ROMANIA

 

i. Name of country

ROMANIA

ii. Region

Southeastern Europe, bordering the Black Sea, between Bulgaria and Ukraine

iii. Population

21,230,362 (July 2021 est.)

iv. General Introduction

Romania joined the EU in 2007, but it has yet to be granted the right to use the Euro. It only recently qualified to join the Schengen Area. Visas are not required for 153 countries to visit Romania. A one-year renewable temporary residence permit is granted in exchange for a EUR 100,000 investment. If you invest EUR 500,000 or create 50 jobs, your provisional permission can be extended and renewed every three years. You can apply for permanent residency after five years as a couple with minor children. Citizenship is only granted under strict conditions after 8 years of residency in the country.

Romania is an attractive target for foreign investment, standing at the crossroads of three very large markets: the EU, the Commonwealth of Independent States (CIS) and the Middle East. It is the second largest country in Central and Eastern Europe (CEE) and the largest in South-Eastern Europe (SEE) in terms of size (ninth in the EU 28) and population (seventh in the EU 28).

Romania's GDP was worth USD250 billion in 2019, according to official data from the World Bank and projections from Trading Economics. The GDP value of Romania represents 0.21% of the world economy.

Foreign investment benefits from an overall positive environment, whether it is private or public, targeted at private or state-owned entities, direct or indirect, and irrespective of the industry concerned. With a stable and growing economy, a large consumption market and a wealth of natural and human resources, Romania has seen a decrease in previously significant drawbacks such as bureaucracy, corruption and legislative instability, and started to emerge as an appealing jurisdiction for foreign investors.

According to data presented on 13 February 2020 by Romania's National Bank (BNR), foreign direct investment (FDI) in Romania amounted to EUR5.29 billion in 2019 (up from EUR5.26 billion in 2018), an increase of EUR30 million or 0.5% for 2019.

According to data from the BNR, the main sectors (based on total FDI investment stock) in 2018 were:

  • Manufacturing (30.9%).
  • Construction and real estate transactions (16.8%)
  • Trade (15.8%).
  • Financial intermediation and insurance (11.5%).

The main investing countries were The Netherlands (23.9%), Germany (12.7%), Austria, (12.2%), Italy (9.5%) and Cyprus (6.2%). The Bucharest region attracts the most foreign capital in the country (60.7% of the total).

In terms of FDI, Romania has numerous advantages, for example:

  • In addition to a large domestic market, Romania has a strong industrial tradition, coupled with a cost of labour among the lowest in the EU and a well-educated workforce. This has been the reason for the development of a significant industrial sector (particularly for automobiles) but also for services.
  • Romania has one of the lowest tax rates in the EU. The tax regime favours industrial investment and start-up initiatives equally.

v. Wifi Speed

Romania's internet infrastructure is highly developed and competitive, boasting the top connection speed in the region, while also coming in 4th out of 175 countries by average fixed broadband speed, with 205.89 Mbps in February 2021, twice faster than the global 97.52 Mbps average.

vi. Electrical outlet

For Romania there are two associated plug types, types C and F. Plug type C is the plug which has two round pins and plug type F is the plug which has two round pins with two earth clips on the side. Romania operates on a 230V supply voltage and 50Hz.

vii. Per Capita GDP

Real GDP per capita
$28,800 note: data are in 2017 dollars (2020 est.)
$29,900 note: data are in 2017 dollars (2019 est.)
$28,500 note: data are in 2017 dollars (2018 est.)

note: data are in 2010 dollars

viii. Climate

temperate; cold, cloudy winters with frequent snow and fog; sunny summers with frequent showers and thunderstorms

ix. Residence-by-Investment

Foreign investors who commit to investing in Romanian businesses and job creation can obtain citizenship and residency in Romania. The naturalization time for citizenship is cut in half if foreigners invest at least EUR 1 million or more under the current citizenship legislation.

Romania is a member of the EU, but it is currently in the process of joining the Schengen area. Romania has committed to using the euro once the necessary conditions are met.

Investment

Temporary Residence

  • To receive temporary residency in Romania, foreigners must invest
  • EUR 100,000 and creation of at least 10 new jobs in the case of a limited liability company;
  • EUR 150,000 and at least 15 new jobs in the case of a joint-stock company
  • Permanent Residency
  • Foreign nationals who invested an investment of EUR 1,000,000 EUR or 100 new jobs, the conditions of continuous residence of five years and personal financial means equal to the
  • minimum wage are waived.

Processing Time

  • Processing time is 3 weeks

Key Benefits

  • Romania joined the EU in 2007, but it has yet to be granted the right to use the Euro. It only recently qualified to join the Schengen Area. Visas are not required for 153 countries to visit Romania. A one-year renewable temporary residence permit is granted in exchange for a EUR 100,000 investment. If you invest EUR 500,000 or create 50 jobs, your provisional permission can be extended and renewed every three years. You can apply for permanent residency after five years as a couple with minor children. Citizenship is only granted under strict conditions after 8 years of residency in the country.

Requirements

In Romania, this visa is granted based on the prior approval of the Romanian Center for the Promotion of Foreign Investments to those who are either associates or shareholders of companies that are legally represented in Romania, or who will become managers or administrators of such companies. The conditions include starting a new business or investing in an existing one in order to create at least 10 permanent jobs over a five-year period. Furthermore, the investor will benefit from obtaining this type of visa in the following ways: he will be able to bring his family to live with him in Romania (spouse and minor children). After 5 years, the investor, his spouse, and minor children can apply for Romanian citizenship.

xi. Natural Resources

petroleum (reserves declining), timber, natural gas, coal, iron ore, salt, arable land, hydropower

xii. Ethnic Groups

Romanian 83.4%, Hungarian 6.1%, Romani 3.1%, Ukrainian 0.3%, German 0.2%, other 0.7%, unspecified 6.1% (2011 est.)

note: Romani populations are usually underestimated in official statistics and may represent 5–11% of Romania's population

xiii. Languages

Romanian (official) 85.4%, Hungarian 6.3%, Romani 1.2%, other 1%, unspecified 6.1% (2011 est.)

xiv. Religion

Eastern Orthodox (including all sub-denominations) 81.9%, Protestant (various denominations including Reformed and Pentecostal) 6.4%, Roman Catholic 4.3%, other (includes Muslim) 0.9%, none or atheist 0.2%, unspecified 6.3% (2011 est.)

xv. Median Age

total: 42.5 years
male: 41 years
female: 44 years (2020 est.)

xvi. Urbanization

urban population: 54.3% of total population (2021)
rate of urbanization: -0.15% annual rate of change (2020-25 est.)

xvii. Physician density

2.98 physicians/1,000 population (2017)

xviii. Government type

semi-presidential republic

xix. Unemployment Rate

3.06% (2019 est.)
3.56% (2018 est.)

x. Taxes

Headline Personal Income Tax Rate (highest marginal tax rate)

  • 19% (standard rate)
  • 9% ((food, medicines, books, newspapers and hotel services)
  • 5% (reduced rate)

Individuals domiciled in Romania are considered to be tax residents in Romania.

According to Romanian legislation, domicile is the place where the individual declares she or he has his or her main dwelling. Romanian tax residents are taxed in Romania on their worldwide income (except salary income obtained from abroad for work performed abroad).

Romanian citizens not domiciled in Romania and foreign individuals are taxed in Romania only on income sourced in Romania, unless other residency criteria are met

Residence

Individuals are tax resident in Romania if they satisfy any of the following criteria:

  • They are domiciled in Romania.
  • Their centre of vital interests is in Romania. Romanian tax legislation defines the centre of vital interest as being the place where the personal and economic relationships of the individual are closer.
  • In analysing personal relationships, attention will be paid to: the family of the spouse; the child or children; dependents who are arriving in Romania together with the individual; membership in a charitable or religious organisation; and participation in cultural or other activities of a similar nature.
  • In analysing economic relations, attention will be paid to whether the individual: is employed by a Romanian employer if he or she is involved in a business activity in Romania; owns real estate in Romania; and has accounts open with banks in Romania or has credit/debit cards to banks in Romania.
  • They are present in Romania for a period, or multiple periods, exceeding a total of 183 days, during any 12 consecutive month period which ends in the calendar year concerned.
  • They are Romanian citizens working abroad as civil servants or as employees of the Romanian state.

Tax resident individuals become taxable on their worldwide income starting from the date on which any of the criteria are met. This is subject to the provisions of any applicable double tax treaty concluded between Romania and the country of the foreign individual regarding residency.

An individual is subject to property tax on land and buildings located in Romania, irrespective of the individual's domicile or residence.

A Romanian tax resident domiciled in Romania who becomes a tax resident in a country which has a double tax treaty with Romania must pay income tax on a worldwide basis in Romania until the date they become resident in the new jurisdiction. Individuals that become tax resident in a country which does not have a double tax treaty with Romania will continue to be subject to income tax in Romania on a worldwide basis for the calendar year in which the change of residency occurs, and the next three calendar years.

An individual domiciled in Romania must submit a questionnaire establishing their tax residency within 30 days prior to leaving Romania for a period or periods which exceed 183 days in a consecutive 12-month period.

Headline Corporate Income Tax Rate (excluding dividend taxes)

  • 16% (or 1% revenue for micro-entities with at least one employee, or 3% for micro-enterprises with no employees)

There are tax incentives in place that benefit all investors, foreign or Romanian, including e.g.:

  • Tax credit of up to 80% of the corporate tax due, for up to 10 years, for investments exceeding approx. EUR 330,000, subject to EU state aid legislation.;
  • Incentives for investment in certain sectors (production, logistics, service centres, R&D, tourism, film production, sports, etc.
  • 50% additional corporate tax deduction for eligible expenditure related to R&D activities;
  • Corporate tax exemption for the first 10 years of activity for taxpayers carrying out exclusively innovation, research and development activity.

Romania has double tax treaties in place with 90 other jurisdictions, including with the EU member states (the UK, France, Germany, The Netherlands, Cyprus, Spain, and so on) as well as with the US.

Romania has introduced a general anti-avoidance rule in its domestic legislation (by Law 227/2015 regarding Fiscal Code) stating that cross-border transactions or a chain of cross-border transactions which are qualified as "artificial" by the competent tax authorities will not fall within the scope of double tax treaties.

"Artificial transactions" are defined as cross-border transactions or chains of cross-border transactions devoid of economic content and which cannot be normally used in ordinary business practice, their essential purpose being to avoid taxation or to obtain tax advantages that could otherwise not be granted.

Moreover, Romania also implemented in its legislation, the general anti-abuse rule provided by Anti-Tax Avoidance Directive ((EU) 2016/1164), for profit tax purposes. For the purposes of calculating profit tax liabilities, an arrangement or a series of arrangements are ignored which, having been put into place for the main purpose or one of the main purposes of obtaining a tax advantage that defeats the object or purpose of the applicable tax law, are not genuine having regard to all relevant facts and circumstances.

An arrangement or series of arrangements are deemed "not genuine" if they are not undertaken for valid commercial reasons reflecting economic reality.
Romania has implemented the OECD's CRS into both the primary and secondary legislation by Order of the Ministry of Public Finance. The Order requires financial institutions to declare certain categories of information when identifying taxpayers and/or financial information when opening or closing financial accounts (among other things).

Romania has also introduced certain legal instruments which outline:

  • The compliance rules that financial institutions should use when identifying accounts and reporting such information.
  • The general procedures for reporting the information.
  • The administrative rules and procedures for ensuring implementation and compliance with the reporting and financial due diligence measures.

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