General Introduction

Romania is a country in South-Eastern Europe. It is north of the Balkan Peninsula, located near the Lower Danube River. Part of Romania is circled by the Carpathian Mountains. It also has a border on the Black Sea. Most of the Danube Delta is found inside Romania.

Romania is a semi-presidential unitary state. It was created when Moldavia and Wallachia joined together in 1859. It was given its independence in the Treaty of Berlin of 1878. During the 2000s, Romania made changes to the country, such as reforms to the democratic system, human rights acts, freedom of speech acts, economy, and law. That led to Romania’s joining to the European Union on 1 January 2007. Romania has the 9th biggest area of land and the 7th biggest population (with 19 million people) of the European Union Member States. Romania joined NATO on 29 March 2004.

Legal System

There are two main legal systems in the world: civil law and common law. The Romanian legal system belongs to the first group, under which only the Constitution and other statutory legislation constitute a legitimate source of legal rules.

Therefore, unlike under the US and other common law systems,
• Formally, the Romanian legal system does not recognize case law or judicial precedent as a source of legal rules. Previously decided cases therefore are not binding upon lower courts and do not create “law”;
• The doctrine provides the rule where the law is silent;
• Trials in the Romanian legal system do not have a pretrial phase during which, for instance, discovery might occur as it does in the common-law system. Instead, discovery or its equivalent occurs as the trial proceeds. In criminal cases, however, there is a pretrial phase;
• There are no jurors, and;
• The judge has a proactive role in searching for the judicial truth.


Romania’s economy is healthy. Currently, Romania makes around $350 billion in gross domestic product and the GDP per capita is $16,540.
Until the 1900s, Romania was still a largely agricultural country. During the communist era, that is, between 1947-1989, the country had a severely planned economy. The transition from planned economy to a market economy after the communist regime led to economic collapse in the 1990s, the reasons was that more money was printed, expensive prices and substantial privatization of the companies, which initially led to skyrocketing unemployment. The reforms in the 1990s allowed foreign investors for the first time to buy land in Romania. When it was going explosively good for the industry in the Latin countries such as France, Italy and Spain, these countries began to trade with Romania because it is a favourite country for them to grow in. Foreign companies began and continue to expand in Romania since then, and such expansions spur the market.

Business of Foreign Persons

With a marketplace of nearly 20 million people, 37 million acres of arable land, breathtaking landscapes, an expanding economy, a well-educated workforce with more than 50,000 specialists in information technology, access to the Black Sea and Asia, Romania offers significant opportunities to foreign businesses.

After joining the European Union in January 2007, Romania went through a series of government reforms in order to satisfy the conditions of EU membership. Nowadays, the requirements of membership, including EU directives, are one of the driving forces in Romania’s program of reform, modernization, and investment in infrastructure. More significantly, these directives are accompanied by funding from the EU in the form of Structural Adjustment Funds and other programs, which enable the new members to align their economies with the rest of the EU.

Romania is a market with excellent potential, a strategic location, and an increasingly solid business climate. While careful evaluation of the market is required in order to seize business opportunities, exporting to, or investing in Romania is gradually becoming less challenging than in previous years in terms of business environment predictability.
Its economy is among the EU’s fastest growing members, with an impressive 7 % GDP growth in 2017, 5 % for 2018 and 4 % in 2019, primarily driven by consumption and investment.

The standard CIT rate is 16 % for Romanian companies and foreign companies operating through a permanent establishment (PE) in Romania. Resident companies are taxed on their worldwide income unless a double tax treaty (DTT) stipulates otherwise. Non-resident companies are taxed on all income derived from Romanian taxpayers, regardless of whether the services are rendered in Romania or to those that are tax resident in Romania due to place of effective management.

The CIT due for nightclubs and gambling operations is either 5% of the revenue obtained from such activities or 16 % of the taxable profit, whichever is higher.

Micro-companies are subject to a mandatory revenue tax rate (see details below) in lieu of the standard CIT.

The condition for a company to be considered a micro-company is to have a maximum revenue at the end of the previous year of EUR 1 million.
The tax rates used for micro-company income tax are:
• 1 % for micro-companies with one or more employees.
• 3 % for micro-companies with no employees.
Newly established companies are required to follow the micro-company tax regime starting with the first fiscal year.
Micro-companies can opt once for applying CIT if they fulfil both of the following conditions:
• Have a subscribed share capital of at least RON 45,000.
• Have at least two employees.
The calculation and payment of tax for micro-companies shall be performed quarterly, by the 25th day (inclusive) of the month following the quarter for which the tax is calculated.
There are no county or local taxes on corporate income.


There are several taxes and contributions payable by each company incorporated in Romania. Branches or subsidiaries of foreign companies that operate on Romanian territory will also have to comply with the tax laws and the requirements for accounting and auditing. The most important taxes for companies in Romania include:
• the profit tax: 16 % applicable on the Romanian-source profits; a minimum 5 % rate can apply for certain business activities;
• the withholding tax on dividends is set at 5 % rate, while for interests and royalties, this is set at 10 % rate;
• the micro-enterprise income tax (for registered incomes of EUR 1 million);
• the Value Added Tax: with a newly reduced rate of 9 % for all foodstuffs and a standard rate of 19 % in 2021;
• the real estate property tax: between 0.25 %-1.5 % of the entry value of the building – a tax levied at a local level for owned buildings and land.
There is no stamp duty tax and there are no transfer taxes. Employers in Romania must also pay social security: 15.8 % of the gross salary for normal working conditions, a health fund contribution of 10 %, an unemployment contribution of 0.5 % and other contributions.

Depending on the business field in which they operate, investors may have to pay additional taxes to run their business (like energy taxes or some for the pharmaceutical industry).

In 2021, there is no tax imposed on the income derived from the allocated dividends of a company. Also, there are no taxes for the reinvested profits in a company in Romania, particularly for the technological equipment.
In 2021, the VAT in Romania is charged to taxable bodies registered for VAT purposes according to Section 153 of the Tax Code. The standard VAT rate is 19 %. The 9 % reduced VAT rate is provided by the Tax Code for certain services and/or supplies of goods, including all kinds of bread and bakery products and different varieties of wheat. The reduced rate of 5 % applies to the tax base for the delivery of housing as part of social policy, including the land on which they are built. VAT exemptions are provided in the Fiscal Code.

Labour Law

The relevant Romanian labour laws are:
• Labour Code, approved by the Act 53 of 2003 (“Labour Code”)
• Act 62 of 2011 on the Social Dialogue (“Law no. 62”)
• Act 67 of 2006 on the Employees’ Protection in Case of the Transfer of Undertakings (“TUPE Law”)
• The standard terms of the employment are provided by the Labour Code.

The Romanian labour laws require the mandatory filing with the Employees’ Registry, i.e. REVISAL of a Standard Employment Agreement in Romanian language. This is a 3-page form issued by the Ministry of Labour. In practice, the employers supplement the provisions of the Standard Employment Agreement with an Annex. Such Annex includes detailed rights and obligations of the parties to the employment agreement.
A Job Description must be appended to the Standard Employment Agreement as well.

The Standard Employment Agreement has to be registered with the Employees’ Registry, a day prior to the starting date of the execution of the employment agreement.

The Labour Code provides that the employment agreement shall not include provisions which would diminish the employee’s rights below the minimum levels established by the relevant legislation.

Any document regarding the execution of an employment agreement must be registered with the Employees’ Register one day prior to the starting date of the employment.

An employment agreement shall be concluded after a prior verification of the professional and personal skills of the person applying for employment. Also, a person may only be employed on the basis of a medical certificate, attesting that the concerned person is able to perform the respective activity.

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Elena Grecu attorney at law