tax on income from other sources is payable by the 25th of
the month following the one the income was earned.
Any income whose source is not identified is subject
to 10% income tax applied to the tax base adjusted
according to the procedures and indirect methods for the
reconstitution of taxable base. The tax authorities compute
the income tax and late payment penalties – i.e. currently
0.03/day of delay.
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Filing and payment requirements
As a general rule, taxpayers, with certain exceptions, have
to file an annual income tax return with the tax authorities
by the 15th of March of the following year, for the income
derived from Romania and abroad, and also for reporting
the estimated income for the year in progress.
Taxpayers can make either advanced tax payments or an
annual tax payment by the 15th of March of the following
year the income is earned. Under certain conditions,
tax incentives are granted to taxpayers that settle the
respective tax liabilities before the deadline. In 2018, the
tax incentives consist of:
• 5% of the income tax due to the State Budget for
cases where the annual tax return is submitted
electronically
• Additional 5% of the income tax due to the State
Budget provided that the tax on 2018 estimated
income is paid by 15 December 2018.
As an exception, for income earned in 2018, the annual
tax reporting is due by 31 July 2019, including also the
estimated income for 2019. Moreover, the tax due for
2018 shall also be paid towards the State Budget by 31
July 2019.
Taxpayers earning only salary income throughout the
entire tax year fulfil their tax obligations through employer
withholdings. Employers withhold the income tax on a
monthly basis. Similar rules apply for activities performed
based on sportive contracts and intellectual property
rights. The income payer computes, withholds, declares
and pays the income tax and social charges, only if the
income exceeds 12 minimum national wages per year.
Expatriates employed and remunerated from abroad, but
performing an activity in Romania, should file monthly tax
returns and pay monthly tax in Romania by the 25th of the
following month, if certain conditions are met.
Social charges due on salary income
Under Romanian employment regulations, both employer
and employee are required to contribute into the social
security system.
As of January 2018, most of the employer social charges
were transferred to the employee.
Poenari Fortress - Arges County
Social charges at the individual level
• Social security contribution (i.e. pension) – 25% on the
gross monthly income
• Health fund contribution – 10% on the gross monthly
income.
Social security charges at the employer level
• Work insurance contribution – 2.25% on the gross
monthly income.
Social charges due by foreign individuals
Citizens of the European Union countries and Switzerland
(as of 1 June 2009) benefit from coverage of medical
expenses incurred on Romanian territory, as well as
exemption from the social charges based on certificates of
coverage (i.e. A1 and S1 certificates) issued according to
the EU regulations on social security.
Also, certain exemptions may be applicable in case of
non-EU citizens, if there is a Social Security Treaty in place
between their home country and Romania and a certificate
of coverage is obtained for them.
However, if an individual is not subject to mandatory social
charges in the home country (as per the above rules),
that person will fall under the jurisdiction of the Romanian
social security system and social charges will be due under
Romanian legislation (the home-country employer or the
employee must follow a certain procedure to register for
social security purposes).
Social charges due on income from independent
activities
• Social security contribution (i.e. pension) – due only
for taxpayers that estimate to obtain in the year in
progress an income above 12 national minimum
wages. In such a case, the contribution would be of
25% on the chosen income per year, but not less than
12 national minimum wages
• Health fund contribution – due only for taxpayers that
estimate to obtain in the year in progress an income
above 12 national minimum wages. In such a case,
the contribution would be of 10% due on 12 national
minimum wages per year.
Under certain conditions, tax payers do not have the
obligation of paying the above social contributions.

Turnul Chindiei - Targoviste
Social charges due on income from intellectual
property rights
• Social security contribution (i.e. pension) – due only
for taxpayers that estimate to obtain in the year in
progress an income above 12 national minimum
wages. In such a case, the contribution would be of
25% on the chosen income per year, but not less than
12 national minimum wages
• Health fund contribution – due only for taxpayers that
estimate to obtain in the year in progress an income
above 12 national minimum wages. In such a case,
the contribution would be of 10% due on 12 national
minimum wages per year.
Under certain conditions, tax payers do not have the
obligation of paying the above social contributions.
Social charges due on income from agricultural
activities
• Health fund contribution – due only for taxpayers that
estimate to obtain in the year in progress an income
above 12 national minimum wages. In such a case,
the contribution would be of 10% due on 12 national
minimum wages per year.
Under certain conditions, tax payers do not have the
obligation of paying the health fund contribution.
Social charges due on investment income
• Health fund contribution – due only for taxpayers that
estimate to obtain in the year in progress an income
above 12 national minimum wages. In such a case,
the contribution would be of 10% due on 12 national
minimum wages per year.
Social charges due on income from other income
• Health fund contribution – due only for taxpayers that
estimate to obtain in the year in progress an income
above 12 national minimum wages. In such a case,
the contribution would be of 10% due on 12 national
minimum wages per year.
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Filing and payment requirements
As a general rule, the health fund contribution is due
only if the taxpayer estimates to obtain in the current
year income from independent activities, rental income,
intellectual property rights, investment income and other
types of income, except for salary, above 12 national
minimum wages.
Taxpayers who do not meet the abovementioned
thresholds can still get insured either with the public health
fund or pension system by choice.
Taxpayers, with certain exceptions, have to file an annual
return with tax authorities by the 15th of March of the
following year, for the income derived from Romania and
abroad, and also for reporting the estimated income for
the year in progress.
Taxpayers can pay either in advance or on an annual basis
their social charges by the 15th of March of the following
year the income is earned. Under certain conditions,
tax incentives are granted to taxpayers that settle the
respective social charges before the deadline.
As an exception, the estimated income for 2019 should be
reported by 31 July 2019.
Taxpayers earning only salary income throughout the
entire tax year fulfil their tax and social charges obligations
through employer withholdings. Employers withhold
the salary tax and social charges on a monthly basis.
Expatriates employed and remunerated from abroad, but
performing an activity in Romania, should file monthly
tax returns and pay monthly salary tax and social charges
in Romania by the 25th of the following month, if certain
conditions are met.
6.10. Tax Procedure Code
The Tax Procedure Code regulates the rights and
obligations of parties engaged in tax relations regarding:
• Administration of taxes (i.e. activities related to tax
registration, declaration, assessment, verification and
collection of taxes, settlement of appeals against tax
assessments) provided by the Tax Code
• Administration of customs duties
• Contributions, fines, and other revenues of the general
consolidated budget.
The Tax Procedure Code constitutes the common law for
administration of taxes and, in the absence of regulations
regarding certain matters, provisions of the Civil Procedure
Code are to be applied.
General principles for administration of taxes
Consistent application – states the obligation of the tax
authorities to apply in a consistent manner the provisions
of tax legislation with a view to correctly assess taxes due
by taxpayers.
Right to be heard – according to this principle, the tax
authorities are bound to allow the taxpayer to express
its position with respect to the deeds and circumstances
relevant in the decision-making process, prior to adopting
a decision. The Tax Procedure Code stipulates several
exceptions from this general principle.
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Confidentiality – tax authorities are obliged to ensure the
confidentiality of information pertaining to taxes and
taxpayers.
Good faith – both tax authorities and taxpayers are bound
to act in good faith in all relationships under the Tax
Procedure Code.
Representation and certification
Taxpayers may appoint representatives in their relations
with the tax authorities. Representatives of taxpayers
without Romanian tax residence should themselves be
Romanian tax residents.
Taxpayers may opt for a certification by a tax consultant of
their tax returns, including tax amendments, prior to the
submission to the tax authorities.
General procedure provisions
Competence of tax authorities
The tax authorities are empowered to administer tax
claims, perform tax audits and issue application norms
for tax legislation. Customs authorities are empowered to
manage customs related duties.
The competent tax authority for the administration of
taxes is the tax authority where the taxpayer or the
income payer has its tax domicile. In the case of taxpayers
performing activities through a permanent Romanian
establishment, the competent tax authority is determined
based on the place where the permanent establishment is
located.
Tax administrative document and its notification
The tax administrative document shall be issued in writing,
on paper or in electronic format.
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Alba Iulia City
The written tax administrative document shall be
communicated by way of delivering it to the taxpayer/
representative, under signature or by means of a
registered letter with recorded delivery. The tax
administrative document in electronic format shall be
communicated by electronic means whenever the taxpayer
has opted for this way of issuance and communication.
Tax administrative documents that have not been
communicated according to the abovementioned
provisions are not binding for the taxpayer and have no
legal effects
Correction of material errors
The tax authority may proceed to correct material errors
identified in the tax administrative deeds upon its own
initiative, or further to an application submitted by the
taxpayers.
Material errors are typing mistakes, omissions or
erroneous mentions made in the tax administrative
act, except the ones that lead to the nullity of the tax
administrative deed or the ones that refer to the substance
of the tax act.
The deed issued with regard to the correction of the
material error, or the decision to reject the request for
correction of the material error, as the case may be, will be
communicated to the taxpayer.
Means of evidence
Any factual item serving to ascertain the tax situation,
including audio and video recordings, data and information
on any storage medium, as well as other legally permitted
exhibits, shall be considered as evidence.

Obligation to provide information
Taxpayers or their appointed representatives are bound to
provide the tax authorities with the requested information
necessary for the determination of the facts regarding the
tax position. The tax authorities may request information
from other persons with which the taxpayer has or has had
economic or legal relations, and they have an obligation
to provide the requested information. Such information
will be considered only if it is confirmed by other evidence.
All documents must be presented in Romanian language.
In case the tax authorities request translations and the
taxpayer fails to provide them, the tax authorities may
ignore the documents.
The reporting obligations of residents of other EU
Member States
Payers of specific categories of income and capital will
have to submit a tax return for the income paid to each
beneficiary who is a resident of other EU Member States,
by the last day of February of the current year, for the
elapsed year.
Taxpayers who are residents of other EU Member States
and who derive income from real estate properties located
in Romania shall submit a tax return for the income derived
by May 25th of the current year, for the elapsed year.
Estimation of the tax base
Whenever tax authorities are unable to determine the
actual tax situation, they will determine the tax base and
related tax liabilities by reasonably estimating the tax
base using any evidence and means of evidence provided
by the law.
The resulting tax liabilities shall be determined subject to
a subsequent verification, except for the ones determined
during tax audits.
Oradea Square risk identified further to the risk analysis. The risk analysis
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Transmission of documents via remote electronic means
Taxpayers may submit to the competent tax body requests,
written documents or other documents via electronic
means of remote transmission.
Registering for tax purposes of permanent
establishments
The non-resident taxpayers operating in Romania through
one or more permanent establishments have the obligation
to indicate the designated permanent establishment(s)
together with the declaration of tax registration.
The duration for settling the contributors' requests
The requests submitted by taxpayers to the tax body are
settled within 45 days as of their registration. This period
can be extended whenever further evidence is needed to
enable the adoption of the decision, but no more than 2
months, 3 months or 6 months, depending on the type of
additional information requested.
In the cases where, based on the risk analysis, the
settlement of the demand requires a tax inspection, the
deadline for solving the request is no more than 90 days
from the registration of the application.
The statute of limitation for tax obligations
The limitation period of the right of the tax body to
establish tax obligations is of 5 years and starts to elapse
as of July 1st of the year following that for which the tax
liability is due.
If the tax obligations result from acts falling under criminal
law provisions, the statute of limitation is of 10 years.
Tax Audits
Method of selection for determining the taxpayers
subjected to tax audit
The selection of the taxpayer’s subject to tax audits is
made by the task authorities, depending on the level of
identifies and analyses the non-reporting risk of taxpayers
and further conducts the appropriate assessment of the
means for mitigating such risks in the tax administration
activity. The taxpayer may not object to the selection
procedure used.
The targeted time periods
The tax audit is carried out within the statute of limitation
period and for the period starting at the end of the
previously controlled period, if the limitation period allows it.
Tax audit duration
The duration of the tax audit is determined by the tax
inspection body, depending on the objectives of the
inspection, but it may not exceed a maximum of 180 days
for large taxpayers as well as for taxpayers/payers with
secondary headquarters, regardless of size, 90 days for
medium-sized taxpayers and 45 days for other taxpayers.
If the tax audit exceeds the double legal duration stipulated
by law (i.e. 180, 90 or 45 days), the tax audit shall cease
without the tax authorities issuing a tax audit report and
a tax decision. In this case, the tax audit may resume only
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with the approval of the hierarchically superior body of the
one performing the audit and with the observance of the
statute of limitation period.
Antifraud audit
Antifraud inspectors can carry out operative and
unscheduled audits, except the ones part of the Directorate
for combatting frauds (in Romanian, "Direcţia de combatere
a fraudelor"). This type of audit may also be performed as
a pro-causa audit (in Romanian, "control tematic") which is
a check carried out to discover, review and assess a tax risk
specific to one or more determined business areas.
Burden of proof
Taxpayers are responsible for proving the facts and deeds
supporting their declarations and/or requests addressed to
the tax authorities, whereas the latter have the obligation
to motivate the tax acts issued based on their own evidence
or findings.
Rescheduling the payment of tax debt
Subject to certain conditions, the payment of tax liabilities
(of individuals or legal persons) which are administered by
the NATA may be rescheduled.
The rescheduling of outstanding tax liabilities may be
granted by the authorities (further to a request of the
taxpayer) for a period of maximum 5 years. For debtors
who do not set up any guarantee, the rescheduling may be
granted for up to 6 months. The rescheduling period shall
be determined by the competent tax authority according to
the amount of the tax obligations and the financial capacity
of the debtor.
Rimetea Village - Cluj County
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Suspension of enforcement
The enforcement of tax deeds may be suspended if, after
filing a tax challenge against the said deed, the taxpayer
notifies and submits with the tax authorities a bank letter
of guarantee/insurance policy at the level of the amounts
owed as per the tax deed. The bank letter of guarantee/
insurance policy must be issued for a term of at least 6
months.
The taxpayer may also obtain the suspension of the
tax deeds by means of a court claim. In such case, the
taxpayer must pay a judicial bond in the amount set by the
Tax Procedure Code and demonstrates: (i) the apparent
unlawfulness of the tax deed, as well as (ii) the imminent
damages facing the taxpayer in case the tax deed is
enforced.
The procedure for challenging tax deeds
Competence to settle tax challenges
The challenges against tax deeds are settled by the
specialized dispute resolution structures, as follows:
• For the settlement of appeals concerning tax
receivables up to RON 3 million, the competence
belongs to the specialized dispute resolution
structures within the regional directorates of general
public finances (in Romanian, "direcţiile generale ale
finanţelor publice") in whose territorial jurisdiction the
tax domicile of the taxpayer is
• For the settlement of appeals filed by great
taxpayers, concerning tax receivables up to RON 3
million, the competence belongs to the specialized
dispute resolution structure within the General Tax
Administration Directorate for Great Taxpayers (in
Romanian, "Direcţia Generală de Administrare a Marilor
Contribuabili")
• For the settlement of appeals concerning tax
receivables of RON 3 million or higher in value,
the competence belongs to the special General
Directorate for Solving Appeals within the NATA (in
Romanian, "ANAF – Direcţia Generală de Soluționare a
Contestaţiilor")

The effects of non-settlement of a tax challenge by the
tax authorities
If the tax challenge is not settled within 6 months as of
its filing date, the taxpayer may address directly to the
competent court for the annulment of the challenged tax
deeds.
6.11. Tax sanctions
Failure to submit tax returns and failure to pay taxes in due
time entails fines and penalties as follows:
Failure to file tax returns
Non-filing of tax returns by the respective deadline may
attract the following fines:
• RON 500 to RON 1,000 for individuals and legal
entities not falling into the category of medium and
large taxpayers
• RON 1,000 to RON 5,000 for legal entities falling into
the category of medium and large taxpayers
• Failure to submit the recapitulative statement shall be
sanctioned with a fine of RON 1,000 to RON 5,000.
Submittal of inaccurate or incomplete recapitulative
statements shall be sanctioned with a fine of RON 500
to RON 1,500.
The above actions will not be punished if the persons
correct the recapitulative statement until the lapse of
the legal filing deadline, if the submittal of inaccurate or
incomplete recapitulative statements was not identified
by the tax body prior to correction, or if the persons,
subsequent to the legal filing deadline, correct the
statements following an event non- imputable to the
taxable person.
The offender shall have the possibility of paying half of the
fine's minimum amount within 48 hours.
Additionally, for failure to withhold or failure to pay taxes
withheld at source (taxes on salary type income, dividend
income and non-residents' income), a fine ranging between
RON 1,000 and RON 27,000 could be applied, depending
on the tax obligations.
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Interest and penalties on delays in payment of tax due
For the late payment of tax liabilities, late payment interest
and late payment penalties are due, as follows:
• Late payment interest computed at 0.02%/day of delay
• Late payment penalties computed at 0.01%/day of
delay.
For not declaring the tax obligations of the entity or
incorrectly declaring it, where the tax obligation is
assessed by the tax audit under tax decisions, a special
non-declaring penalty of 0.08%/day is applicable. Late
payment penalties are not cumulated with the special non-
declaring penalty. Such penalty is reduced by 75% in case
the taxpayer duly pays the tax obligations set under the tax
decision issued as a result of the tax audit.
There is also a penalty for the late payment of tax liabilities
due to the local budgets. The penalty is computed as
follows: late payment charges of 1% are due, computed
to the amount of outstanding tax liabilities, assessed
for each month or fraction of the month, starting the
day immediately following the deadline and up to their
settlement
Deferral of outstanding tax liabilities
Tax liabilities under the administration of the NATA could
benefit from the deferral of payment, as an incentive to
ease the effects of the economic downturn.
Instruments for the prevention of offences
For a limited number of offences, expressly provided by the
law, the tax authority will issue a warning and, as the case
may be, a remedy plan for the taxpayer to follow without
impairing a fine. A remedy plan is not necessary in case the
taxpayer fulfils its obligation during the audit or the offence
does not have a continuous nature. In case a remedy plan
has been set up and the taxpayer did not comply with
the remedy measures, the ordinary sanctions (except the
warning) will become applicable.
If, within 3 years from the implementation of prevention
instruments, the taxpayer commits the same offence or
another offence for which the instruments for prevention
of offences are applicable, the exemption from fines will not
be available and normal sanctions regime will apply.
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7 Outsourcing
Market in
Romania

Iasi City
For the past decade, Romania has
been a constant presence amongst
the Top 10 favoured outsourcing
destinations worldwide.
With more than 265 companies
operating in the business services
sector, Romania is highly ranked
in the mature outsourcing market.
Around 125,000 people work in
the business services, representing
1.5% of the Romania's active
population, and the industry's
potential would be 300,000
employees, as estimated in by the
Association of Business Service
Leaders in Romania (ABSL).
Business services have grown at
a rapid pace (>10% CAGR in the
last 7 years) is dominated by BPOs
(Business Process Outsourcing),
SSCs (Shared Services Centres,
R&Ds and ITOs opened by large
multinationals operating in a
variety of sectors (IT, Banking,
Telecommunication, Automotive,
FMCG, etc.), most of them (more
than 95%) exporting services.
It is undeniable that the foremost
reason for outsourcing business
processes and back-office functions
to off-/ near-shore destinations is
primarily cost; however, the Romanian
market is quite singular within the
regional landscape of Central Europe.
It's uniqueness lays in the fact that
the mix of competencies, culture,
business acumen and proficiency in
foreign languages, is well blended
with a relatively attractive cost rate.
7.1. Where SSCs nest
and what they're doing
As expected, the SSC/BPO industry
has developed in large urban centres,
where a large, constant inflow of
skilled graduates is available.
Thus, Bucharest as the leading
academic centre, leads the way, with
an estimated 75% of the business
services being delivered from the
capital. As the hiring challenge
becomes more pervasive, companies
are looking at Tier 2cities: Iaşi and
Cluj-Napoca (also with a significant
student population) are already
established as prime locations since
the 2010s. Incumbent locations, such
as Timişoara and Braşov have the
potential to join the leading pack by
the mid-2020s.
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SSCs Accenture Ness Technology

Bombardier Alten Group SCC Services
BEIS/Hunnerbeck Amazon R&D Unicredit BP
Emerson Arcadis Project Eng. VeoFinances
Office Depot Capgemini VS Communication
E.on Conduent Xerox Services Europe
Leoni Iasi New Call Concept XL World
Recall/Iron Mountain
Population
SIG Combibloc SSC Cluj-Napoca 290,000 SSCs Hella
Steelcase SSC
Tenaris SSC Population Continental Linde Gas
300,000 Bosch SSC Takata (closed)
Call Centers Alcatel Lucent
Arvato Bertelsman Dräxlmaier Call Centers
Sykes Enterprises Faurecia BUW
Flextronics
Timisoara ITOs
ITOs
Population
Brasov Galati Selir Haufe-Lexware
Accenture (Evoline) SSC
Population Helpline
Cybercom, EBS, Edava, 320,000
Evozone, Fortech, I-Quest, 290,000 Ness Techmology
Thomson Online Benefits

R&Ds
Arvato Services (BPO)
Bosch, Emerson
DCI database
Bucharest IBm GDC
BPOs
Population Intesa Sao Paolo
BUW/Convergys
Evalueserve Craiova 2,000,000
EXL Service
Cality Wind Technologies
Genpact UCMS Computer Generated Solutions
HP (GEBOC) Call Point Raiffeisen Bank

SSCs Deutsche Telekom Michelin BPOs & other Dell Softvision

Allianz Technology Enel OMV Petrom SSC Accenture (BPO) EOS (collection) Stefanini (BPO)
Alstom Finance SSC Ericsson GSC Procter & Gamble ADP CoE Genpact (BPO) Teleperfromance
Atalian Goodyear Rompetrol Ariston GFK TELUS International
BAT Honeywell Samsung Arvato Bertelsmann IBM GBS (BPO) Temenos SSC
Cameron HP (GeBOC) Schneider Electric Alliance (AMOS) Mictrosoft TMF Group Romania
Carestream Huawei Societe Generale Coface Oracle Walter Services
DB Schenker Kellogg Vodafone Conectys S&T Wipro
Deutsche Bank Mellon Romania CGS Siemens IT Xerox

The business services market in Romania is mainly situated in Bucharest and Cluj-Napoca, with growth in Timisoara, Iasi and Brasov

Shifting towards the services they offer, SSCs/BPOs in
Romania differ greatly and may be split is three categories:
support centres, back-office focused, and innovation-driven
locations.
The first category of support centres (call-centres) is
expectedly the least flamboyant, as services rendered
by these organizations have been largely commoditized
or work has been replaced with partially automated
processes. Typically, these centres ensure 1st and 2nd level
support, customer care, help desk or surveys for large
global organizations. Although still significant in terms of
size (Arvato Bertelsman, Stefanini, Webhelp and Sykes
Enterprises being the largest players), these are not
expanding whilst new centres haven't opened during the
past few years, facing the same hiring difficulties as the
IT industry in Romania, which has been confronted with
a systemic lack of resource availability for the last three
years.
A second tier is represented by back-office driven SSCs/
BPOs, who constitute the bulk of the local sector. Versatility
is key to these centres, as services rendered may range
from your typical Finance and Accounting, HR and
procurement processes outsourcing, to highly specialized
commodity trading and operational surveillance for global
industrial conglomerates.
Given the structure and mindset of the workforce in such
centres, an interesting development has marked the
evolution of back-office centres during the last few years:
many local SSCs have built or planning to build their own
continuous improvement and automation practices, having
pro-actively asked their mother companies for financing
towards self-development/ optimization. Leading players in
this segment are P&G, Societe Generale, Genpact, Oracle,
Orange, IBM, Honeywell, BAT, Continental, Office Depot,
DB Schenker, Michelin, Molson Coors and many others.
The third layer may be the most prolific and the most
expansive of the bunch: IT outsourcing, innovation and
R&D centres. The likes of Amazon (AWS), Microsoft, UiPath,
Adobe and Google occupy about 5,000-7,000 employees,
who actively generate value-add for their global parents
and contribute to building new cutting-edge technologies
in areas of machine learning, augmented reality, big data,
cloud or automation, to name just a few.
7.2. Current and future workforce
Given that the average age of SSC/BPO employees rarely
exceeds 30, and in some organizations may even be around
25, a steady influx of talented, skilled and hard-working
university graduates is a must, in order to ensure the
sustainability of this thriving industry.
Romania has more than 100 academic institutions, split
into large, multi-competency, traditional universities, in its
largest cities, as well as smaller, local universities across
the country. Bucharest, the country's capital city, has
over 30 universities, with approximately 50,000 students
graduating each year.

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OUTSOURCING
MARKET IN ROMANIA

45 Gross average monthly salary in EU member countries

April 2019

Denmark € 5,200
13 15 Germany € 3,900
12
8 United
5 4 3 3 Kingdom
€ 3,000
France € 3,000
t

uj

ov

lj

ad

u
Ias

€ 2,600
es

Italy
ar

Do
nt

bi
Cl

as

Ar

Si
ar

iso

ta
Br
ch

ns

Czech € 1,300
Tim

Republic
Bu

Co

Poland € 1,200
Number of graduates (Public & Private Systems) '000 Portugal € 1,100
Hungary € 1,100
In terms of competencies, more than 50% of students
graduate with majors in technical and business topics, Romania € 1,080
which ensures a good pool of candidates for the services Bulgaria € 640
industry. In terms of foreign languages spoken, English is
considered default, whilst French, German, Spanish and
Italian constitute the second of the foreign languages Gross average monthly salary figures
mostly spoken. Sources: public information, National Institute for Statistic of Romania /
https://tradingeconomics.com/romania/wages?poll=2018.09.30
Currently, the industry is already being confronted with a
systemic lack of resource availability, as the demand highly
offsets the supply of workers. This is still manageable for
the existing players, however new comers often choose to 7.3. Office space
provide higher wages, loyalty incentives, better amenities
to scale up, unless they differentiate massively from the An additional and mandatory requirement is that of
established firms. available office space, as both SSCs and BPOs typically
As workers tend to switch jobs more often, following better occupy several hundreds of people. Responding to this
paying jobs (up to 25% yearly turnover), recruitment costs demand, developers have built a significant number of
rise, whilst productivity decreases (new people should modern furnished office buildings in the past few years
be trained before they become productive). The cost of (bringing the existing total to almost 4m sqm, with an
the skilled labour to continue to gradually converge with additional 0.5m under construction).
EU levels in the coming years, but sizeable labour cost Prices vary obviously, depending on location and amenities,
advantage should remain for the next 15-20 years, the however suitable locations can be found within a range of
talent cost in Romania being as much as 3 times lower than 10-15 EUR/sqm. Occupancy rates vary as well, however
in Germany, France and the United Kingdom. immediate availability is still a good bet, with Bucharest,
Cluj-Napoca and Timişoara exhibiting around 5-10%
Evolution of gross* average monthly salary in Romania
vacancy.
Looking forward, we can observe migration of BPOs/
2007 € 480 SSCs even further away from the current hotspots, into
secondary and tertiary cities where workforce and office
2008 € 520
space are still plentiful and at lower cost.
2009 € 480
2010
2011
€ 485
€ 510
7.4. Brief conclusion
2012 € 520 Romania, as an outsourcing destination is among the most
2013 € 550 mature places to open shop. On par with other destinations
in terms of cost structure, availability of prime office space
2014 € 580 and infrastructure, it is differentiated when compared
2015 € 650 to others mainly by the nature of its workforce, which is
2016 € 720 culturally close to Western Europe, highly versatile and
driven by growth and experience. Pared with investments in
2017 € 730
automation and a modern work culture, it will support the
2018 € 1,060 outsourcing sector estimated growth for the next years.
2019 € 1,080

101
8 EY in
Romania

EY Romania has been a leader on the professional services market since its set up, in 1992. Our 850+ employees in
Romania and Moldova provide integrated and seamless assurance, tax, transactions, and advisory services to clients
ranging from multinationals to local companies.
We have a tailored approach to each sector we address, with key insights in areas such as: financial services, oil and
gas, energy and utilities, public administration, FMCG, telecommunication and real estate.

Our portfolio of services
Our professionals in Romania have a deep and wide
ranging expertise, covering all business areas:
Assurance Services
EY Romania's reputation for providing high-quality
professional audit services independently, objectively
and ethically is fundamental to our success as
independent auditors. We continue to invest in initiatives
to promote enhanced objectivity, independence and
professional scepticism. These are fundamental
attributes of a high-quality audit.
As part of EY Vision 2020+, EY has invested significantly
in improving audit methodologies and tools, with the
goal of performing the highest-quality audits in the
profession. This investment reflects EY's commitment to
building trust and confidence in the capital markets and
in economies the world over.
Our assurance team is coordinated by 8 experienced
partners and 7 associate partners and comprises over
300 professionals.
We also help companies find ways to manage risk,
investigate alleged misconduct, and measure the
financial implications of disputes. We investigate unusual
financial activity, perform electronic evidence discovery,
and review financial reports - all with the sensitivity and
urgency you require.
EY BUILDING - BUCHAREST
Our assurance services include:
• External Audit
• Financial Accounting Advisory Services
• Forensic & Integrity Services
EY Romania leadership is responsible for setting the right
tone at the top and demonstrating EY's commitment to
building a better working world through behaviour and
actions. While the tone at the top is vital, our people also
understand that quality and professional responsibility
start with them. Our shared values, which inspire our
people and guide them to do the right thing, and our
commitment to quality are embedded in who we are and
in everything we do.
Advisory Services
The nature of business is evolving very fast, new
generations are now dominating the workforce and
disruptive technologies are helping us to become more
innovative, more agile and more productive. We see an
increased focus on business, digital and operating model
reshape.
We believe better questions come from better
connections. This means embracing a diversity of
groundbreaking ideas and a rich mix of talents,
backgrounds and experience. These combined
perspectives will give you new insights, help you realize
your organization's purpose and equip you to operate in
an entirely new way.
 8
Romania Business Passport 2019

EY IN
ROMANIA

We are already seeing the impact that this approach can make: how traditional business models can adapt to the changing
tech landscape; how customers' experiences can become richer and more personalized through data-led insights and
how can you solve burden business challenges through Intelligent Automation technologies. This is how we are answering
tomorrow's questions today.

Operating model reshape Customer & Digital

• Process improvement (including also employee and • Customer and commercial analytics
process analytics), Lean management; • Customer segmentation, experience and product
• Intelligent automation (RPA, Chatbots, OCR, emerging offerings
technologies) • Digital strategy and digital execution
• Revenue improvement
• Cost optimization
• Innovation setup and implementation
• Shared Services Centre setup
and improvement

IT & Data Regulatory

• Enterprise architecture • Regulatory compliance with various regulations (e.g.

• Datawarehouse & Reporting setup and implementation PSD2, AML4/5/6, Basel IV, IFRS 9, IFRS 17, MiFID2,
• Data management etc)
• IT systems implementations • Financial services risk management (credit risk, market
risk, liquidity risk, operational risk, interest rate risk
• Cybersecurity
from banking book, etc)
• Asset management

Industry specific solutions

• Financial Services
• Energy
• Workforce planning analysis across the entity or for • Asset Management
specific organizational units
• Grid losses reduction
• Network units analysis and optimization
• Network performance optimization
• Commercial transformation
• Customer experience
• Cost optimization
• Operational excellence
• Customer analytics
• Workforce management
• Revenue improvement solution
• Market risk management
• Loan origination system
• Lean management implementation
• Advanced data reconciliation enabler
• Business Process Management (front and back
offices activities) • Government & Public Sector
• Anti-Money Laundering solution • Digital government
• Organizational effectiveness
• Public procurement support
• Large public investments assessment and design

Each of the services and solutions above are customized to specific client particularities and precise needs.

Bucharest

104
Tax advisory and compliance services
Our taxation services are aimed at assisting enterprises to function effectively and
efficiently within the Romanian tax and regulatory environment. We accomplish this by
providing you with an understanding of both technical and practical issues associated with
doing business in Romania, with the overall aim of taking decisions that optimize tax saving
and mitigation of risks.
We offer the following services:
• Business Tax Services
• People Advisory Services
• Indirect Tax Services
• International Tax Services
• Transaction Tax Services
• Tax Controversy Services:
• Assistance and representation during the tax audit
• Assistance and representation in front of the tax authorities and of the courts of law

Legal Services
Radu și Asociații SPRL is a Romanian full-service law firm, offering both legal consultancy
services and assistance before the courts of law, with a significant tax controversy practice.
Radu și Asociații SPRL is a member firm of Ernst & Young Global Ltd and part of the
expanding EY Law global network, which has more than 2,300 lawyers and offices in 84
countries.
Our expertise has been recognized by the market and international firm directories.
Chambers Global 2019 has recognized our Corporate/M&A Practice while Chambers
Europe 2019 has placed our Tax Controversy practice on Band 1. The Legal 500 Europe,
Middle East and Africa 2019 has also ranked our Commercial, Corporate and M&A Practice,
as well as our Tax Controversy practice.

Transaction Advisory Services

Our client-centered objective is to leverage the competitive advantage of EY's global
connections as well as our local knowledge, to deliver integrated transactions advisory
services tailored to client's specific needs. We identify the true value of the transaction,
including synergies, company fit and future opportunities. Taking the best of our
approaches, we tap into our extensive industry knowledge, and help you develop solutions
that will build long-term value for your business.
We offer the following services:
• Mergers & Acquisitions (M&A)
• Capital & Debt Advisory
• Transaction Diligence
• Restructuring
• Feasibility Studies and Business Plans
• Valuations & Business Modelling
• Data Analytic
 9 Apendix

Alba Iulia Fortress

1. Double Tax Treaties - Withholding Tax Rates
Dividends Interest Royalties (a) The lower rate applies if the beneficiary
Country Commissions of dividends is a company owning at
(gg) (hh) (hh)
least 25% of the capital of the payer.
Albania 10/15 (a) 10 15 15
(b) The lower rate applies if the beneficiary
Algeria 15 15 15 - of dividends is a company owning at
least 10% of the capital of the payer.
Armenia 5/10 (a) 10 10 15 (c) The rate is 0% if the indebtedness on
which the interest is paid is guaranteed,
Australia 5/15 (b) 10 10 - insured, or financed by the other state
or by a financial institution that is a
Austria 0/5 (a) 0/3 (n) 3 -
resident of the other state.
Azerbaijan 5/10 (a) 8 10 - (d) The 0% rate applies if the beneficial
owner of the dividends is one of the
Bangladesh 10/15 (b) 10 10 - following:
• The government of a contracting state or
Belarus 10 10 15 - any governmental institution or entity of
a contracting state
Belgium 5/15 (a) 10 5 5
• A company that is resident of either
Bosnia and contracting state and that has at least
5/10 (a) 7 5 -
Herzegovina 25% of its capital owned directly
Bulgaria 5 0/5 (ss) 5 - or indirectly by the government or
governmental institutions of either
Canada 5/15 (b) 10 5/10 (r) - contracting state

China (mainland) 0/3(ii) 0/3(aaa) 3 -

(e) The 5% rate applies to royalties paid
for patents, brands, designs and models
Costa Rica (dd) 5/15 (a) 10 10 5 and know-how.
(f) The 2.5% rate applies to royalties
Croatia 5 10 10 - relating to computer software or
industrial equipment.
Cyprus 10 10 0/5 (e) 5
(g) The 0% applies to interest paid to
Czech Republic 10 7 10 - the German government, Deutsche
Bundesbank Kreditanstalt fur
Denmark 10/15 (a) 10 10 4 Wiederaufbau or Deutsche Investitions
und Entwicklungsgesellschaft (DEG) and
Ecuador 15 10 10 10 to interest paid on a loan guaranteed
by Hermes-Deckung. The 0% rate also
Egypt 10 15 15 16 (aaa) applies to interest paid to the Romanian
government if it is derived and
Estonia 10 0/10 10 2
beneficially owned by certain types of
Ethiopia 10 15 15 -
institutions (for example, the Romanian
government, an administrative-
Finland 5 0/5 2.5/5 (f) - territorial unit, a local authority, or
an agency, bank unit or institution of
France 10 10 10 - the Romanian government) or if the
debt claims of Romanian residents
Georgia 8 10 5 5 are warranted, insured or financed by
a financial institution wholly owned
Germany 5/15 (b) 0/3 (g) 3 - by the Romanian government. In
addition, as long as Germany does not
Greece 25/45 (h) 10 5/7 (i) 5
impose taxes on interest, Romania
may not tax interest. The protocol to
Hong Kong 0/3/5 (yy) 0/3 (zz) 3 -
the treaty provides that the following
Hungary 5/15 (j) 15 10 5 types of interest are taxed only in the
state where the interest arises and
Iceland 5/10 (a) 3 5 - according to the law of that state,
provided that they are deductible in the
 9
Romania Business Passport 2019

APENDIX

Dividends Interest Royalties determination of profits of the interest

Country Commissions payer:
(gg) (hh) (hh)
India 10 0/10 (pp) 10 -
• Interest derived from rights or
debt claims carrying a right to
12.5/15 participate in profits
Indonesia 12.5/15 (a) 12.5 10
(k) • Interest linked to the borrower's
Iran 10 8 10 - profits
• Interest derived from profit-sharing
Ireland 3 0/3 (l) 0/3 (i) - bonds

Israel 15 0/5/10 (m) 10 -

(h) The lower rate applies to dividends paid
by companies resident in Romania.
Italy 0/5 (bbb) 0/5 5 - (i) The lower rate applies to cultural
royalties.
Japan 10 10 10/15 (i) -
(j) The lower rate applies if the beneficiary
Jordan 15 12.5 15 15 of dividends is a company owning at
least 40% of the capital of the payer.
Kazakhstan 10 10 10 10 (k) The lower rate applies to payments
received for the use of, or the right
Korea (North) 10 10 10 - to use, patents, trademarks, designs
or models, plans, secret formulas and
Korea (South) 7/10 (a) 0/10 (x) 7/10 (k) 10
processes, or industrial, commercial
or scientific equipment, and for
Kuwait 0/1 (ii) 1 20 -
information concerning industrial,
Latvia 10 10 10 2 commercial or scientific experience.
(l) The 0% rate applies to the following
Lebanon 5 5 5 - types of interest:

Lithuania 10 10 10 2
• Interest paid in connection with
sales on credit of industrial,
Luxembourg 5/15 (a) 0/10 (c) 10 5 commercial or scientific equipment
• Interest on loans granted by banks
Macedonia 5 10 10 - or other financial institutions
(including insurance companies)
Malaysia 0/10 (o) 0/15 (p) 0/12 (q) 16 (vv)
• Interest on loans with a term
Malta 5/30 (h) 5 5 10 greater than two years
• Interest on debt-claims
Mexico 10 15 15 - guaranteed, insured or directly
or indirectly financed by or on
Moldova 10 10 10/15 (k) - behalf of the government of either
Morocco 10 10 10 10
contracting state
(m) The 0% rate applies to interest arising
Namibia 15 15 15 - in one contracting state with respect
to debentures, public funds or similar
Netherlands 0/5/15 (s) 0/3 (t) 0/3 (t) - instruments of the government that
is paid to residents of the other
Nigeria 12.5 12.5 12.5 16 (uu)
contracting state and to interest
Norway 0/5/10 0/5 (ss) 5 -
on loans granted or guaranteed by
the NBR or by the Bank of Israel.
Pakistan 10 10 12.5 10 The 5% rate applies to interest paid
with respect to sales on credit of
10/15/25 merchandise or industrial, commercial
Philippines 10/15 (a) 10/15 (u) -
(v) or scientific equipment and to interest
Poland 5/15 (a) 10 10 0/10 (tt) on loans granted by banks. The 10%
rate applies to other interest.
Portugal 10/15 (w) 10 10 - (n) As long as Austria, under its national
law, does not levy withholding tax on
Qatar 3 3 5 3 interest paid to Romanian residents,
the withholding tax rate is 0%. Austria
Russian Federation 15 15 10 -
notified Romania that as of 2015,
San Marino 0/5/10 (ee) 3 3 -
Austria started levying withholding tax
to interest income derived by non-
Saudi Arabia 0/5 (jj) 0/5 (kk) 10 - residents (except legal entities and
certain categories of individuals).

108
 9
Romania Business Passport 2019

APENDIX

Dividends Interest Royalties (o) The 0% rate applies to dividends paid

Country Commissions by a company resident in Malaysia to
(gg) (hh) (hh)
a Romanian resident; the 10% rate
Singapore 0/5 (ff) 5 5 - applies to dividends paid by a company
resident in Romania to a Malaysian
Slovak Republic 10 10 10/15 (k) -
resident.
Slovenia 5 5 5 - (p) The 0% rate applies to interest paid to
Romanian residents on long-term loans.
South Africa 15 15 15 - (q) The 0% rate applies to industrial
royalties received from Malaysia by
Spain 10/15 (a) 10 10 5
Romanian residents.
Sri Lanka 12.5 10 10 10 (r) The 5% rate applies to the following:
• Copyright royalties and similar
Sudan 5/10 (a) 0/5 (rr) 5 - payments with respect to the
production or reproduction of
Sweden 10 10 10 10
literary, dramatic, musical or other
Switzerland 0/15 (ll) 0/5 (mm) 0/10 (y) -
artistic works (but not including
royalties with respect to motion
Syria 5/15 (a) 10 12 - picture films or works on film
or videotape or other means of
Tajikistan 5/10 (a) 10 10 - reproduction for use in connection
10/20/25 with television broadcasting)
Thailand 15/20 (a)
(z)
15 10
• Royalties for the use of, or the
right to use, computer software,
Tunisia 12 10 12 4
patents or information concerning
Turkey 15 10 10 6 industrial, commercial or scientific
experience (but not including
Turkmenistan 10 10 15 - royalties paid with respect to a
rental or franchise agreement)
Ukraine 10/15 (a) 10 10/15 (k) -
(s) The 0% rate applies if the beneficiary
United Arab Emirates 0/3 (d) 0/3 (xx) 3 - of the dividends is a company owning
at least 25% of the capital of the payer.
United Kingdom 10/15 (a) 10 10/15 (i) 12.5 The 5% rate applies if the beneficiary
of the dividends is a company owning
United States 10 10 10/15 (i) - at least 10% of the capital of the
payer. The 15% rate applies to other
Uruguay (qq) 5/10 (a) 0/10 (nn) 10 - dividends.
Uzbekistan 10 10 10 - (t) Romania will not impose withholding
tax on interest and royalties paid
Vietnam 15 10 15 - to Dutch residents as long as Dutch
domestic law does not impose
Yugoslavia (Federal withholding tax on these types of
10 10 10 10
Republic) (oo) payments.
Yugoslavia (former) (u) The lower rate applies to interest
5 7.5 10 10 (ww)
(bb)
related to sales on credit of equipment,
Zambia 10 10 15 - loans granted by a bank or to public
issues of bonds and debentures.
Non-treaty countries 16 0/16 (cc) 16 16 (v) The 10% rate applies to royalties paid
by a company that is registered as a
foreign investor and is engaged in an
activity in a priority economic related to sales on credit an insurance company. The
field. The 15% rate applies of industrial and scientific 20% rate applies to interest
to royalties related to film or equipment. with respect to sales on credit.
television production. The 25% (y) Romania will not impose The 25% rate applies to other
rate applies to other royalties. withholding tax on royalties interest payments.
(w) The 10% rate applies if the paid to Swiss residents as long (aa) NOT USED
beneficiary of dividends is a as Swiss domestic law does (bb) This treaty is currently applied
company owning at least 25% not impose withholding tax on only to Bosnia-Herzegovina.
of the capital of the payer for royalties.
(cc) The 0% rate applies to the
an uninterrupted period of two (z) The 10% rate applies if the following types of interest:
years.
(x) The 0% rate applies to interest
beneficiary of the interest is a
financial company, including
• Interest related to public
debt instruments or to

109
 9
Romania Business Passport 2019
APENDIX
instruments issued by the
NBR with the purposes of
reaching monetary policy
objectives
• Interest paid to EU pension
funds
• The 16% rate applies to
other interest payments.
(dd) The treaty is not yet in force.
(ee) The 0% rate applies if the
beneficiary of the dividends
is a company owning at least
50% of the capital of the payer.
The 5% rate applies if the
beneficiary of the dividends is a
company owning at least 10%
of the capital of the payer. The
10% rate applies to all other
dividends.
(ff) The 0% rate applies to
dividends paid to the
government of the other
contracting state.
(gg) In accordance with an EU
directive, the following rules
apply to dividends paid to
companies residing in the EU:
• The withholding tax rate in
Romania is 0% if certain
conditions are met, such
as the beneficiary of the
dividends owns at least
10% of the capital of the
payer for an uninterrupted
period of one year before
the payment of the
dividends.
• The withholding tax rate
in Romania is 16% if the
conditions mentioned in
the preceding bullet are not
satisfied.
(hh) The withholding tax rate is 0%
for interest and royalties if both
of the following conditions are
satisfied:
• The beneficial owner of
the interest or royalties is
a legal person resident in
an EU member state or a
permanent establishment
of an entity resident in such
a state.
• The beneficial owner of the
interest or royalties holds
at least 25% of the value
or number of participation
titles in the Romanian
entity for an uninterrupted
period of at least two years
that ends on the date of
110
payment of the interest or
royalties.
(ii) The 0% rate applies to
dividends paid to the
government or political
subdivisions, local authorities or
administrative territorial units.
The 0% rate also applies to
majority state-owned companies
(at least 51%) if the minority
shareholders are residents of
that state.
(jj) The 0% rate applies if the
beneficial owner of the
dividends is one of the
following:
• The government of a
contracting state
• A governmental institution
or entity of a contracting
state
(kk) The 0% rate applies if any of
the following circumstances
exists:
• The payer of the income
from debt-claims is
the government of a
contracting state or an
administrative-territorial
unit or an administrative
subdivision or a local
authority thereof.
• The income from debt-
claims is paid to the
government of the other
contracting state or
administrative-territorial
unit, or an administrative
subdivision or local
authority thereof, or an
agency or instrumentality
(including a financial
institution) wholly owned
by the other contracting
state or administrative-
territorial unit, or an
administrative subdivision
or local authority thereof.
• The income from debt-
claims is paid to any other
agency or instrumentality
(including a financial
institution) with respect to
loans made in application
of an agreement between
the governments of the
contracting states.
• The income from debt-
claims is paid on loans
granted, insured or
guaranteed by a public
institution for purposes of
promoting exports.
(ll) A withholding tax exemption for
dividends applies if either of the
following circumstances exists:
• The dividends are paid to
a company (other than a
partnership) that holds
directly at least 25% of
the capital of the company
paying the dividends.
• The beneficial owner
of the dividends is the
government of the
contracting state or a
governmental institution
or entity of a contracting
state.
(mm) The withholding tax exemption
for interest applies if either of
the following circumstances
exists:
• The interest is paid to
related parties (that is,
direct parent or sister
companies) that have a
shareholding of 25% or
more.
• The loan is secured by a
governmental institution.
(nn) The 0% rate applies if any of
the following circumstances
exist:
• The beneficial owner
is the government, an
administrative subdivision,
a local authority or an
administrative-territorial
unit.
• The beneficial owner
is a bank owned by
the government, an
administrative subdivision,
a local authority or an
administrative-territorial
unit.
• The loan is guaranteed,
assured or financed by a
bank entirely owned by the
government.
(oo) This treaty is currently applied
also to Montenegro and Serbia.
(pp) The 0% rate applies if the
interest is derived and
beneficially owned by:
• The Government, an
administrative territorial
unit, a political subdivision
or a local authority or an
administrative territorial
unit, or

• In the case of Romania – by
the NBR, the Export-Import
Bank of Romania; and in
the case of India – by the
Reserve Bank of India,
the Export-Import Bank of
India, the National Housing
Bank, or
• Any other institution that
may be agreed between
the competent authorities
through exchange of
letters.
(qq) This treaty entered into force
starting 1 January 2015.
(rr) The 0% WHT rate applies if:
• The interest is derived and
beneficially owned by the
government, local authority
or administrative territorial
unit thereof or any agency
or bank unit or institution
of that government, a
local authority or an
administrative territorial
unit; or
• The debt is warranted,
insured or financed by a
financial institution wholly
owned by the government.
(ss) The 0% rate applies to interest
income:
• which is derived and
beneficially owned by the
Contracting State or an
administrative - territorial
unit or a local authority
thereof, or the Central Bank
of that State, or any agency
or bank or institution of
that State or administrative
- territorial unit or local
authority; or
• if the debt-claims of a
resident of the Contracting
State are warranted,
insured or financed by a
financial institution wholly
owned by that State.
(tt) According to the Protocol
to the tax treaty concluded
between the two states, a tax
rate of 0% will apply as long
as Poland does not introduce
in its domestic legislation the
withholding tax of commissions
paid to non-residents.
(uu) According to the Protocol to the
tax treaty concluded between
the two states, this applies
only to the commission income
obtained by a tax resident of
Nigeria from Romania.
(vv) According to the Protocol to the
tax treaty concluded between
the two states, this applies
only to the commission income
obtained by a tax resident of
Malaysia from Romania.
(ww) This applies only to the
commission income obtained
by a tax resident of Egypt from
Romania.
(xx) The 0% interest WHT would
apply as follows:
• in the United Arab Emirates
for the interest paid to the
Government of Romania
or to any of its financial
institutions;
• in Romania for the interest
paid to the Government of
the United Arab Emirates or
its financial institutions;
• for interest paid from
institutions the capital of
which is wholly or partially
owned by the Government
of Romania or the
Government of the United
Arab Emirates.
(yy) The 0% dividend WHT rate
would apply for dividends
derived and beneficially owned
by:
• in the case of the
Hong Kong Special
Administrative Region:
(i) the Government of
the Hong Kong Special
Administrative Region;
(ii) the Hong Kong
Monetary Authority;
(iii) the Exchange Fund;
(iv) a financial institution
wholly or mainly owned
by the Government of
the Hong Kong Special
Administrative Region
and mutually agreed
upon by the competent
authorities of the
Contracting Parties;
• in the case of Romania:
(i) Romania or an
administrative --
territorial unit thereof;
(ii) the NBR;
(iii) the Export-Import
Bank of Romania
(EXIMBANK);
(iv) a financial institution
9
Romania Business Passport 2019
APENDIX
wholly or mainly
owned by Romania
and mutually agreed
upon by the competent
authorities of the
Contracting Parties.
The 3% applies if the beneficial
owner is a company (other
than a partnership) which holds
directly at least 15 per cent
of the capital of the company
paying the dividends;
The 5% applies in relation to
the beneficial owner in all other
cases.
(zz) The 0% interest WHT rate
would apply for interest derived
and beneficially owned by:
• in the case of the
Hong Kong Special
Administrative Region:
(i) the Government of
the Hong Kong Special
Administrative Region;
(ii) the Hong Kong
Monetary Authority;
(iii) the Exchange Fund;
(iv) a financial institution
wholly or mainly owned
by the Government of
the Hong Kong Special
Administrative Region
and mutually agreed
upon by the competent
authorities of the
Contracting Parties;
• in the case of Romania:
(i) Romania or an
administrative --
territorial unit thereof;
(ii) the NBR;
(iii) the Export-Import
Bank of Romania
(EXIMBANK);
(iv) a financial institution
wholly or mainly
owned by Romania
and mutually agreed
upon by the competent
authorities of the
Contracting Parties.
In addition, if and as
long as the Hong Kong
Special Administrative
Region, under its
internal legislation,
levies no withholding
tax on interest, no
interest WHT should
be applied by Romania
also.
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Romania Business Passport 2019

APENDIX

(aaa) The 0% rate applies to the (iii) Interest paid to the (bbb) 0 per cent of the gross amount
following types of interest: other state or a of the dividends if the beneficial
(i) Interest paid in political subdivision, owner is a company (other
connection with sale local authority or than a partnership) which holds
on credit of equipment, administrative- directly at least 10 per cent
merchandise or territorial unit thereof, of the capital of the company
services or any entity wholly or paying the dividends on the
mainly owned by the date the dividends are paid and
(ii) Interest on loans
other state (more than has done so or will have done
granted by financial
50%) so for an uninterrupted period
institutions of the other
of two years in which that date
state
falls.

2. Social Security Treaties

Please refer to the below list with the states with whom Romania has concluded social security treaties, as well as
comments and social security contributions covered:

Country Comments Social security contributions covered

It only covers the pension contribution and it provides exceptions from
Canada
paying contributions in case of assignment
No administrative procedures have been put
Macedonia
in place
Covers pension and medical leave indemnities.
Moldova It does not provide for any assignment provisions and exceptions from
paying contributions
Covers pension and medical leave indemnities.
Russia Please refer to Note1 herebelow It does not provide for any assignment provisions and exceptions from
paying contributions
Covers pension and medical leave indemnities.
Armenia Please refer to Note1 herebelow It does not provide for any assignment provisions and exceptions from
paying contributions
Covers pension and medical leave indemnities.
Belarus Please refer to Note1 herebelow It does not provide for any assignment provisions and exceptions from
paying contributions
Covers pension and medical leave indemnities.
Ukraine Please refer to Note1 herebelow It does not provide for any assignment provisions and exceptions from
paying contributions
Covers pension, health indemnity, medical leave indemnities, work
Turkey accidents. it provides exceptions from paying contributions in case of
assignment
No administrative procedures have been put
Albania in place and the social security agreement is
not in force
It only covers the pension contribution and it provides exceptions from
South Korea
paying contributions in case of assignment
It only covers the pension contribution and it provides exceptions from
Israel
paying contributions in case of assignment
Administrative procedure have been put in
Quebec Covers pension and medical leave indemnities
place as of 2015
Administrative procedure have been put in
Serbia Covers pension, health fund and medical leave indemnities
place as of 2018

Note1: the countries referred above are covered by the Totalization Treaty concluded between Romania and the former Soviet Union

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 Romania Business Passport 2019

This publication contains information in summary form

and is therefore intended for general guidance only. It is
not intended to be a substitute for detailed research or
the exercise of professional judgment.
Neither EYGM Limited nor any other member of the
global EY organization can accept any responsibility for
loss occasioned to any person acting or refraining from
action as a result of any material in this publication. On
any specific matter, reference should be made to the
appropriate advisor.
This book reflects information current as of 1 June 2019.
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For more information, please visit www.ey.com
or www.eyromania.ro.

113
 Romania Business Passport 2019

Contacts

Bogdan Ion Aurelia Costache

Country Managing Partner Advisory Services Leader
Romania & Moldova aurelia.costache@ro.ey.com
bogdan.ion@ro.ey.com

Alex Milcev Nicolas Sabran

Tax & Law Services Leader Assurance Services Leader
alexander.milcev@ro.ey.com nicolas.sabran@ro.ey.com

Florin Vasilică Dragoș Radu

Transaction Advisory Services Leader Legal Services Leader
florin.vasilica@ro.ey.com dragos.radu@ro.ey.com

114
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