Business Guide to Romania* - Bayern - Europa

Business Guide to Romania* - Bayern - Europa

Business Guide to Romania*

2005 Edition


PricewaterhouseCoopers ( provides industry-focused assurance, tax and advisory services for public

and private clients. More than 120,000 people in 144 countries connect their thinking, experience and solutions to

build public trust and enhance value for clients and their stakeholders. These services include audit, accounting and

tax advice; management and human resource consulting; financial advisory services including mergers &

acquisitions, business recovery and project finance; and legal services through a global network of affiliated law


("PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited,

each of which is a separate and independent legal entity.)

This guide has been prepared for the assistance of PricewaterhouseCoopers clients and also parties interested in

doing business in Romania. It does not exhaustively cover the subject, but is intended to be a synopsis of some of

the important initial questions that may arise. When specific problems occur in practice, it is likely that a close

understanding of the laws, regulations and decisions of the country will be of benefit, and appropriate accounting,

tax and legal advice be considered.

The material contained within this Guide has been assembled in June 2005 and is based on the legislation as it

stands at the beginning of June 2005. For the most up to date information, please contact PricewaterhouseCoopers


For further information, please contact one of the following:

T erritorial S enior P artner

Vasile Iuga

As s uranc e S ervic es

Vasile Iuga

Dinu Bumbacea

David Fuller

Alexandru Lupea

Advis ory S ervic es

Dinu Bumbacea

Emilian Radu

T ax and L egal S ervic es

Rene Bijvoet

Mihaela Mitroi

Edwin Warmerdam

P ric ewaterhous eC oopers

Opera Center

1-5 Costache Negri Street

Bucharest 5, Romania

Tel: + 40 21 202 8500

Fax: + 40 21 202 8700

E-mail: .c om/ro

Copyright © 2005 PricewaterhouseCoopers. All rights reserved. *connectedthinking is a trademark of PricewaterhouseCoopers LLP.


Chapter Page

1. Romania: a Profile 7

1.1 Physical Characteristics: Geography and Climate 7

1.2 Political Structure 7

■ Government 7

■ Presidential Elections 8

■ Parliamentary Election 8

1.3 Population and Urbanisation 8

1.4 Language 8

1.5 Education 8

1.6 The Economy 8

1.7 Transport and Communications 9

■ Transport 9

■ Communications 10

1.8 Suggestions for Business Visitors 10

■ Visas 10

■ Currency 11

Business and Social Etiquette 11

■ Public Holidays 11

1.9 Living Conditions 11

2. Business Environment 12

2.1 Business Climate 12

2.2 The Aims of Government 12

2.3 Free Trade Zones 12

2.4 Financial Services 12

2.5 European Union Associate Status 13

2.6 NATO Accession 13

2.7 International Agreements 13

2.8 Real Estate 14

2.9 The Property Market 15

2.10 Business Lobby Groups 15

3. Foreign Investment, Privatisation and Foreign Trade 16

3.1 Foreign Investment 16

■ Regulatory Climate 16

■ Regulatory Legislation 16

■ Restrictions on Foreign Investment 16

PricewaterhouseCoopers - Business Guide to Romania 2005 1

■ Investment Incentives 16

■ Guarantees and Rights 17

3.2 Privatisation 17

■ Regulatory Climate 17

■ Privatisation Background 17

■ Privatisation in 2004 17

■ Privatisation Calendar 17

3.3 Trade 18

■ Regulatory Climate 18

■ Regulatory Authority 18

4. Banking, Finance and Insurance 19

4.1 Banking and Other Lending Institutions 19

■ The National Bank of Romania 19

■ The Foreign Currency Market and Foreign Currency Rules 20

■ Commercial Banks 20

■ Money Laundering 21

■ Foreign Investments 21

■ Credit Unions 21

■ Building Societies 22

■ Institutions Issuing Means of Performing Electronic Payments 22

4.2 Specialised Financial Institutions 22

4.3 Leasing 22

4.4 Capital Markets 22

4.5 Insurance 23

5. Corporate and Business Law 25

5.1 Legal Framework 25

■ Company Law 25

■ Commercial Register Law 25

■ Competition Law 25

■ Direct Investment Legislation 25

5.2 Forms of Business Organisation 25

■ Registration Procedure 26

■ Capital and Shares 26

■ Directors (Administrators) 27

■ Censors 27

■ General Meeting of Shareholders 27

5.3 Branches 27

5.4 Representative Offices 27

6. Labour Relations and Social Security 29

6.1 Labour Relations and the Labour Code 29

■ Availability of Labour 29

■ Employer / Employee Relations 29

■ Fund to Guarantee Outstanding Salary Payments 29

2 PricewaterhouseCoopers - Business Guide to Romania 2005

■ Unions 30

6.2 Working Conditions 30

■ Salaries and Wages 30

■ Working Hours 30

■ Paid Holidays 30

■ Equal Opportunities 30

■ Health and Safety 30

■ Termination of Employment 31

6.3 The Social Security System 31

■ Coverage 31

■ Contributions 31

■ Employees' Contributions 31

■ Employers' Contributions 31

6.4 Foreign Personnel 32

■ Fiscal Registration Number 32

■ Residence Permit 32

■ Work Permit 32

7. Accounting and Audit Requirements and Registrations 33

7.1 Accounting 33

■ Introduction of International Financial Reporting Standards 33

■ Existing Romanian Accounting Regulations 34

■ Significant Accounting Differences between RAR and IFRS 34

7.2 Chart of Accounts 34

7.3 Audit Requirements 34

■ Legally Required Audits 34

■ Auditing Standards for Legally Required Audits 34

■ Securities Commission Requirements 34

■ Accountants and Law Firms 34

8. Taxation of Corporations 35

8.1 Corporate Tax System 35

■ Companies 35

■ Dividends 35

■ Accounting and Fiscal Depreciation 35

■ Territoriality 36

■ Representative Offices 36

8.2 Incentives 36

■ Profit Tax Legislation 36

■ Direct Investments 36

■ Free Trade Zones 36

■ Disadvantaged Areas 36

■ Industrial Parks 37

■ Oil and Gas Incentives 37

8.3 Gross Income 37

■ Accounting Period 37

PricewaterhouseCoopers - Business Guide to Romania 2005 3

Business Profits 37

■ Capital Gains 37

■ Interest, Royalties and Service Fees 37

■ Dividends 37

8.4 Deductibility of Expenses 38

■ Provisions and Reserves 39

■ Changes in the Destination of Reserves and Funds 39

■ Thin Capitalisation Rules 39

■ Transfer Pricing 40

■ Losses 40

8.5 Tax Computations 40

■ General Aspects 40

■ Consolidation 40

8.6 Other Taxes 40

■ Withholding Tax 40

■ Property Tax 41

■ Health Tax 41

■ Advance Tax Ruling 41

9. Taxation of Individuals 42

9.1 Individual Income Taxpayers 42

9.2 Taxable Income and Method of Taxation 42

■ Salary Income 43

■ Income from Independent Activities 43

■ Rental Income 43

■ Income from Pensions 43

■ Income from Agricultural Activities 43

■ Income from Prizes 43

■ Other Income Subject to 16% Flat Tax Rate 43

■ Income from Investments 44

■ Income from Real Estate Transactions 44

■ Income from Gaming 44

9.3 Tax-exempt Income 44

9.4 Deductions from the Annual Income Tax 45

9.5 Taxation of Non-residents 45

10. Indirect Taxation 46

10.1 Value Added Tax (VAT) 46

■ Scope of VAT 46

■ Place of Supply 46

■ Taxable Regimes 46

■ Import VAT 47

■ VAT Incentives 47

■ Simplification Measures 47

■ Taxable Amount 48

■ Non-Deductible Input VAT 48

4 PricewaterhouseCoopers - Business Guide to Romania 2005

■ VAT Compliance 48

10.2 Customs and International Trade 48

■ Customs Duties 48

■ Temporary Import Relief 48

■ Customs Duties Incentives 49

■ Verification of the Declared Customs Value 50

■ Import Restrictions 50

■ Customs Regime for Individuals 50

10.3 Other Indirect Taxes 50

■ Excise Duties 50

■ Clearance Fees 51

11.Fiscal Procedure 52

11.1 General Principles 52

■ Liability of Other Persons 52

■ Rules Governing Evidence 52

■ Fiscal Administrative Acts 52

■ Fiscal Domicile 53

■ Tax Jurisdiction 53

■ Other Rules 53

11.2 Specific Tax Procedures 53

■ Tax Registration 53

■ Tax Returns and Tax Assessment 53

■ Tax Audit 53

■ Collection of Budgetary Receivables 53

12.PricewaterhouseCoopers in Romania 54

■ Assurance Services 54

■ Advisory Services 55

■ Tax Services 56

■ Legal Services 56

Appendices 57

Appendix I Government Ministries - contact details 59

Appendix II Major Banks - contact details 60

Appendix III Hotels and Restaurants 61

Appendix IV Chart of Accounts - for companies applying OMF 94

or OMF 306/2002


Appendix V Major Differences between OMF 94 (for filing with the

Ministry of Public Finance) and IFRS


Appendix VI Accountants and Law Firms 66

Appendix VII (a) Double Taxation Agreements 67

Appendix VII (b) Withholding Tax Rates of Some Major DTAs 68

Appendix VIII Individual Income Tax Calculation 69

Appendix IX Customs Duties 70

Appendix X Import Duty Exemptions 71

Appendix XI Excise Tax for Domestic and Imported Products 72

PricewaterhouseCoopers - Business Guide to Romania 2005 5


(by county)

6 PricewaterhouseCoopers - Business Guide to Romania 2005

Chapter 1

Romania: a Profile

■ Romania's population accounts for 21.7 million

■ GDP has registered a 8.3% growth in 2004 as

against 2003

1.1 Physical Characteristics: Geography

and Climate

Romania is situated in southeastern Europe, just north of

the Balkan Peninsula. With an area of 238,391 square

kilometres (91,780 square miles), Romania is the second

largest country in Central and Eastern Europe.

Romania borders on Ukraine and the Republic of Moldova

to the north and northeast, on Bulgaria to the south, on

Serbia to the southwest, and on Hungary to the

northwest. The Black Sea coast is its eastern border. The

Danube River runs along Romania's southern border for

1,075 km, and eventually forms the Danube Delta before

flowing into the Black Sea.

Romania has a varied terrain and large areas of the

country are mountainous. It is rich in natural resources,

amongst which are to be found oil, natural gas, coal, iron

ore, non-ferrous ore (copper, lead, and zinc), gold and

silver ore, sulphur, and salt.

The climate is continental with hot summers, long cold

winters, and short springs and autumns. The average

temperature in summer is 23° Celsius (72° Fahrenheit),

although on some days it may exceed 40° C (102° F). In

winter, the weather is usually frosty, with considerable

snowfall.The temperature averages -3° C (27° F), but it

may occasionally fall below -25° C (-13° F).

1.2 Political Structure


The Constitution, passed by Parliament on 21 November

1991, proclaims Romania a republic and a parliamentary

democracy. The President is elected for five-year terms

(according to the Constitution amendment in 2003) while

the bicameral Parliament is elected for four-year terms.

The bicameral parliament is composed of the Senate (137

seats) and the Chamber of Deputies (332 seats).

The President nominates the Prime Minister. Cabinet

ministers, selected by the Prime Minister, have to be

approved by Parliament before taking up office.

The latest elections took place in November-December

2004. The current President is Traian Basescu, who was

Mayor of Bucharest from 2000 to 2004.

In the current cabinet, Calin Popescu-Tariceanu is Prime

Minister. The cabinet comprises 15 ministers, three vicepremiers

and five ministers-delegate, 23 members in all.

The ministers are:

Cãlin Constantin Anton Prime Minister

Popescu - Tãriceanu

Mihai Rãzvan Ungureanu Foreign Affairs

Ene Dinga European Integration

Ionel Popescu Public Finance

Monica Luisa Macovei Justice

Teodor Atanasiu National Defence

Vasile Blaga Administration and Interior

Gheorghe Barbu Labour, Social Solidarity and


Ioan-Codrut Seres Economy and Commerce

Gheorghe Flutur Agriculture, Forestry and Rural


Sulfina Barbu Environment and Waters


Gheorghe Dobre Transport, Constructions and


Mircea Miclea Education and Research

Monica Octavia Muscã Culture and Religious Affairs

Mircea Cintezã Health

Zsolt Nagy Communications and

Information Technology

PricewaterhouseCoopers - Business Guide to Romania 2005 7

Chapter 1 - Romania: a Profile

Contact details for all government ministries are listed in

Appendix I.

The territory of Romania is subdivided into 41 counties

(judete) plus Bucharest; these are the administrative units

of local government. Bucharest and its surrounding area

form a unitary district with county status. Local councils

and mayors are directly elected. Also, the government

appoints its representatives (prefects) to each county.

Presidential Elections

Traian Basescu, the candidate of the centre-right coalition

(DA) , which is formed by the Liberal and Democratic

Parties (PNL-PD), won the second round of Romania's

presidential election on 12 December, 2004, defeating

Adrian Nastase of the Social Democratic Party/Humanist

Party alliance (PSD-PUR).

Parliamentary Election

Romania's parliamentary election on 28 November 2004

resulted in a near-tie between the Social Democratic

Party/Humanist Alliance, which won 36.6% of seats in the

Chamber of Deputies and 37.1% in the Senate, and, the

centre-right coalition (DA) which won 31.3% of seats in

the Chamber of Deputies and 31.8% in the Senate. Also

the Greater Romania Party won 12.9% of seats in the

Chamber and 13.6% in the Senate, and the Party of

Ethnic Hungarians won 6.2% in the Chamber and 6.2% in

the Senate.

ate Chamber

1.3 Population and Urbanisation

Romania's population accounts about 21.7 million,

according to the latest statistics information (July 2004).

Ethnic Romanians make up about 89% of the population.

The main minority groups are Hungarians (7%), followed

by a large community of Rroma, and smaller numbers of

Germans, Russians, and Serbs. More than half of the

population (55%) lives in urban areas.

Major Cities

8 PricewaterhouseCoopers - Business Guide to Romania 2005

The population of Romania is predominantly Christian of

different denominations: Orthodox (89%), Roman Catholic

(5%), Reformed (3.5%), Greek Catholic (1%), Pentecostal

(1%). Romania also has small Jewish and Muslim


1.4 Language

The official language of the country is Romanian. The

language uses the Latin alphabet and is part of the

Romance language family. In some parts of Transylvania,

Hungarian is spoken alongside Romanian, while in other

parts of Transylvania and in Western Romania German is

spoken also.

In addition, many Romanians speak English and/or

French, and business is often conducted in one of the

latter two languages.

1.5 Education

Education is mandatory from the ages of six to fifteen.

The Romanian state education system includes primary,

secondary, and higher education institutions. The higher

education sector consists of academic universities and

polytechnic institutes. Like many post-communist

countries, Romania has always had a reputation for

strength in scientific fields. Recent years have seen an

increase in the number of secondary and post-secondary

establishments and private education has become more

popular. Business administration and management

studies have been introduced in cooperation with the US

and Canada.

1.6 The Economy

Romania's recent economic and political achievements

have prompted all international rating agencies to

upgrade the country's ratings. S&P has revised its outlook

from positive to stable, falling in line with previous

City Population Industries

Bucharest 1,930,000 Capital; business and manufacturing centre

Constanta 350,000 Shipping and tourism

Iasi 389,000 Manufacturing and transportation

Timisoara 332,277 Business, manufacturing and agriculture

Galati 322,000 Transportation and agriculture

Cluj-Napoca 338,000 Business and manufacturing

Brasov 308,000 Agriculture, manufacturing and tourism

Craiova 320,000 Manufacturing and transportation

upgrades made by Moody's and Fitch Ratings. These

changes are expected to improve Romania's position on

foreign capital markets.

The economy, continued to grow, with figures for 2004

showing over 8% increase in GDP, outpacing 2003's

growth rate of 4.9%. The surge in economic growth was

due mainly to increased domestic demand, favourable

developments in the agricultural sector as well as a strong

expansion of the services and construction industries. The

government has said it will aim for a 5.5% economic

growth for this year.

Inflation slipped to 9.3% at end-2004 (from 14% at the

end of 2003) and is estimated to fall to 7% by year-end

2005. The unemployment rate also dropped, falling to

6.2% in 2004 against 7.2% at the end of 2003.

The foreign direct investment stood at around EUR 4

billion, up 115% compared to 2003, according to data

from the National Bank of Romania. The sharp increase in

foreign investment was the result of major privatizations

that took place in 2004 (e.g. the sale of the national oil

company - Petrom, the sale of electricity and gas

distribution companies). The social capital subscribed by

foreign investors in Romanian companies was of EUR

2.25 billion in 2004, 46% up compared to 2003, according

to the National Trade Register Office. The number of new

companies established by foreign investors was of

10,169, having a subscribed social capital of EUR 160

million in 2004.

Key economic indicators (drawn from official statistics)

Chapter 1 - Romania: a Profile

Foreign direct investment (FDI) is expected to further

increase in light of upcoming EU membership,

provisionally set at 1 January 2007.

The trade deficit last year reached EUR 7.34 billion,

31.4% above the level reported for 2003, according to the

National Statistics Institute. Imports amounted to EUR

26.3 billion in 2004, a 24% increase on 2003, while

exports rose by 21.3% in 2004 to EUR 18.9 billion.

Romania's industrial output rose by 5.3% in 2004 from

2003, according to the National Statistics Institute. Labour

productivity was 11.9% higher year-on-year, data showed.

Meanwhile, the central bank's (BNR) hard currency

reserves, excluding some 105 tonnes of gold, rose to

EUR 10.8 billion at the end of December 2004 from

EUR 6.4 billion the previous year, while at the end of May

2005, the total reserves reached EUR 13.2 billion. The rise

was mainly due to the central bank's hard currency

purchases from the interbank market.

1.7 Transport and Communications


Rail: Romania has a railway network of 11,385 kilometres,

of which electrified track of 3,971 kilometres. International

express trains connect the main central European capitals

with Bucharest, the Black Sea coast and main cities.

Indicator 2002 2003 2004

GDP (EUR billion) 48.4 50.3 58.9

GDP (% change against previous year) 4.9 4.9 8,3

GDP per capita (EUR) 2,230 2,318 2,714

Inflation % (year-end) 17.9 14.1 9,3

Unemployment % (year-end) 8.1 7.2 6.2

EUR/ROL exchange rate (average) 31,234 37,591 40,592

Foreign direct investment (EUR billion) 1.1 1.9 4.1

External debt (EUR billion) 14.6 15.24 17.5

Exports FOB (EUR billion) 14.7 15.6 18.9

Imports CIF (EUR billion) 18.8 21.2 26.3

Credit Rating

Standard & Poors B+ BB BB+

Moody's B1 Ba3 Ba3

Fitch BB- BB BBB-

Foreign Exchange Reserves

(EUR billion) 5.895 6.399 10.839

PricewaterhouseCoopers - Business Guide to Romania 2005 9

Chapter 1 - Romania: a Profile

Romania is a member of the International Railway Tariff

System RIT and Inter Rail.

Roads : The total length of roads in Romania reaches

198,589 km, of which national roads account for 14,696

km. Highways have a total length of around 114 km.

Major east-west highway projects are in different stages

of development.

Waterways: Romania has access to both the Black Sea

and the Danube River. In Constanta, the Black Sea's

largest commercial port, can anchor vessels with a

maximum displacement of 200,000 tdw. The Danube is

now connected to the North Sea by the Danube-Main-

Rhine waterway.

Air: In Romania there are currently 18 airports open to

commercial air traffic, the most important being Bucharest

(Henri Coanda), Timisoara (Traian Vuia) and Cluj-Napoca

(Someseni). The main Romanian providers of scheduled

passenger air transportation are: Tarom, the Romanian

flag carrier based in Bucharest Henri Coanda; and

Carpatair, a private Romanian-Swiss regional airline based

in the Timisoara International Airport and which has

international flights to Germany and Italy. Also many

international airlines serve Romania and there are daily

flights to most European capitals.

Air freight is handled almost exclusively in Bucharest.


Telephone networks: The incumbent fixed-line operator

Romtelecom, owned by OTE of Greece, has upgraded

service considerably in recent years. Romtelecom has

introduced new digital exchanges, optic fibre overlay

networks, and expanded international dialling and ISDN

services. After the market's liberalisation in January 2003,

more telecom operators have entered the market,

competing with Romtelecom on international, long

distance and more recently on local calls. Following

liberalisation, tariffs for international calls decreased by

60%, due to competition using VoIP. Sixty alternative

fixed telephony operators were active in Romania at the

end of 2004, having around 250,000 subscribers.

At end-2004 there were 14.6 million subscribers to

Romanian fixed and mobile telephone services, up 56.6%

on the 2002 figures, according to the Communications

Regulatory Authority. Out of these subscribers, 30.05%

were to fixed telephony and 69.95% to mobile operators.

Mobile telephony was the driver of the telecom sector in

the recent years, acquiring a number of 10.1 million

subscribers since the launch of the GSM in 1997. The

10 PricewaterhouseCoopers - Business Guide to Romania 2005

main mobile operators are: Mobifon (Connex), Orange and

Telemobil (Zapp).

Television: Television is the most widely used advertising

medium in Romania today and the one with the greatest

impact. Public television consists of three national

networks, TVR 1 and TVR 2 and TVR Cultural and there

are at least seven major private television stations

including Pro TV, Antena 1, and Prima TV. More than half

of the total number of households have cable television,

allowing access to a wide range of international and local

broadcasts. Programmes are shown in the original

language with Romanian subtitles.

Radio: State-owned Radio Romania operates three

national AM radio networks. There are also several private

FM networks, including three with extensive national

range (Kiss FM, Radio 21 and Pro FM) and one with

international coverage (Europa FM).

Newspapers and Periodicals: Romania has a multitude of

daily newspapers written for diverse audiences. There are

also more than 200 weekly papers as well as a growing

number of magazines, many of which are produced under

license from a foreign copyright owner. Distribution is

made through the national press distribution company


Research, Advertising, and Media Buying: The growth of

the consumer society has stimulated the emergence of

research organisations (eg. CSOP Gallup, IRSOP and

IMAS), and marketing research consultants (eg. Mercury

Marketing & Research and AMER Nielsen). There are a

number of agencies in the advertising sector, most with

international affiliations (eg. McCann Erickson, Leo

Burnett & Target, Saatchi & Saatchi, D'Arcy, Grey, Lowe &

Partners, Ogilvy & Mather, Graffiti BBDO and Young &


Internet: There were around 4.4 million Internet users at

the end of 2004. The number of Internet connections in

Romania rose by 92.49% year-on-year to 980,364 in

2004, according to the National Regulatory Authority for

Communications (ANRC). Also, the number of Internet

providers in Romania rose to 515 in 2004 from 233 the

previous year while the number of PCs exceeded 2.6

million in 2004.

1.8 Suggestions for Business Visitors


As is the case with any business trip, when visiting

Romania some advance preparation is essential. Useful

information for visitors is outlined below.

All visitors to Romania require passports, preferably with a

validity of more than six months. Visitors from a number

of countries such as the EU member states, EU accession

countries, Switzerland, the USA and Canada do not

require a visa obtained before arrival in Romania.

Also, one must declare cash amounts that exceed

EUR 10,000 at customs upon arrival or departure.


As of 1 July 2005, the Romanian Leu (ROL), was subject

to denomination so that 10,000 old lei (ROL), in circulation

on that date, has been exchanged for 1 new leu (RON).

The existing banknotes and coins, i.e. the old lei, shall be

legal tender until end-December 2006.

By 31 December 2006, the existing banknotes and coins,

i.e. the old lei, are to be replaced gradually by the new

banknotes and coins.

Starting 1 January 2007, the exchange shall be made only

at the NBR branches carrying out payments and at the

offices of the credit institutions authorised by the NBR

Governor's order to perform the exchange. There is no

time limit for exchanging ROL notes and coins for RON

notes and coins.

Transactions between residents must be in ROL/RON. All

prices are given in ROL and RON.

The exchange rates at 1 June 2005 were:

1 EUR = 36,172 ROL/3.617 RON;

1 USD = 29,510 ROL/2.951 RON.

Cash, traveller's cheques and credit cards may be used in

Romania, but cash remains the preferred method of

payment. The use of credit cards has significantly grown

in popularity in recent years, and automatic teller

machines are more numerous. Euros and dollars can be

exchanged at official exchange offices.

Business and Social Etiquette

Romanian business customs tend to be formal.

Introductions are respectful, business cards are

exchanged and suits are worn. The handshake is used

both on meeting and taking leave. Dealing with public and

state officials can sometimes be time-consuming and

requires perseverance.

Romanians are often very proud of their national heritage,

and tend to be sensitive about cultural and political

matters that concern their country.

Public Holidays

Romania has the following public holidays:

■ New Year (1 and 2 January);

■ Orthodox Easter Sunday and Monday;

■ Labour Day (1 May);

■ National Day (1 December);

■ Christmas (25 and 26 December).

Chapter 1 - Romania: a Profile

Additionally, little business takes place between

Christmas and New Year. During the summer, some

companies, government agencies, and the courts are

closed for August or operate with reduced hours and


1.9 Living Conditions

Bucharest and large Romanian cities like Constanta, Iasi,

Timisoara, Cluj Napoca or Brasov offer reasonable living

conditions for expatriates. While normal precautions

against petty theft and car crime should be taken,

Bucharest and other cities do not have a high crime rate

and are safer than many other international capitals.

Bucharest has numerous restaurants and cafes, including

a steadily increasing number of privately owned

restaurants serving international cuisine. Appendix III

presents a list of contact numbers for hotels and

restaurants in Bucharest. There are also a variety of

theatres, concert halls, libraries, cinemas, bars,

nightclubs, and casinos.

Bucharest is the least expensive European city in terms of

cost of living, being in the 103rd place worldwide from

144 cities across six continents, according to a survey

made by Mercer Human Resource Consulting. The survey

covers and measures the comparative cost of over 200

items in each location, including housing, transport, food,

clothing, household goods and entertainment.

The standard of housing varies widely in Romania. The

existing residential market offers a wide range of choices,

from modern flats and villas to refurbished old villas

located in picturesque neighbourhoods. The new supply

is more adequate to international standards and quality is

improving every year. The northern area of the city is the

most popular among expats.

PricewaterhouseCoopers - Business Guide to Romania 2005 11

Chapter 2

Business Environment

■ Government introduced flat tax

■ EU treaty signed in April 2005 and membership

expected in 2007

■ Ratings agencies improved outlook

2.1 Business Climate

The vigorous economic growth in the last five years, the

continuous reduction of the inflation, the progress in

restructuring the economy and the acceleration of the

privatisation process have determined the European

Commission to acknowledge Romania as having a

functioning market economy, in its 2004 regular report.

Romania's progress has been recognized also by all the

rating agencies as well. At the beginning of 2005

Romania's credit outlook was improved to “positive” from

“stable” by Standard & Poor's, which cited the country's

progress toward joining the European Union in 2007. At

the end of 2004, Fitch upgraded the country's long-term

foreign currency two notches to investment grade ('BBB

minus'). Also, US financial rating agency Moody's

upgraded Romania's country rating by two steps to Ba1.

The new government moved fast in modifying the

country's tax system, replacing a 25% corporate profit tax

and an 18-40% personal income tax scale with a flat tax

rate 16%. To offset a possible revenue gap the

government said it plans to raise excise taxes on petrol,

alcohol and cigarettes as well as capital gains taxes. The

government also says that budget shortfalls might be

avoided as lower taxes would help curb tax evasion.

The privatisation process will continue this year with large

privatisations in the financial sector as well as in the

energy sector.

The Fiscal Code and the Fiscal Procedural Code have

been subject to constant change since their entry into

force. The adoption of the Labour Code was also a major

12 PricewaterhouseCoopers - Business Guide to Romania 2005

step forward in the transposition of the acquis on social

policy and employment.

2.2 The Aims of Government

The Government's main objective is the EU accession.

The new government is determined to meet all the EU

requirements so that Romania can join the EU in 2007.

The main government priorities on short term are the fight

against corruption, the independence and restructuring of

the judiciary system, the regulations on public

procurement, state aids and competition, border and

environmental control.

2.3 Free Trade Zones

Romania has six designated Free Trade Zones, mainly

located around ports: Constanta Sud-Agigea (on the

Black Sea), Sulina (at the mouth of the Danube), Braila,

Galati, Giurgiu (on the Danube), and Curtici-Arad (on the

Hungarian border).

The Free Trade Zone legislation falls under Law 84/1992

modified by the Law 244/2004. Specific customs rules

also are in force concerning Free Trade Zones. The

relevant legislation allows, under certain conditions,

exemption from customs duties and value added tax,

unrestricted import and re-export of foreign goods, and

permission to conduct financial transactions in convertible


2.4 Financial Services

The banking sector continued to benefit from better

economic times in 2004 and retail banking services such

as mortgages, leasing and insurance have started to pick

up considerably. Most Romanian banks are now in

private hands; while the two remaining state-owned large

banks, BCR and the Savings Bank CEC, are expected to

go private either this year or in 2006. BCR's assets under

management total about EUR 6 billion, accounting for

nearly one-third of Romania's banking sector. CEC is

ranked fourth with assets totalling EUR 1.4 billion at the

end of 2004. CEC has the largest network of about 1,400

branches and offices.

Most banks have set up investment arms; the big four

accounting firms have also established a significant

presence in the country.

Both the capital market and the insurance industry

recorded upswings in 2004. Market capitalisation for the

two regulated capital markets, the Bucharest Stock

Exchange and the over-the-counter RASDAQ market was

around EUR 12 billion at the beginning of June 2005 as

compared to EUR 11 billion at the end of 2004. Foreign

investment in the stock exchange in 2004 stood at some

EUR 74.7 million, a 3.5-fold increase on the previous year.

Investors mainly focused on the market's blue chips,

which include Petrom, Rompetrol Rafinare (Petromidia)

and banking operators Banca Romana pentru Dezvoltare

(BRD) and Banca Transilvania. Financial investment

companies (SIFs) are also highly sought-after stock.

The two stock exchanges, BSE and Rasdaq are set to

merge in fall 2005. The next in line to join will be Sibiu

Monetary - Financial and Commodities Exchange

(BMFMS), by the end of 2005.

The capital market regulator is the National Securities

Commission, which intends to bring more transparency

and trust to the Romanian market through its regulations.

There are 45 registered insurance companies in Romania

offering an increased range of insurance services. A large

number of these companies are members of UNSAR

(National Union of Insurance and Reinsurance

Companies) and this group comprises around 90% of

capital and premiums in the industry. Large international

insurers have established domestic operations and sales

forces. There is also a significant number of insurance

brokers authorised by the market regulator.

The insurance industry regulator is the Insurance

Surveillance Commission. During the recent period,

numerous regulations have been issued to fill the

legislative gap and to be in line with EU legislation in this

sector as in many others.

Romanians are increasingly interested in the insurance

market but insurance penetration is still much lower than

the EU average. Although most of the large insurance

companies operating in the Romanian market offer

various life insurance services, sometimes associated with

private pension plans, life insurance has a reduced share

Chapter 2 - Business Environment

in the overall insurance activity. The Romanian market is

dominated by non-life insurance.

The government is moving forward in reforming the

pension system under a three-pillar scheme and the

emergence of private pension funds is expected to give

the industry a boost.

For more details in respect of Financial Services in

Romania, please refer to Chapter 4.

2.5 European Union Associate Status

The negotiations for EU accession were officially launched

in 2000. In October 2004, the European Commission's

Progress Report on Romania stated that the country's

economy meets the criteria for being regarded as a

functional market economy.

At the end of 2004, the European Commission confirmed

the provisional finalisation of all negotiation chapters and

the treaty with the EU was signed in April 2005. The

provisional date for Romania’s Accession to the EU was

set for 2007. However, in case of "major shortcomings"

observed during the preparation for accession, the entry

can be delayed by one year, in compliance with the

safeguard clause included in the Accession Treaty.

Between 2000 and 2004, Romania has received important

grants from the EU through the Phare, Ispa and Sapard

instruments that exceeded EUR 2.6 billion. For 2005 and

2006, Romania is set to receive from the EU some

EUR 1 billion per year as pre-accession funds.

The EU post-accession funds allocated for Romania

(2007 to 2009) stand at EUR 11 billion, of which

EUR 6 billion will be paid in this period (the rest of the

payments to be made as the projects are unfolded).

Romania's contribution to the EU budget will stand at

some EUR 800 million in 2007, over EUR 800 million in

2008 and some EUR 900 million in 2009.

2.6 NATO Accession

Romania officially joined the Alliance at the end of March

2004, some 55 years after NATO had been established.

2.7 International Agreements

Romania has diplomatic relations with over 170 nations.

This has enabled the country to join important

organisations and be party to key agreements including

the following:

■ Membership:

PricewaterhouseCoopers - Business Guide to Romania 2005 13

Chapter 2 - Business Environment

- United Nations

- World Bank

- International Monetary Fund

- World Trade Organisation

- European Bank for Reconstruction and Development

- Bank for International Settlements

- Council of Europe

- Organisation for Security and Co-operation in Europe

■ Agreements:

- Associate member, European Union (EU)

- Central European Free Trade Agreement (CEFTA)

- Free trade agreement with European Free Trade

Association (EFTA)

- Most Favoured Nation (MFN) status with United


- Partnership for Peace programme with NATO and

official invitation to join NATO as full member

- Free Trade Agreements with Hungary, Czech

Republic, Turkey and Moldova.

In addition, Romania has concluded a number of bilateral

agreements concerning trade, avoidance of double

taxation, and mutual guarantees of investments.

2.8 Real Estate

Pior to 1990, most land in Romania was owned by the

state, by the state-owned entities or by the so-called

"agricultural cooperatives". Individuals owned only a

limited amount of farmland and residential land.

After 1990, specific regulations governing the

retrocession of property taken over by the state either

legally or abusively during the socialist regime, back to

their former owners, were passed. Thus, the main

regulations are Land Law no. 18/1991, Law no. 54/1998

on the transfer of titles on lands. Law no. 1/2000 on the

Retrocession of Agricultural and Forestry Land and Law

no. 10/2001 on the Legal Regime of Immovable

Properties Abusively Taken from their Legal Owners

between 6 March 1945 and December 1989, as

subsequently amended.

Romanian individuals and legal entities (regardless of the

citizenship or nationality of their shareholders) are free to

acquire title to the land.

In accordance with the provisions under the Romanian

Constitution, amended in 2003, foreign citizens and

14 PricewaterhouseCoopers - Business Guide to Romania 2005

stateless individuals will be entitled to acquire title to land

in Romania only with the observance of the conditions

resulting from the accession of Romania to the European

Union and from other international treaties Romania is

party to, on the basis of mutuality and in accordance with

the provisions of a special type of law ("lege organica", in

Romanian) to be passed in this respect, as well as by

legal inheritance. As per the provisions of the draft law

regulating the conditions on the foreign citizens' and

stateless persons' right to acquire title to land, initiated by

the Romanian Ministry of Justice, foreign citizens of EUmember

states shall be entitled to acquire title to land

only after 5 years from the accession of Romania to the

European Union.

Currently, foreign individuals and companies may own

buildings and/or obtain the right to use the land (based on

lease agreements, concession agreements, etc). Also,

Romanian or foreign companies and individuals are

allowed to rent land and or buildings.

Authentication by a notary public is compulsory for the

land transfer to be valid. Validity of transfer of title to the

land against third parties is to be ensured by the recordal

of such with the relevant Land Register. When purchasing

real estate properties, one should take into account that

there are certain regions in Romania where the

registration of ownership in the Land Register has been

implemented only recently, and therefore a proper review

of ownership when purchasing real estate property is

quite difficult to assess. It is therefore advisable for legal

title checks to be conducted in respect of any property,

before acquiring it.

Furthermore, the National Cadastre and Land Registration

Agency has recently been established (through the

reorganisation of the former National Cadastre Office),

with its remit to include real estate property registration in

Romania, a role taken over from the Ministry of Justice.

This Agency also coordinates and oversees the

performance of cadastral work at the national level.

Under the new legal provisions, ownership right and other

in rem rights on immovable properties are to be recorded

with the real estate information register (i.e. Land Registry)

solely on the basis of transfer deeds, which must be

concluded in authentic (notarised) form. The public

notary having prepared the deed of conveyance, which

alters, establishes or extinguish an interest in real estate,

shall apply for the registration with the Real Estate

Registry of such deeds, no later than the day after their


Mortgages are created under authentic deeds and in

order to have effect towards third parties, they must be

recorded in the Land Registry. Also the intent to create a

mortgage for land/building can be recorded in the Land

Registry. Recording of the intent to mortgage expires

after two months as of the registration in the Land


In order to enforce the mortgage, the mortgageor (e.g. a

bank) must resort to an enforcement agent to start the

enforcement procedures. Commencement of this

procedure is registered in the Land Book. Objections can

be filed against the enforcement procedure, which could

suspend such procedure. In case of bankruptcy, the

mortgageor submits its claim with the liquidator and has

priority to the sale proceeds of the asset mortgaged, over

any other receivables, except for the taxes and liquidation

costs related to the sale of the asset.

New legislation instrumental to EU integration relating to

public-private partnership has been recently enacted.

The focus of the recent legislation is on the design,

financing, building, exploitation, maintenance and transfer

of any public asset under a 'public private partnership

agreement for work concessions'. In accordance with the

newly enacted provisions, assets being private property of

the state resulting from the implementation of the PPP

project, as well as the plots of land used for the project

may be alienated, mortgaged, pledged or posted as

security in the benefit of third parties, provided that the

prior approval of the owner has been obtained.

2.9 The Property Market

The market for office buildings in Bucharest is growing

while the availability of land is decreasing. Industrial, retail

and residential property sectors are reporting strong

growth. The northern and central areas in Bucharest are

the most popular areas for office building construction.

The average sales price for an A-class office in Bucharest

is EUR 1,550 per square meter, according to a survey by

the real estate agency Colliers. Bucharest-based first

class buildings totalize 150,000 square meters (sqm).

Rent prices for offices in Bucharest are around EUR 16

per sqm, according to the above mentioned study.

Monthly rent for space within the retail sector ranges

from minimum EUR 10 per sqm, to maximum EUR 100

per sqm, depending on the location. Magheru Boulevard

is Bucharest's most expensive area with 50-100

Euros/sqm, followed by Calea Victoriei and Calea

Dorobanti - 20-60 Euros/sqm. Apartment rents vary from

EUR 400 to EUR 5,000 per month, depending on location,

Chapter 2 - Business Environment

size and furnishings. Rental costs for villas in some

residential areas, especially in the northern part of

Bucharest, may range from EUR 1,500 to EUR 7,000.

2.10 Business Lobby Groups

There are a number of business groups that lobby

Government ministries on policy issues. These include the

Foreign Investors Council (FIC) (tel. + 40 21 222 19 31, the American Chamber of Commerce

(AMCHAM) (tel. + 40 21 315 86 94, and

the Businessmen's Association of Romania (AOAR) (tel.:

+40 21 319 01 43,

PricewaterhouseCoopers - Business Guide to Romania 2005 15

Chapter 3

Foreign Investment, Privatisation

and Foreign Trade

■ Foreign and domestic investments enjoy equal


■ Foreign direct investments in 2004 account for

around EUR 4 billion

■ Large privatisations took place in the energy sector

3.1 Foreign Investment

Regulatory Climate

Total foreign direct investment in 2004 stood at around

EUR 4 billion, up 115% compared with 2003, according

to data from the National Bank of Romania. At the end of

2004, a number of 107,398 companies with foreign capital

were registered in Romania, having a total subscribed

social capital of EUR 9.95 billion.

In September 2002, the Romanian Agency for Foreign

Investment (ARIS) was established as a government

authority responsible for the implementation of state

policy for attracting foreign investment.

The role of ARIS is to promote Romania's business

environment abroad and help ease an investor's entry into

Romania. ARIS provides investors with all the necessary

information about Romanian legislation, investment

opportunities, as well as assistance with administrative

procedures for registering the company with the Trade


All businesses must be registered according to the

legislation that governs the particular type of enterprise.

According to the Law on Direct Investments, foreign and

local investment should be treated equally.

ARIS has monitored and assisted a number of 50 projects

(in different stages) in Romania in 2004 with a cumulated

value of EUR 3.3 billion.

16 PricewaterhouseCoopers - Business Guide to Romania 2005

Regulatory Legislation

The following major pieces of legislation (in addition to

taxation law) regulate foreign investment in Romania:

1. Commercial Code

2. Company Law

3. Competition Law

4. Law on Direct Investment

5. Law regarding the promotion of direct investments

with a significant impact on economy

6. Law on Banking Activities

7. Securities Law

8. Commercial Companies Privatisation Law

9. Trade Register Law.

Restrictions on Foreign Investment

No restrictions are imposed on foreign ownership or

participation in joint ventures and in Romanian

companies. It is possible for a foreign entity to own 100%

of any type (SA, SRL) of Romanian-registered company.

Currently, the main industrial sectors in which additional

governmental approval is necessary for investors are:

■ Defence;

■ State Monopolies;

■ National Security.

Resident and non-resident companies are allowed to

acquire and hold rights over movable assets in Romania.

Investment Incentives

Law 332/2001 on the promotion of direct investments

with a significantimpact on the economy provides that

companies that invest over USD 1 million or the

equivalent, in Romania can benfit from certain incentives,

as follows: customs duty exemption for certain

tangible/intangible goods included in a list, an investment

allowance of 20% of the value of the investment, applied

in the month when the investment is finalised and

utilisation of accelerated depreciation for fixed assets,

except for buildings (Further details are provided in

Chapter 8 - Taxation of Corporations).

In order to benefit by the incentives, the investment

should be registered with the Romanian Agency for

Foreign Investments.

The Fiscal Code provides for VAT payment exoneration for

import of equipment (machines, means of transportation,

apparatus etc) and certain raw materials (Further details

are provided in Chapter 10 - Indirect taxation).

Guarantees and Rights

Foreign investments are not to be subject to

nationalisation, expropriation, requisition, or any other

measure of similar effect, except when this is in the public

interest and even then only after 'appropriate

compensation'. Romania is party to a number of bilateral

investment guarantees and is a member of the Multilateral

Investment Guarantee Agency (MIGA). There are,

however, no government guarantees available to

compensate for inconvertibility.

3.2 Privatisation

Regulatory Climate

Investors can either acquire the state's shares in a fully or

partially state-owned joint stock company from the

Authority for State Assets Recovery (AVAS) or the

responsible ministers.

Privatisation includes a wide array of methods, including

open and closed tenders, local stock auctions and direct

sale. In certain cases, foreign investment banks act as


Privatisation Background

The privatisation process commenced in 1990 with the

creation of joint stock companies out of approximately

6,200 state-owned entities. Of the shares in these

companies, 70% were allocated to the State Ownership

Fund (SOF) and 30% to one of the five Private Ownership

Funds (POFs). Following Emergency Ordinance No

296/December 2000, the State Ownership Fund became

the Authority for Privatisation and Management of State

Ownership (APAPS) - a public institution that operated

under the authority of the Romanian Government. In 2004

the Bank Asset Recovery Agency has merged through

Chapter 3 - Foreign Investment, Privatisation and Foreign Trade

absorption with the Authority for Privatization and

Management of State Ownership resulting the Authority

for State Assets Recovery.

Privatisation in 2004

After a slow start and many delays due to various

reasons, including international unfavorable conditions,

the privatization in the energy sector finally happened.

The need of massive funds in order to align Romania's

energy infrastructure with those of the EU countries as

well as the permanent pressures from the IMF, the WB

and EU for restructuring and privatization of the sector

has lately accelerated the privatization process.

The most significant privatisation in the country's postcommunist

history is the privatization of Petrom, the

Romanian national integrated oil company and the largest

Romanian company in terms of turnover (estimated

EUR 2.3 billion for 2004) and market capitalization

(EUR 6.2 billion as of middle June). The successful bidder

was the Austrian OMV which agreed to pay USD 1.86

billion (EUR 1.49 billion) for 51% stake in Petrom

(EUR 669 million for a third of the company's shares and

another EUR 830 million for a capital increase in order to

hold a majority stake), according to public sources. Other

bidders included Hungary's MOL and the US Occidental

Oil and Gas Holding Corporation.

Other privatisation deals of 2004 included the privatization

of the two electricity distribution companies, Electrica

Banat and Electrica Dobrogea with the Italian company

Enel, and the two gas distribution companies Distrigaz

Sud and Distrigaz Nord with Gaz de France respectively

the German E.ON Ruhrgas.

Privatisation Calendar

At the beginning of 2005, the Government had finalised

other two important privatisations in the energy sector.

CEZ AS, the Czech Republic's biggest energy company,

has taken over electricity distributor Electrica Oltenia SA,

and E.ON AG, Europe's second-largest utility, acquired

51% of Electrica Moldova SA.

Privatisation process for Electrica Muntenia Sud is also

schedule to begin in 2005. Other electricity distribution

companies will also be privatised as well as the three

power holdings: Craiova, Turceni and Rovinari.

In the financial sector, the two remaining large state

banks are likely to be sold also in 2005-2006. In the

telecoms sector the sale of remaining state's shares at

Romtelecom, as well as the privatisation of the

PricewaterhouseCoopers - Business Guide to Romania 2005 17

Chapter 3 - Foreign Investment, Privatisation and Foreign Trade

Radio-communication National Company are scheduled

for 2006, while the privatisation of the Romanian Post

Office is schedule to be completed by 2008.

3.3 Trade

Foreign trade regulations have been gradually liberalised

since 1990 and now broadly follow the guidelines set by

the EU.

Regulatory Climate

A specific license is generally not required for the import

and export of commodities into and out of Romania.

Exceptions are those commodities subject to quota as

stipulated by international trade agreements signed by

Romania and those considered as potentially dangerous

for human health or the environment. Other non-tariff

barriers also apply upon the import or export of certain

goods, such as goods susceptible for dual use (both

civilian and military) or goods falling under the CITES


Regulatory Authority

The Licence Department of the Ministry of Economy and

Trade is in charge of issuing trade licences.

Other public entities also issue approvals for the import or

export of goods that are subject to other non-tariff

barriers, e.g. ANCEX (The National Agency for Controlling

Exports of Strategic Products).

18 PricewaterhouseCoopers - Business Guide to Romania 2005

Chapter 4

Banking, Finance and Insurance

■ Harmonisation of banking legislation with EU

Directives continues

■ Banks continue to expand retail activities

■ New consumer lending legislation is introduced

■ Leasing market continues to consolidate and


■ New consolidated capital market legislation in line

with EU Directives is passed, to be followed by

merger between the Bucharest Stock Exchange and


■ Insurance market continues to develop and to

increase its weight in GDP

■ The two remaining state-owned banks, BCR and the

Savings Bank CEC, are expected to go private

either this year or 2006

4.1 Banking and Other Lending


Romania has a two-tier banking system. The National

Bank of Romania (NBR) is Romania's central bank and is

under the Parliament's control. Lending institutions

operate under the authorisation and strict supervision of

the NBR.

The privatisation of the largest Romanian bank, the

Romanian Commercial Bank, will be finalised at the end

of the first quarter of 2006, at the latest. In 2003, EBRD

and IFC jointly acquired 25% of the bank's shares, but

they will be sold to the new investor when the

privatisation takes place. CEC (The Romanian Savings

Bank) is also expected to be privatised.

The National Bank of Romania

A Board of Directors, consisting of nine members elected

by the Parliament, heads the National Bank of Romania

(NBR). The term of office is usually five years. The Board

of Directors includes the governor of the NBR, three vicegovernors

(of which one is first vice-governor), and other

five ordinary members. It is the responsibility of the

directors to issue NBR policy guidelines.

The prime functions of the NBR are:

■ Targeting the inflation level. For several years the key

objective was to ensure stability of the domestic

currency with a view to maintaining price stability;

■ To issue and control the supply of banknotes and


■ To license all banking institutions in Romania and

monitor their activities;

■ To establish and manage the state's foreign exchange


■ To establish and manage monetary and credit policy;

■ To supervise the foreign currency operations regime;

■ To align Romania's banking sector and monetary

system with EU norms and standards.

NBR has its own Supervision Division conducting on-site

evaluation of all lending institutions operating in Romania

(i.e. commercial banks, credit unions, building societies

and companies issuing means of performing electronic

payments). This process generally takes place on an

annual basis.

There is ongoing co-operation between the NBR and

international banking institutions, including the IMF and

the World Bank, as well as with other European central

banks. This is aimed at developing and improving

procedures and supervisions and furthering the NBR's

transformation into a dynamic, modern central bank.

NBR also collaborates on the domestic financial market

with the Insurance Surveillance Commission and National

Securities Commission for exchange of information and to

maintain an adequate surveillance over the financial

market in general.

PricewaterhouseCoopers - Business Guide to Romania 2005 19

Chapter 4 - Banking, Finance and Insurance

NBR publishes on a monthly basis the reference interest

rate used as benchmark interest rate for domestic

currency denominated loans.

Large-scale changes have been brought to the banking

legislation in order to harmonise it with EU legislation.

The Foreign Currency Market and Foreign

Currency Rules

The Romanian currency is the leu (plural lei), abbreviated

as ROL. The inter-bank foreign exchange market was

established in 1994. Foreign currency can be bought or

sold at spot or forward rates. Intermediaries authorised by

the NBR freely set the exchange rate. The NBR also

publishes daily official reference exchange rates.

On 20 April 2005, the reference exchange rates published

by the National Bank of Romania were USD 1 = ROL

27,986 and EUR 1 = ROL 36,495.

A new denomination for the Romanian Leu will be

introduced as of 1 July 2005 - i.e. 10,000 old ROL will be

replaced by 1 new RON. Current bank notes and coins

and new ones will circulate until 31 December 2006; after

that date only the new RON may be used.

Exchange offices provide exchange facilities to private

individuals (residents and non-residents).

In March 2003, the reference currency for establishing the

ROL official exchange rates against other foreign

currencies was changed to EUR (replacing the USD).

The NBR recently issued a new Set of Foreign Currency

Regulations that governs the transactions between

residents and non-residents performed both in foreign

currency and ROL and the transactions performed

between residents in foreign currency.

In the past, Foreign Currency rules have been amended

several times, mainly as regards the restrictions

applicable to some foreign currency operations, in order

to harmonise the domestic rules with EU legislation.

The government has recently liberalised the capital

account allowing non-residents to open ROL

denominated time deposit accounts with Romanian

banks. However, the NBR reduced the reference interest

rate from 17.31% p.a. to 8.45% p.a from January to April

2005 in order to reduce the impact of such liberalisation.

The NBR is also entitled to apply certain safeguard

measures in case the related capital inflows generate

strong fluctuations in the market. In addition, a partial

relief for foreign currency operations between residents

was given in order to balance the liberalisation's effects.

20 PricewaterhouseCoopers - Business Guide to Romania 2005

The following steps remain before Romania reaches full

liberalisation of foreign currency operations ahead of

accession to the EU:

■ from 1 September 2006

- transactions of residents with foreign money market

instruments / transactions of non-residents with

domestic money market instruments;

- operations in current accounts and term deposit

accounts opened by residents abroad.

For statistical purposes, notification/reporting to the NBR

must be made for operations generating long and

medium-term private foreign debt, for non-monetary

operations between residents and non-residents (offset,

clearing, barter, etc) and for residents to participate in

more than 10% of the share capital of a foreign company.

Commercial Banks

The banking market has witnessed significant changes in

recent years following the development of domestic

banks and the influx of foreign banks into Romania. Most

domestic banks in Romania are now private, and foreign

banks are investing at a fast pace. A large number of

banks have recently started extending their retail

activities. Consumer and mortgage loans registered

significant increases. This trend is expected to continue in

the coming years. Currently there are 38 banks and

branches of foreign banks authorised to operate in


Thin capitalisation rules are not applicable to lending


At the end of December 2003 significant new

amendments were brought to the Banking Law. The

amendments were designed to be in line with EU


New definitions of lending institutions were introduced,

and now cover commercial banks, credit unions, building

societies and those issuing means of performing

electronic payments.

The Banking Law only applies to banks and those issuing

means of performing electronic payments, while special

laws will separately regulate credit unions and building


Commercial banks in Romania must be registered with

and operate under a license issued by the NBR. Banks

may engage in the following activities:

■ Taking deposits;

■ Making loans;

■ Issuing guarantees and letters of credit;

■ Issuing and trading securities;

■ Owning and administering movable and immovable

assets for own activity and bank's staff use, lending

operations with movable and immovable assets, up to

5% of own funds;

■ Leasing through a subsidiary only until EU accession;

after accession, direct financial leasing will be


Commercial banks may also participate in currency

auctions provided they have broker or dealer licenses.

The main regulations issued by the NBR for banks are:

■ Minimum share capital and own funds of ROL 370

billion from 31 May 2004 (only cash capital infusions

are accepted);

■ Legal reserve: 5% of gross profit until the legal

reserve represents a fifth of the share capital

(deductible for tax purposes);

■ General banking risks fund of 1% of the balance of

assets bearing risks specific to banking operations

(deductible for profit tax purposes);

■ Setting up of specific credit risk provisions for

principal and interest related to loans granted

(deductible for profit tax purposes);

■ Minimum reserve requirements of 18% (deposited

with the NBR) for ROL and 30% for foreign currency;

■ Capital Adequacy Ratios of 12% (own funds/net

exposure) and 8% (own capital/net exposure); also

special capital adequacy requirements will be fully

applicable starting from 2006 in relation to the trading

book activities;

■ Lending limit of 10% of own funds to any client;

■ Total long term investments in non-financial

companies and non-lending institutions (20% of nonfinancial

company's share capital and 15% of bank's

own funds), but total amount cannot be more than

60% of bank's own funds;

■ Financial statements need to be approved by external

independent auditors;

■ Restrictions on holding property other than for own


■ Detailed operational reports to the NBR in

standardised format and specific frequency.

As a general trend, the supervision of banking activity has

tightened with respect to significant shareholders, top

management and administrators, internal audit, money

laundering, customer identification procedures, solvency

and investment portfolio risks.

A legislative framework has been created for derivatives,

but as it is relatively new, the market is still undeveloped.

Also, the tax legislation has not been updated to include

specific provisions regarding the tax treatment of


Money Laundering

Special legislation against money laundering has been in

place since December 2002. Generally, transactions

above EUR 10,000 could be investigated.

Foreign Investments

In the last few years there has been an increase in the

number of foreign banks operating in Romania, either

through branches or subsidiaries (requiring a minimum of

five shareholders).

Appendix II lists major foreign banks operating in

Romania as of 20 April 2005.

Banks have to apply IAS rules harmonised with EU

Directives for accounting and reporting purposes, starting

with financial statements of 2001/2002. Effective from

2006, banks would need to prepare the consolidated

financial statements in accordance with International

Financial Reporting Standards (IFRS). Also, from the same

date, banks would need to report their own funds on a

consolidated basis.

Credit Unions

Chapter 4 - Banking, Finance and Insurance

Although credit unions have been operating for some time

in Romania, under a more restrictive legislative framework

introduced during 2001 and 2002, they are now

assimilated with lending institutions, as are banks.

Credit unions must obtain a license from the NBR in order

to operate. Although their activity is not regulated by the

Banking Law, but under a separate legal framework, their

activity is subject to similar requirements as those

applicable to banks.

The same accounting treatment for banks applies to

credit unions as well.

PricewaterhouseCoopers - Business Guide to Romania 2005 21

Chapter 4 - Banking, Finance and Insurance

Building Societies

The general legal framework for building societies has

been in place since 2002, but there is only one building

society currently operating on the Romanian market.

Similar regulations for banks currently apply to building

societies, but adjustments are expected.

Institutions Issuing Means of Performing

Electronic Payments

The new Banking Law has introduced the possibility that

an institution, other than a bank, may issue means of

performing electronic payments.

The minimum share capital for such institutions is

ROL 120 billion.

4.2 Specialised Financial Institutions

Specialised financial institutions in Romania are still

developing and, at present, the range of services offered

is quite limited, especially in relation to factoring

operations. Brokerage houses have been established and

many of these are linked to banks. Also, mortgage

companies may now operate in accordance with a new

specific regulatory framework. Also, a new specific

regulatory framework in line with EU legislation was

introduced in 2004 to regulate consumer lending activities

performed by entities other than banks and more recently

by entities linked to banks.

4.3 Leasing

Government Ordinance no. 51/1997, revised at the

beginning of 2000, and further amended in December

2004, provides a more stable framework for leasing

operations in Romania. However, we expect that there will

soon be changes in the leasing legislation in order to

harmonise it with EU legislation. As in many countries,

leasing operations are split into finance leases and

operating leases.

Currently, there are over 7,000 companies that qualify as

leasing companies, but only 100 are actively operating on

the Romanian leasing market. They offer both financial

and operational leases and various types of assets to be

leased for flexible periods of time. Minimum share capital

for a leasing company is ROL 500 million.

Effective from 1 January 2004, the Fiscal Code brought a

new definition of a financial lease, recognised for tax

purposes. A financial lease is a leasing activity that fulfils

at least one of the following conditions:

22 PricewaterhouseCoopers - Business Guide to Romania 2005

1. the risks and benefits related to the ownership over

the leased asset are transferred to the lessee from the

signing date of the contract;

2. the lease agreement clearly states that at the end of

the lease period the ownership over the leased asset

will be transferred to the lessee;

3. the leasing period exceeds 75% of the asset's useful


Thin capitalisation rules are not applicable to leasing

companies for leasing operations. For accounting

purposes, the definition provided by IAS needs to be

observed by companies applying IAS rules.

Details of customs and VAT implications of leasing are

included in Chapter 10 - Indirect Taxation.

4.4 Capital Markets

In 2003, the Bucharest Stock Exchange and the

Electronic Stock Exchange RASDAQ drafted a merger

plan to be in line with EU markets. The merger procedure

started in 2004 after the new consolidated capital market

legislation was approved.

The main changes brought by the new consolidated

capital market law are:

■ change in the legal status of BSE from a public

interest institution to a private company;

■ merger of BSE with the OTC market;

■ new market architecture regarding relationships

between regulatory, trading and settlement


■ creating the legal framework for new trading

instruments (e.g. bonds, derivatives);

■ increased safety for investors owing to the creation of

the Investors Compensation Fund.

Under the new capital market legislation, banks are

allowed to act directly as intermediaries with previous

authorisation in this respect. One Romanian bank has

already taken the first step to trade on the capital market.

The supervisory body is the National Securities

Commission (which also regulates, supervise and controls

the OTC market and institutional investors). The National

Securities Commission was established after the initial

Securities Exchange Law was passed in 1994. In 2002,

the Government issued a new legal framework for

securities transactions, regulated markets, brokers,

investment funds and derivatives. This legal framework

tried to bring more transparency and accuracy of the

transactions and participants on the capital market.

A new consolidated capital market legislation in line with

EU Directives was approved in 2004.

All institutions under the supervision of the National

Securities Commission are required to apply IAS rules,

starting from financial statements for 2003.

Bucharest Stock Exchange

The first Bucharest Stock Exchange (BSE) opened in

1882, although in subsequent years most securities

trading took place outside the market. The existing Stock

Exchange opened in July 1995 with Canadian and British

technical assistance. Currently 67 brokers are active

members of the BSE. BSE is open for trading during each

working day. Trading is stopped on Easter and between

22nd December and the first working day of the following

year. The exchange's trading system encompasses both

order-driven and block trade markets and is fully

automated, with all transactions matched and reported

immediately. The BSE lists 60 companies divided into two

categories (17 being listed in the first tier and 43 in the

second). There are also 21 bonds listed on BSE (20

issued by municipal entities and one by a private

company). Certain criteria need to be fulfilled in order for

a company to be listed on the BSE (transparency

included). Also, there are certain restrictions for trading

and price fluctuation.

The level of transactions on BSE has significantly

increased in the previous years from EUR 1,852.47 million

in 2000 to EUR 27,049 million in 2004 and this upward

trend is expected to continue in 2005. Listing of municipal

bonds, some mutual funds and development of

derivatives instruments together with more-strict trading

and transparency rules, contributed to the increase in the

level of transactions.

The BET (Bucharest Exchange Trading), the official index,

measures BSE performance. It is a synthetic indicator

based on the 10 most liquid shares traded on the BSE.

The index increased by 127% (EUR denominated) in


BET-C and BET-FI measuring the performance of all

traded stocks on BSE and, respectively, the performance

of five financial investments companies with special

statute under Romanian law, increased by more than

110% during 2004.


The RASDAQ trading system opened in October 1996 as

part of a USD 20 million capital market development

project run by the US Agency for International

Development (USAID). RASDAQ is modelled on

America's NASDAQ system.

RASDAQ is an exchange market that trades all the

companies initially privatised through the Government

Mass Privatisation Programme. It has less rigorous

requirements than the BSE. A RASDAQ index

(composite) based on all transactions began as a

benchmark of activity in 1998. There are currently 3,890

companies listed on RASDAQ in three categories (two top

categories and a base category for most of the


New regulations have been issued for the purpose of

tightening supervision and increasing transparency of

transactions in this market.

Following the approval in 2004 of the consolidated capital

market law, the BSE and RASDAQ started a merger

process, which is expected to be finalised in 2006. As a

result, 109 companies have passed from the trading

system of RASDAQ to the BSE trading system.

The merger is intended to form a unified capital market,

also incorporating the Sibiu Monetary Financial and

Commodity Exchange (BMFMS).

Futures and options whose underlying assets are

commodities, currencies and stocks traded on BSE are

traded on the Bucharest Commodities Exchange and the

BMFMS, but the volume is still low.

4.5 Insurance

The Insurance Surveillance Commission (ISC) regulates

and controls the activity of insurance companies and

insurance brokers.

A council formed by a president, a vice-president and

three members nominated by the Parliament heads the


The prime functions of the ISC are:

Chapter 4 - Banking, Finance and Insurance

to supervise insurance companies' financial standing

in order to protect the insured persons' interest;

to ensure that insurance companies observe

prudential norms specific to insurance activity;

to issue norms for enforcement of Insurance Law

32/2000, to help elaborate the chart of accounts,

PricewaterhouseCoopers - Business Guide to Romania 2005 23

Chapter 4 - Banking, Finance and Insurance

accounting norms and procedures specific to

insurance activity;

to authorise insurance companies and insurance

brokers and to apply penalties for non-compliance.

Starting from September 2001, the ISC has been

accepted as a member of the International Association of

Insurance Supervisors.

The insurance legislation is continuously being improved.

Numerous amendments to the existing regulations have

been issued to fill in the legislative gap and to harmonise

the domestic insurance legislation with EU Directives. This

process is expected to continue in the coming period.

The main rules refer to classes of insurance, insurers and

insurance broker authorisation procedure, minimum

solvency margins, insurers' insolvency, technical reserve

calculation methods, life insurance funds administration,

investments and asset valuation. Insurers have to set up

specific technical reserves for their insurance activity,

which are tax deductible.

There are 45 insurance companies and 270 insurance

brokers currently operating in Romania. Among them,

foreign insurance companies hold a large slice of the

24 PricewaterhouseCoopers - Business Guide to Romania 2005

market and their share is increasing, especially in the life

insurance business (i.e. AIG, ING Nederlanden, Generali,

Allianz-Tiriac, Interamerican, Grawe, Aviva, etc).

The insurance market saw a significant growth in 2004 in

quantitative terms. The volume of gross written premiums

in 2004 was ROL 35,000 billion (EUR 863 million), three

times higher than in 2001. The gross written premiums

represented 1.4% of GDP in 2004 as compared to 0.9%

in 2001.

Currently, non-life insurance represents more than 70% of

insurance activity in Romania, of which compulsory thirdparty

liability car insurance has the main share. The life

insurance market, despite its significant increase during

previous years, is still undeveloped. In 2004 the

Parliament approved the law on occupation pensions and

universal pension funds (Pillar II).

From 1 January 2002, insurance companies have applied

IAS rules for accounting and reporting purposes.

Chapter 5

Corporate and Business Law

Provided by David & Baias, correspondent law

firm of PricewaterhouseCoopers in Romania

■ Legislation allows for the establishment of a wide

range of business entities, including wholly foreign

owned subsidiaries and branches

■ The most common type of company is the limited

liability company (SRL), largely because it is easiest

to operate and can have a sole shareholder

■ Many foreign businesses initially establish

representative offices

■ Expert legal and tax advice should be sought in the

early stages of operation, as legislation varies

according to interpretation and changes regularly

5.1 Legal Framework

Romanian legislation governing domestic and foreign

investment has undergone radical changes since the 1989

Revolution, particularly with the introduction of the

Company Law in 1990 (re-issued in 1998, modified again

in May 2001 and April 2003, and republished in November

2004). The current legislative bases for investment and

business operations in Romania are described below.

Company Law

Company Law governs certain forms of business

organisation. The Law covers registration procedures and

documentation, capital and shares, administration and

shareholders, mergers and liquidation.

Commercial Register Law

The Commercial Register Law regulates the organisation

and functioning of the Trade Register, stipulates the

obligation of business entities to register their entry into

operation and any subsequent changes in status, (e.g.

management, shareholding structure) operation, or nature

of business, and details the registration procedure.

Competition Law

The Competition Law aims at maintaining a competitive

market. Its provisions should be observed by all

companies when establishing their business terms or

acquiring other businesses. Clearance requirements,

depending mainly on the parties' turnover, are set for

mergers and acquisitions, as well as for certain

agreements (e.g. agreements including exclusivity


Direct Investment Legislation

The only legislation in force that stipulates certain

incentives for investors in Romania is the Law on the

Promotion of Direct Investments with Major Economic

Impact (Law no. 332/2001). This law was passed in July

2001 and prescribes the procedures and conditions for

the performance of large-scale investments in Romania

(investments over USD 1 million). Investments that qualify

as significant investments can benefit from a number of

incentives as provided by the Fiscal Code (see Chapter 8

- Taxation of Corporations, for details).

5.2 Forms of Business Organisation

Romanian legislation lists the following types of business


1. Limited liability company (societate cu raspundere

limitata - SRL);

2. Joint stock company (societate pe actiuni - SA);

3. General partnership (societate în nume colectiv -


4. Limited partnership (societate în comandita simpla);

5. Limited partnership on shares (societate în comandita

pe actiuni);

6. Branch of a foreign company;

PricewaterhouseCoopers - Business Guide to Romania 2005 25

Chapter 5 - Corporate and Business Law

7. Silent partnership (asocatie în participatiune - not a

legal entity);

8. Sole proprietorship;

9. Family association.

All entities (except for the silent partnership) are

considered as resident in Romania for tax and currency

regulation purposes and must comply with statutory

requirements in Romanian legislation for book and record

keeping (see Chapter 7 for further details). The silent

partnership is considered as resident in Romania for tax

purposes, while for currency regulation purposes it will

have the Leader's status.

Dividends/net profits are to be distributed according to

the approved annual accounts (please see Appendix VII

for details regarding the deadline for filing the annual


The family association and sole proprietorship are types

of businesses generally not available to foreign investors

with the exception of EU citizens and the European

Economic Area citizens.

The forms of business most commonly used by foreign

investors are the limited liability company (SRL) with one

to 50 shareholders, the joint stock company (SA) with a

minimum of five shareholders and the branch (of a foreign

parent company). Banks and insurance companies can

only be organised in the form of joint stock companies


Representative offices are often used as a market entry

technique, allowing for an assessment of existing

opportunities before making a more substantial

commitment to Romania.

Registration Procedure

The registration procedures for limited liability companies

and joint stock companies are quite similar and consist of

the following main steps:

■ The constitutive documents (by-laws) must be

prepared, approved, and signed by the shareholders;

certain documents must be signed in front of a notary

public or a lawyer;

■ The subscribed capital must be paid upon submission

of the incorporation documents. In the case of a joint

stock company (SA), each shareholder must pay at

least 30% of its subscribed capital upon submission

of the incorporation documents. Capital in cash is

required for all types of companies;

26 PricewaterhouseCoopers - Business Guide to Romania 2005

■ The company is registered with the Trade Register by

issuance of a Registration Certificate. This provides a

Registration Code (Rom. "cod unic de inregistrare",

abridged as "CUI") valid for both the Trade Register

and the tax authorities. The Registration Certificate

also includes in the appendix a certificate of status

certifying the registration of the statements that the

company meets all the requirements for engaging in

the activities covered by the company's objectives.

The relevant authorities would subsequently conduct

investigations at the registered head-offices of the

company, or at other locations where activity might be

carried out, in order to assess the fulfilment of the

operating requirements;

■ The company legally exists and has the right to start

and run its activities starting from the date of its

registration with the Trade Register.

The branch registration procedure is technically similar to

the above.

During the registration procedure, the company would

have a limited legal capacity - i.e. only for registration

purposes. The incorporation procedure takes between

three and five days from when the relevant file is

submitted with the Trade Registry.

Companies and branches whose names contain the

words "national, Romanian, institute" and/or their

derivations or words commonly used in connection with

central public authorities and institutions, have the

obligation to seek a supplementary approval from the

General Secretariat of the Government. If the trade name

includes words commonly used in connection with local

public authorities and institutions, the approval of the

County Hall should be obtained.

Capital and Shares

The minimum capital required for an SRL is ROL 2 million,

about EUR 50. Capital contributions can either be in cash

or in kind, but cannot be entirely in kind.

Capital is divided into shares (Rom. "parti sociale") that

cannot have a value of less than ROL 100,000. Shares

can be freely transferred between existing shareholders.

Transfer of the shares to third parties can only be done

with the approval of shareholders representing at least

75% of the capital. The transfer of shares must be

registered with the Trade Register and entered in the

company's Shareholders Register.

An SA-type company must have a minimum capital of

ROL 25 million in cash or in kind contributions (the law

estimates an increase in the minimum share capital to

EUR 25,000 by 31 December 2005). Part of the share

capital must be contributed in cash. At least 30% of the

subscribed capital must be paid up when founding the

company. The balance must be paid within 12 months

from the foundation of the company.

Capital is divided into shares and the nominal value of a

share must be at least ROL 1,000. Shares can either be

nominative or bearer shares, as established in the

company's constitutive documents. However, shares that

are not fully paid up can only be nominative shares.

In general, shares must have equal value and grant equal

rights to the shareholders. The Company Law, however,

lists the conditions under which preferential shares can be

issued. Such shares give their holders the right to a

preferential dividend, but they do not confer any voting


The Company Law states that upon finding that, due to

losses incurred, the net asset value, determined as the

difference between the total assets and the company's

debts, amounts to less than half of the share capital, the

directors shall convene the extraordinary general meeting

to decide on whether to reinstate the share capital,

reduce it to the remaining value or dissolve the company.

Directors (Administrators)

Both SRLs and SAs must have one or more directors

(administrators), each appointed by the shareholders.

Directors are responsible for the management of the


The administrators can be Romanian or foreign citizens, in

any proportion.

Administrators may appoint one or more executive

managers to carry out the day-to-day business of the



If a limited liability company has more than 15

shareholders, it has the obligation to appoint company

censors (see Chapter 7 for further details).

As explicitly stated in the Company law, joint stock

companies are under an obligation to appoint either

censors or auditors, depending on the specific situation of

the company.

General Meeting of Shareholders

The General Meeting of Shareholders decides on all major

issues concerning the company, in accordance with

provisions in the company's constitutive documents and

Chapter 5 - Corporate and Business Law

in the Romanian Company Law. Among others, the

General Meeting of Shareholders decides on:

■ Change of the head office;

■ Opening branches, subsidiaries or working units;

■ Changes in the object of activity;

■ Increases and decreases in capital;

■ Appointment of directors (administrators) and censors;

■ Approval of annual accounts (including dividend


■ Merger and liquidation.

5.3 Branches

Branches must be registered using the same procedures

for SRLs and SAs. The foundation of a branch requires

the following documentation:

■ Records of the existence of the parent company (i.e.

company memorandum and articles of association,

certificate of foundation, letter of reference from bank,

latest financial statements);

■ Decision of the Board of Directors to establish a

branch in Romania, listing the activities of the branch

and nominating a General Manager.

Branches must have a General Manager appointed by the

Board of Directors of the parent company, who will

represent the branch in dealings with third parties in

Romania. The General Manager can be Romanian or a

foreign citizen. Branches can only operate in the same

field of activity as their parent companies and they are not

allowed to include in their objectives more or other

activities than the parent company.

5.4 Representative Offices

Representative Offices are often established as a first step

in committing to Romania. Legally speaking, a

Representative Office cannot commit to any contractual

engagements in its own name but can perform the

following activities for its parent company:

■ Using facilities only for the purpose of storage or

display of goods or merchandise belonging to its


■ Maintenance of a stock of goods or merchandise

belonging to its parent only for the purpose of storage

or display;

PricewaterhouseCoopers - Business Guide to Romania 2005 27

Chapter 5 - Corporate and Business Law

■ Maintenance of a stock of goods or merchandise

belonging to its parent only for the purpose of being

processed by a third party;

■ The sale of goods or merchandise belonging to its

parent displayed at exhibitions or trade fairs which are

not permanent or are occasional, if the merchandise

or goods are not sold later than within a month after

the closing of the trade fair or exhibition;

■ Maintenance of a fixed place of business solely for the

purpose of acquiring products or goods or collecting

information for its parent;

■ Maintenance of a fixed place of business solely for the

purpose of carrying out activities of a preparatory or

auxiliary nature by its parent;

■ Maintenance of a fixed place of business solely for a

combination of the activities mentioned above, under

the condition that the whole activity carried out

through the fixed place of business is of a preparatory

or auxiliary nature.

28 PricewaterhouseCoopers - Business Guide to Romania 2005

Chapter 6

Labour Relations and

Social Security

■ Salary costs are relatively low (the gross average

monthly wage is around EUR 240)

■ Employer social security, health and unemployment

contributions amount to maximum 32.5 - 36% of

gross payroll costs

■ It is not compulsory for expatriates to be employed

by a Romanian company, though foreigners are

required to register and obtain a fiscal registration


6.1 Labour Relations and the Labour


Availability of Labour

Romania has a well educated labour force.

Unemployment was unknown prior to 1989, largely due to

overstaffing. After 1989 unemployment increased rapidly,

but since mid-1999 it has steadily declined from 11.3% to

6.2% in December 2004.

Skilled labour is mainly available in the industrial and

services sector. Certain skills, such as knowledge of

Western style accounting and double entry bookkeeping

are mainly focused in big cities, but the situation is

gradually improving.

Employer / Employee Relations

Employer-employee relations are governed by the Labour

Code (effective March 2003), other special laws and the

National Collective Agreement.

The new Labour Code covers Romanian employees under

individual employment contracts, working in Romania or

abroad for a Romanian employer, and foreign nationals or

persons without citizenship under employment contracts

working on Romanian territory for a Romanian employer.

A number of framework regulations contained in the

Labour Code are to be subsequently detailed by special

laws. Furthermore, the new standard form of employment

contract allows for individual contracts to include special

clauses, such as:

■ the non-compete clause (binding employees to refrain

from carrying out competing activities against the


■ the mobility clause (entitling employees to extra

benefits for employment by requiring them to move

from one place to another);

■ the confidentiality clause (whereby parties agree not

to disclose information acquired during the course of


Special types of contracts are regulated by the new Code,

including staff leasing, part-time employment, and homebased


Employers are required to maintain a general register of

employees, to be registered with the relevant authorities.

All employees are to be entered in the register, with

information regarding their employment record and data

including performance and termination of employment

contracts. The individual labour books (Rom. "carti de

munca") will continue to be used until 31 December 2006.

Fund to Guarantee Outstanding Salary


Employers will be required to contribute to the guarantee

fund for outstanding salary payments. The fund will be set

aside to ensure settlement of amounts related to

outstanding salaries, but will not be accessible to firms

that are undergoing insolvency procedures. The Labour

Code does not specifically state the amount of the

ntribution, nor does it detail how the fund is actually to be

set aside. Special rules are expected in this respect.

PricewaterhouseCoopers - Business Guide to Romania 2005 29

Chapter 6 - Labour Relations and Social Security


Legislation regarding trade unions was implemented in

February 2003. Under this law, unions are independent

organisations, comprising of at least 15 individuals,

working in the same field or industry, but not necessarily

for similar employers.

Union rights include the right to bring a court action to

defend the interests of any of their members without a

power of attorney. Elected union representatives cannot

be dismissed during their term of office and for a period

of two years beyond the end of their term.

Employers are under an obligation to invite union

representatives to board meetings. It is required to notify

unions of resolutions carried out by the board of directors

within 48 hours of being passed.

6.2 Working Conditions

Salaries and Wages

Average salaries in Romania are low compared to

Western European countries and to other countries in

Eastern Europe. The average national gross salary in

Romanian organisations was the ROL equivalent of EUR

240 per month at the end of December 2004. Romanian

law guarantees entitlement to the minimum gross salary,

currently of ROL 3,100,000 (approx. EUR 80). From time

to time, due to increases in the price of consumer goods,

the government raises the level of the minimum gross

salary in ROL terms.

Private sector salaries are increasing due to the limited

supply of skilled staff in certain professions. Consequently

the average gross salary shown in official statistics is

likely to be misleading to foreign investors seeking skilled

employees for a new business venture. An average gross

salary cost (including salary tax) for a skilled employee is

likely to exceed EUR 500 per month. Employer social

security contributions also apply to the gross salary (refer


Working Hours

The standard working week is 40 hours, generally Monday

to Friday from 8:30 am to 5:00 pm with a 30-minute lunch

break. Most industrial workers also have an eight-hour

working day, but factories usually start an hour earlier

than commercial institutions. However, the maximum

30 PricewaterhouseCoopers - Business Guide to Romania 2005

working time cannot exceed 48 hours per week, inclusive

of overtime.

Overtime can be remunerated by time off or extra pay.

Under the new Labour Code, overtime pay is set by

negotiation, either in the collective agreement or in the

individual contracts of employment. However, overtime

pay cannot fall below 75% of the base salary. Under the

effective National Collective Agreement, overtime is paid

at the rate of 100% of the gross salary. The Collective

Agreement prevails over the Labour Code.

Paid Holidays

In addition to statutory holidays, under the new Labour

Code, employees are entitled to a minimum of 20 days

annual paid vacation. Under the National Collective

Agreement, the minimum holiday is 21 days.

Annual paid holidays, as well as additional paid leave - for

special occasions, such as marriage, birth of a child, or

study - must be specified in the individual or collective

agreement. Most companies grant 21 to 24 days of

annual holiday in addition to the seven days of statutory

holiday (refer to Chapter 1).

Equal Opportunities

The Constitution guarantees equal rights for members of

ethnic and religious groups, as well as for men and


Companies with 75 or more staff are required to employ

disabled people in at least 4% of all positions. Companies

that do not meet the required number of disabled

employees must pay an additional monthly amount equal

to the minimum salary (about EUR 80) for every position

that should have been offered to a disabled person.

The new Labour Code emphasises equality of payment

for equal work. Persons employed in the same position

and carrying out the same work should earn the same

base salary.

Health and Safety

Health and safety regulations vary according to the

particular hazards of the industrial sector in question. In

general, they are less stringent than those applied by

other European countries.

However, the new legislation obligates employers to

ensure the access of employees to specialised medical

care, either independently - by concluding an individual

employment contract with an occupational medical

practitioner - or by concluding a contract with another

employer or with an employers association. A law

governing the legal treatment of occupational medical

services is due to be tabled in Parliament soon.

Termination of Employment

Clauses and grounds for termination are classified by the


■ termination by operation of the law;

■ agreement between parties, on the agreed date;

■ unilaterally by either party, in the cases and under the

restrictive terms as under the law;

a) dismissal (by an act of employee or for reasons

other than an act of the employee);

b) resignation.

Resigning employees are required to give no more than

15 calendar days notice (for non-managerial positions),

and 30 calendar days notice for managerial positions. In

the event of dismissal, the employer is required to give

notice of at least 15 working days to the employee.

However, the effective National Collective Agreement,

which takes precedence over the Labour Code, stipulates

that the notice period for dismissal is 20 working days.

6.3 The Social Security System

Social security legislation was overhauled in April 2001.

The law introduced new definitions of public system,

persons and risks covered in the public system,

contribution and assimilated periods, personal social

security code, pensions, and monthly rates of


The law also stipulates the change of computation

method for state social security contributions (the quotas

being annually determined by the laws on the state's

social security budget).

In Romania all employers and employees, as well as other

categories of taxpayers, must contribute to the state

social, health and employment security system.


Chapter 6 - Labour Relations and Social Security

Social and health security covers pensions, child benefits,

illness and other social care services. Employment

security covers minimal unemployment benefits, and

grants aimed at generating employment.


Both employers and employees are required to contribute

to the social security system. The percentages paid by

the employer and the employee are based on gross salary

and are as follows:

Employees' Contributions as a Percentage of Gross


■ Social security contribution - 9.5% (this percentage

applies to a base capped at five times the average

salary for the respective year). In 2005, the national

average gross salary is ROL 9,211,000

(approx. 240 EUR) per month;

■ Unemployment fund - 1%;

■ Health fund - 6.5%.

Employers' Contributions:

■ Social security fund - 22%; 27%; 32% depending on

working conditions, capped at five times the national

average gross salary multiplied by the average

number of employees;

■ Health fund - 7%;

■ Unemployment fund - 3%;

■ Work accidents insurance fund - 0.5% - 4%;

■ Labour office commission - 0.25% - 0.75%.

From 2005, the percentage of work accidents insurance

fund varies between 0.5% and 4%, depending on the risk

category. The criteria for establishing risk categories were

established by the methodological norms.

Employers calculate and withhold salary contributions

when paying salaries. State budget contributions are

payable by the 25th of the month following the month the

salary relates to. Failure to pay these withholding

contributions within 15 days from this date is a criminal

offence and is sanctioned accordingly.

PricewaterhouseCoopers - Business Guide to Romania 2005 31

Chapter 6 - Labour Relations and Social Security

6.4 Foreign Personnel

Fiscal Registration Number

Foreign individuals receiving income sourced in Romania

need to lodge a fiscal application form with the Romanian

tax authorities in order to obtain a fiscal registration

number. This fiscal application form has to be submitted

to the authorities within 30 days from receiving the first

income payment.

Residence Permit

Foreign individuals whose stay in Romania exceeds 90

days within a six-month period need to apply for a

residence permit, unless a relevant international bilateral

agreement stipulates otherwise.

Prior to applying for a temporary residence permit, a visa

from the Romanian embassy or consulate in their country

must be obtained for entry to Romania, except for citizens


■ EU member states

■ United States

■ Canada

■ Japan

■ Liechtenstein

■ Switzerland

32 PricewaterhouseCoopers - Business Guide to Romania 2005

Work Permit

Foreign individuals performing services in Romania may


■ only a foreign employment agreement;

■ both a foreign and a local employment agreement; or

■ only a local employment agreement.

Only foreign individuals performing services in Romania

based on a local employment agreement need to apply

for obtaining a Romanian work permit. As of November

2004, foreign individuals can be seconded to Romania

(i.e. only on a foreign employment contract) for 1 year.

After this period, they need to obtain a work permit.

In order to obtain a work permit, a working visa should be

obtained from the Romanian diplomatic mission or from

the Romanian consular offices in the country where the

expatriate is domiciled, unless the foreign individual is a

citizen of one of the countries indicated above.

The lack of a local employment relationship does not

significantly change tax liability but could affect social

security liability (i.e. foreigners performing services in

Romania based on local employment agreements are

liable to pay all social security contributions required by

the Romanian legislation).

Chapter 7

Accounting and Audit

Requirements and Registration

■ Gradual introduction of International Financial

Reporting Standards (IFRS) and EU accounting


■ Existing Romanian Accounting Regulations (RAR)

geared towards tax compliance not information


■ Significant differences exist between RAR and IFRS

■ Audit requirements depend on accounting

framework adopted (IFRS or RAR)

7.1 Accounting

Introduction of International Financial

Reporting Standards

Historically, accounting in Romania was directed towards

providing information to two specific groups: the tax

authorities and the government (e.g. the National

Statistics Commission). This led to the preparation of

financial statements that did not take into account the

needs of other interested parties such as shareholders,

bankers, suppliers, customers, employees, and potential


In 1994 a new system of accounting, based on the French

system and incorporating a revised 'Chart of Accounts',

was introduced. Although it allowed the measurement of a

company's assets and liabilities in a manner broadly

consistent with International Financial Reporting

Standards (IFRS), the system still failed to include certain

essential information, such as cash flow statements and

other disclosures, including notes, in financial statements.

Moreover, in practice the system was rarely applied in full,

being restricted mainly to information necessary for tax


In February 2001, the Ministry of Public Finance issued

Order number 94 ('OMF 94') for the approval of the

'Accounting Regulations Harmonised with the Fourth

Directive of the European Union and International

Accounting Standards'. This order stipulates the

application of IAS with certain exceptions. OMF 94 will be

applied to most large companies by 2005, including all

publicly listed companies and state companies ("societati

/ companii nationale”) that are of national interest.

The preparation of financial statements that comply with

OMF 94, excluding the application of certain international

accounting standards (namely non-application of IFRS

dealing with hyperinflation or consolidation), has led to

significant departures from IFRS.

In April 2002, the Ministry of Public Finance issued Order

number 306 ('OMF 306') approving the 'Simplified

Accounting Regulations Harmonised with the European

Directives'. Beginning with 1 January 2003, this Order

should be applied by all companies that do not apply

OMF 94.

The introduction of IFRS has been delayed to 1 January

2006 through the publication of Law 420/2004 regarding

changes to Accounting Law 82/1991. However, while the

first stand alone IFRS financial statements are required to

be filed with the authorities for the year starting 1 January

2006, the first IFRS consolidated financial statements

have to be filed for the year starting 1 January 2007.

Starting 1 January 2006, Romania will also adopt in full

the IVth Directive 78/660/EEC as well as VIIth Directive

83/349/EEC, as stated by the Order of Ministry of Public

Finance 1775/2004.

Existing Romanian Accounting Regulations

The Ministry of Finance currently governs Romanian

Accounting Regulations. The regulations take the form of:

■ Laws (i.e. Accounting Law nr. 82/1991 republished) or

Government Ordinances or sessions, detailing

significant new pieces of legislation;

■ Norms (or regulations), providing a detailed

explanation of how the Laws or Government

Ordinances or Decisions should be implemented;

PricewaterhouseCoopers - Business Guide to Romania 2005 33

Chapter 7 - Accounting and Audit Requirements and Registration

■ Orders of the Ministry of Finance providing additional

guidance on accounting and tax issues.

Significant Accounting Differences Between


Appendix V contains a table indicating some of the major

differences between the practical application of RAR (i.e.

OMF 306 and OMF 94 rules) and IFRS. These should be

kept in mind when reading Romanian financial statements

prepared under RAR.

7.2 Chart of Accounts

Both OMF 94 and OMF 306 require the use of a Chart of


The principle underlying the Chart of Accounts is that all

companies should record the same item in the same

account, irrespective of the nature of their business.

Accordingly the Chart of Accounts is a set of predefined

account numbers and names that must be used by all

companies. A brief summary of the Chart of Accounts for

a commercial company under both OMF 94 and OMF 306

is given in Appendix V (note that the Chart of Accounts

for banking institutions and non-profit organisations is


7.3 Audit Requirements

Audits in Romania take place by legal requirement in

accordance with the provisions of the Emergency

Government Ordinance 75/1999 approved by Law

133/2002 (the Audit Law) and subsequently amended by

Government Ordinance 67/2002 and Law 12/2003. The

Government Ordinance 75/1999 was republished in 2003.

Legally Required Audits

Companies Subject to OMF 94

Companies applying the provisions of OMF 94 are

required to submit to an audit by a member of the

Romanian Chamber of Financial Auditors (‘the Chamber’).

This body was created under Emergency Government

Ordinance 75/1999, and is designed to comply with the

requirements of the EU 8th Directive. The Chamber was

created as part of a UK Government-funded project to

improve accounting and auditing practices.

Companies Subject to Romanian Accounting Regulations

Joint Stock Companies (SAs) and Limited Liability

Companies (SRLs) with more than 15 shareholders that

34 PricewaterhouseCoopers - Business Guide to Romania 2005

are not subject to OMF 94 must be audited by their

appointed company 'censors' or financial auditors if the

companies opt for having an external auditor.

Censors are either individuals or companies appointed by

the SA or SRL at the time of their registration as legal

business entities. Their main responsibilities include:

■ Supervision of the administration of the company and

ensuring that accounts and legal books are properly


■ Ensuring that decisions taken by the General Meeting

of Shareholders are properly implemented;

■ Ensuring that the company and its directors comply

strictly with the law;

■ Ensuring that the end-of-year financial statements are

prepared in accordance with the law.

The auditing rules for companies that are not subject to

OMF 94, or are neither an SA nor SRL included in the

above category, are open to interpretation. Individuals or

companies who are members of the professional

Romanian Accountants Body (CECCAR) normally perform

such audits.

Auditing Standards for Legally Required


Audits performed by members of the Chamber of

Auditors have to be performed in accordance with the

Auditing Standards established by the Chamber, which

are similar to International Standards on Auditing. A

number of international accounting firms (including

PricewaterhouseCoopers) are members of the Chamber.

Audits performed by censors do not have to follow any

particular framework.

Securities Commission Requirements

Companies subject to regulations on securities (all of

which must be SAs) are required to appoint independent

external auditors (individuals or audit firms) who are

members of the Chamber. At least once a year, these

companies must submit an auditor's report to the

National Securities Commission.

Accountants and Law Firms

Details of major accounting and legal firms are provided in

Appendix VI.

Chapter 8

Taxation of Corporations

■ Standard corporate tax rate of 16%

■ Quarterly reporting and payment (monthly for banks)

■ Dividend tax of 10% on dividents paid to resident

legal persons and individuals

■ Micro-companies pay 3% of revenue earned

■ The fiscal year is the calendar year for all entities

8.1 Corporate Tax System


Romanian entities and foreign entities doing business in

Romania are liable for corporate income tax (profit tax).

The standard profit tax rate is 16%, applicable to both

Romanian companies and to foreign companies operating

through a permanent establishment in Romania.

The profit tax liability due by nightclubs and gambling

operations cannot be lower than 5% of the revenues

obtained from such activities.

Companies that have opted for the micro-company

regime (annual turnover up to EUR 100,000 and between

1 and 9 employees) are taxed at 3% of revenue earned,

up to and including the year in which they go beyond

these criteria, payable each quarter, by the 25th of the

month following the quarter for which the tax is paid.


Dividend payments by a Romanian company to Romanian

residents, individual or corporation shareholders are

subject to 10% dividend tax.

If the payments abroad are made towards a beneficiary

resident in a country with which Romania has not

concluded a Double Taxation Treaty, the dividend

withholding tax is 15%. If the payments abroad are made

to a beneficiary resident in a country with which Romania

has concluded a Double Taxation Treaty and the

beneficiary of the payment makes available a fiscal

residence certificate, then the Romanian withholding tax

rates applicable for residents or the rates stipulated in the

Treaties would apply, whichever are more favourable.

After Romania's accession to the EU, dividends paid by a

Romanian company to another company (Romanian or

within the EU) will not be taxed if the beneficiary holds at

least 25% of the share capital of the Romanian company

for a minimum period of 2 years that ends on the date

when the dividends are paid.

Accounting and Fiscal Depreciation

The Fiscal Code makes an explicit distinction between

accounting and fiscal depreciation. For fixed assets

commissioned after 1 January 2004, fiscal depreciation is

to be computed based on the rules set out by the Fiscal

Code and deductibility will no longer depend on the level

of depreciation recorded in the accounts. Accelerated or

reducing balance depreciation methods may be used for

determining the fiscal depreciation while the accounting

depreciation method could be different (e.g. straight-line


Companies are allowed to revalue their fixed assets at the

end of each year. Revaluation is compulsory if the

cumulative inflation rate exceeds 100% over the last three

consecutive years. The respective inflation rates for the

last three years were 17.8% (2002), 14.1% (2003) and

9.3% (2004). Therefore, for 2004 the cumulative inflation

over the last three years did not exceed the 100% limit.

The revaluation needs to be made on the basis of the

inflation index set by the National Institute of Statistics,

and on the market value established under the criteria

stipulated by law.

The Fiscal Code also states that the fiscal depreciation of

fixed assets existing in the company's records as of 31

December 2003 will be computed considering the net

book value of such assets at 31 December 2003 (i.e.

including any revaluation recorded until that date) and by

using the same depreciation methods as in the past

periods. The revaluation recorded in the financial

PricewaterhouseCoopers - Business Guide to Romania 2005 35

Chapter 8 - Taxation of Corporations

statements of the year 2003 would be the last revaluation

possible to be deducted through fiscal depreciation.

No revaluation of fixed assets made and recorded after 1

January 2004 would be taken into account for computing

fiscal depreciation.

Companies need to be prepared to keep a separate

record to reflect the distinct computation of the fiscal and

the accounting depreciation.


A company is considered resident if it is registered in

Romania or has the place of effective management in


Representative Offices

A Representative Office can only undertake auxiliary or

preparatory activities. A Representative Office cannot

trade in its own name and cannot engage in any

commercial activity.

There is a flat tax of EUR 4,000 per fiscal year on

representative offices, payable in ROL using the exchange

rate valid on the payment date.

For representative offices of foreign companies in

Romania, incorporated during the first half of the year (1

January- 30 June) the tax is due by 20 June and is

proportional to the number of months of activity of the

representative office during that semester. The tax due for

the second half (the equivalent of EUR 2,000) must be

paid by 20 December.

In the situation in which a Representative Office is set up

or closed down during the year, the tax due for the

respective year is pro-rated for the months for which the

Representative Office operated in the respective fiscal


8.2 Incentives

Profit Tax Legislation

■ Accelerated depreciation (i.e. up to 50% of the

acquisition value shown as deductible depreciation in

the first year, the remainder being equally spread over

the remaining useful life) can be used for technical

equipment, computers and peripherals without the

need for approval from the local tax authority.

The incentive is also applicable for assets acquired under

financial leasing agreements with ownership transfer

clauses applicable at the end of the contract.

36 PricewaterhouseCoopers - Business Guide to Romania 2005

Direct Investments

The law on direct investments with a significant impact on

the economy, enacted in July 2001, grants specific

incentives for cash investments of a minimum of

USD 1 million or equivalent. The incentives currently in

force are:

■ Customs duties exemption for specific

tangible/intangible goods imported as part of the


■ The investments benefit from a deduction of a 20% of

their value. The deduction shall be calculated during

the month when the investment is carried out, only

from a fiscal point of view;

■ Utilisation of accelerated depreciation for fixed assets,

except for buildings.

To benefit from these incentives, the investment must be

registered with the Romanian Agency for Foreign

Investments before its commencement. This investment

must be made against payments in ROL or in hard

currency and must be effectively accomplished within, at

most, 30 months from the date of registration.

The profit tax incentives granted under this law are

applicable until 31 December 2006. If an investment

qualifies for incentives granted by several laws, the

investor has to opt for one incentive regime.

Free Trade Zones

Taxpayers that operate under licenses in free trade zones

and have made investments by 1 July 2002 in depreciable

tangible assets used in the processing industry,

amounting to at least USD 1 million, benefit from profit tax

exemption until 31 December 2006. This incentive

ceases to apply if changes occur in the shareholding

structure of the taxpayer. A change is deemed to have

occurred in the shareholding structure if more than 25%

of the company's shares have changed hands during a

calendar year.

Until 31 December 2004, all other companies operating in

the free trade zones were liable to pay profit tax of 5% on

the taxable profits generated by activities performed in

these areas. From 1 January 2005 the standard rate has

been applied.

Disadvantaged Areas

Legal persons that have obtained a permanent investor

certificate in a disadvantaged area prior to 1 July 2003 are

exempt from paying profit tax throughout the existence of

the disadvantaged area.

Industrial Parks

For investments in made industrial parks before

31 December 2006, a supplementary deduction is allowed

out of the taxable profit, capped at 20% of the value of

investments in constructions or rehabilitation of

constructions, internal infrastructure and infrastructure for

connecting to the public utilities grid. The incentive is

granted in the month when the investment is finalised.

Taxpayers that benefit from the 20% deduction from the

acquisition value of the assets cannot benefit from this


No property tax is due for buildings and constructions

located in the Industrial Park. Also, land within Industrial

Parks is exempt from land tax.

Oil and Gas Incentives

Under the Petroleum Law, which was amended last year,

there are specific incentives for companies operating in

the field of crude oil and gas exploration and extraction

that have obtained the Petroleum Licence before

September 2004. These incentives are applicable for the

period in which the Petroleum License is in force.

The Fiscal Code stipulates that taxpayers operating in the

field of exploitation of natural deposits are obliged to

establish provisions for rehabilitation of the exploitation

area, up to 1% of the difference between revenues and

expenses from exploitation, throughout the entire working

period of the exploitation of natural deposits. For

titleholders of petroleum agreements that conduct

petroleum operations in marine perimeters with waters

deeper than 100 metres, the provision for closure of oil

rigs, as well as for environmental recovery, is 10% of the

difference between revenues and expenses registered

throughout the duration of the petroleum exploitation.

In addition, under the Fiscal Code the tax depreciation of

buildings and constructions related to petroleum

operations whose useful life is limited to the duration of

the reserves, and which cannot be used for any purpose

after the reserves are depleted, should be calculated on

the basis of units of production, based on the exploitable

petroleum reserve.

8.3 Gross Income

Accounting Period

All entities doing business in Romania are required to

keep their accounts by calendar year. The Government

can approve a financial year that is different to the

calendar year. The fiscal year is considered to be the

calendar year.

Business Profits

The taxable profit of an enterprise is calculated as the

difference between the revenues derived from any source

and the expenses incurred in order to obtain these

revenues, throughout the tax year, of which non-taxable

revenues are deducted and to which non-deductible

expenses are added. Other elements similar to revenues

and expenses are considered when computing the

taxable profit.

The annual accounts are used as the basis for calculating

taxable profit (further details on required adjustments are

given below).

Capital Gains

Capital gains are taxed in the year in which they arise.

Capital gains obtained by a Romanian resident company

are included in ordinary profit and taxed at 16%. Capital

gains obtained by non-residents from the sale of real

estate located in Romania or on the sale of shares held in

a Romanian company are also taxable in Romania at

16%. The 10% tax rate for the sale of real estate located

in Romania and for capital gains on the sale of shares

held in a Romanian company has been cancelled as of 1

May 2005.

The provisions of Double Taxation Treaties prevail over the

provisions of domestic legislation.

Capital losses related to sale of shares are, in general, tax


Interest, Royalties, and Service Fees

Interest, royalties and service fees are included in a

company's business profits for accounting purposes and

are subject to corporate profit tax at the normal rate.


Chapter 8 - Taxation of Corporations

Dividends received by one Romanian company from

another Romanian company are non-taxable revenues.

PricewaterhouseCoopers - Business Guide to Romania 2005 37

Chapter 8 - Taxation of Corporations

The dividends received by a Romanian company from a

foreign company are taxed at 16% in Romania. A tax

credit is available for the tax paid abroad.

After Romania's accession to the EU, dividends received

from a company within the EU should be non-taxable

revenues if the Romanian legal entity holds at least 25 %

of the capital of the company that distributes the

dividends for a minimum period of two years.

8.4 Deductibility of Expenses

Companies may deduct all expenses incurred in order to

obtain taxable revenues. The deductible rules from 1

January 2005 are, among others, as follows:

■ Expenses incurred by acquiring packaging throughout

the useful life established by the taxpayer;

■ Registration fees, subscription fees and contributions

due to the chambers of commerce and industry,

trade unions and employers associations.

Nonetheless, the deductibility of certain expenses is

limited, including :

■ Interest expenses exceeding an annual rate of 7% for

foreign currency loans contracted from entities other

than banks, financial institutions and leasing

companies (see below).

■ Representation expenses are limited to 2% of the

difference between taxable revenues and deductible

expenses, except protocol expenses.

■ Interest expenses and net foreign exchange losses if

the debt to equity ratio is higher than three. (see

below). Interest which is non deductible under this

rule can be carried forward to subsequent years.

■ Travel and accommodation expenses incurred in

Romania or abroad for employees and administrators

of the company are deductible only if the taxpayer

derives profit in the current year or in previous years.

■ Daily allowances for domestic and foreign travel is

deductible up to the level of 2.5 times the ceiling set

for public institutions and provided that the taxpayer

obtains profit in the current year or in the previous

years. If this condition is not met (i.e. the company

has losses) then such expenses are deductible at the

level of the ceiling set for public institutions (at about

EUR 3 day).

■ Marketing, market research, promotion, participation

in fairs and exhibitions are deductible. This deduction

is no longer conditioned by profits recorded by the

38 PricewaterhouseCoopers - Business Guide to Romania 2005

company in the current fiscal year and/or previous


■ Losses recorded at the write-off of bad debts are only

deductible in one of the following cases: closing of

bankruptcy procedure, decease, dissolution or

liquidation of the debtor, major financial difficulties

that affect the debtor's entire patrimony.

■ Social expenses are deductible to the level of 2% of

the salary expenses. Maternity allowances, funeral

benefits and allowances for serious or incurable

diseases and prostheses, as well as expenses for

proper operation of certain activities or units that are

under taxpayers administration fall under this ceiling:

kindergartens, nurseries, health services supplied for

occupational diseases and work accidents until

admission to health establishments, museums,

libraries, canteens, sports clubs, clubs, hostels, as

well as the schools that are under the aegis thereof,

etc. Expenses for transporting employees to and from

the working place are no longer included in this


■ Management and general administrative expenses

allocated by the foreign legal entity to the permanent

establishment are no longer limited to 10% of the

employees' salaries in order to be deductible. Instead,

additional requirements regarding the supporting

documentation for the expenses allocated by the

headquarters are stipulated.

■ Expenses effected on behalf of an employee for

private health insurance premiums and/or to an

optional occupational pension scheme within the limit

of EUR 200 per year per person.

In addition, a number of expenses are specifically nondeductible,


■ Profit tax as well as tax on revenues obtained in

foreign countries.

■ Fines and penalties due to Romanian or foreign

authorities, as well as to non-residents based on

commercial agreements.

■ Expenses incurred for services (management,

consultancy, assistance), if no written agreements are

concluded and if the beneficiaries cannot justify the

necessity of receiving these services for their

authorised activity.

■ Expenses related to non-taxable revenues.

■ Sponsorship and patronage expenses (but the

taxpayers are granted a fiscal credit with the limit of

0.3% of revenue and 20% of the profit tax due).

■ Other salary and/or similar expenses (if not taxed at

the level of the individual).

■ Withholding tax paid on behalf of non-residents.

■ Insurance expenses, except for insurance against

work related accidents or insurance related to assets

owned, rented or leased by the taxpayer.

■ Bad debts expenses in excess of the deductible

provision (see below).

■ Expenses registered for accounting purposes that are

not substantiated with "justifying" documents.

■ Contributions to professional associations and nonguvernamental

(NGO) organizations. These expenses

were previously deductible for profit tax purposes

within EUR 2000.

Provisions and Reserves

Amounts used for setting up or increasing reserves or

provisions are deductible as follows:

■ Setting up or increasing the legal reserve fund to a

limit of 5% of the yearly accounting profit before tax

(with adjustments ) until it reaches 20% of the share


■ Provisions for doubtful debts on debts established

after 1 January 2004 are deductible within the limit of

20% of the accounting value of the provisions for

2004, 25% for 2005 and 30% for 2006, if the related

receivables simultaneously meet the following


- are not collected for a period exceeding 270 days

from the due date;

- are not guaranteed by another person;

- are payable by a person who is not affiliated with the


- were included in the taxable income of the taxpayer;

■ Starting from 1 January 2007, provisions for

accounting purposes are fully tax deductible if the

following conditions are met :

- receivables are booked after 1 January 2007;

- the debtor is a company declared bankrupt by a court


- receivables are not guaranteed by another person;

- the debtor is not a related party;

- receivables were included in the taxable income of

the taxpayer;

■ Provisions for receivables recorded before 1 January

2004 are deductible within the limits stipulated by the

Fiscal Code for provisions established for receivables

recorded after 1 January 2004. In addition, two

conditions have to be met: bankruptcy proceedings

against the debtor have to be opened and the

provisions should not have previously been tax


■ The reserves established by banks or other

authorised lending institutions, as well as by mortgage

companies, as provided for by their regulatory legal

framework (including the legal reserve and general

banking risk fund);

■ Technical reserves set up by insurance and

reinsurance companies, in accordance with their

regulatory legal framework;

■ Risk provisions for transactions carried out on the

financial markets, in accordance with the rules issued

by the National Securities Commission. Interest

Expenses and Foreign Exchange Gains and Losses.

Changes in the Destination of Reserves and


The reduction or cancellation of any provision or reserve

that were deducted from taxable profit, due to changing

the destination of the provision or reserve, distribution

towards shareholders in any form, liquidation, division,

merger or any other reason, is included in the taxable

revenues and taxed accordingly.

Thin Capitalisation Rules

Chapter 8 - Taxation of Corporations

The deductibility of interest and foreign exchange losses

is subject to certain limitations (including thin

capitalisation rules) as set out in the Romanian Fiscal


The first rule limits the deductibility of interest on loans

contracted with all parties not being financial institutions

(where financial institutions include banks, leasing

companies for leasing operations) to the limit of 7% for

loans in hard currency, and of the National Bank of

Romania's rate for ROL loans. Interest exceeding this limit

is non tax-deductible and cannot be carried forward in

future periods.

The second rule is the general thin capitalisation rule.

Since 1 January 2005, this rule states that if a company's

debt-to-equity ratio is higher than three or if the

company's equity is negative, interest expenses and net

foreign exchange losses from long-term loans (other than

from banks and financial institutions) are non-deductible.

PricewaterhouseCoopers - Business Guide to Romania 2005 39

Chapter 8 - Taxation of Corporations

Expenses assessed as non-deductible under this rule can

be carried forward to the following period and are

deductible under the same conditions, until fully


Debt included in the calculation of the debt-to-equity ratio

is represented by all loans with a maturity period of over

one year. The equity includes share capital, reserves,

retained earnings, current year earnings and other equity

elements. Both debt and equity are calculated as the

average of values existing at the beginning and at the end

of the period in which profit tax is calculated.

Transfer Pricing

Romanian transfer pricing legislation requires that

transactions between related parties should be carried out

against market value. Romanian Tax Authorities have

started to take the OECD transfer pricing guidelines into

consideration when applying transfer pricing rules.

If the prices used between related parties are not at arm's

length, the Romanian Tax Authorities can adjust the

related revenues/expenses of the parties in order to

reflect the market value of the respective transactions.

However, the Romanian Tax Authorities will investigate

only the transactions carried out between a Romanian

entity and a foreign related party.

The tax legislation details transfer pricing methods the

taxpayers can apply when setting prices for transactions

between related parties: comparable uncontrolled price

method, cost plus method, resale price method,

transactional net margin method and profit split method.

Currently, there are no formal transfer pricing

documentation requirements stipulated in the legislation.

However, this is expected to change as Romanian Tax

Authorities are continuing to evaluate the impact of

transfer pricing on transactions between related parties.


Romanian companies are allowed to carry forward the

fiscal losses as declared in the yearly profit tax returns for

a period of five years based on a FIFO method. No

adjustment for inflation is allowed in this respect.

For foreign legal persons this rule applies only to revenues

and expenses attributable to their permanent

establishment in Romania.

40 PricewaterhouseCoopers - Business Guide to Romania 2005

8.5 Tax Computations

General Aspects

Tax returns have to be submitted on a quarterly basis

along with the appropriate tax payment, by the 25th of the

next month. Banks are obliged to pay tax and submit tax

returns on a monthly basis.

Non-resident companies deriving income from a real

estate property located in Romania or sale of shares held

in a Romanian company are required to submit a tax

return. Foreign companies can appoint a fiscal

representative to take care of such obligations. If a

Romanian company or a permanent establishment of a

foreign company in Romania pays the income to the nonresident

company, the payer of the income is obligated to

pay the capital gains tax. Sale-purchase contracts should

mention which party is liable for these obligations.


There is no system of group taxation in Romania.

Members of a group must file separate tax returns. There

are no provisions to offset the losses of group members

against the profits of other group members. The absence

of any provisions for group taxation and the 10% dividend

tax implies that the establishment of a holding company

in Romania is unlikely to be advantageous.

8.6 Other Taxes

Withholding Tax

Non-resident companies and individuals are subject to the

following withholding taxes if there are no overriding

provisions in international treaties:

■ 10% (16% as of 1 January 2006) withholding tax on

interest for term deposits; Also the withholding tax

applies on interest for demand deposits if the interest

rate exceed the reference interest rate quoted on the

inter-bank market for one month deposits

denominated in the relevant currency;

■ 20% from gambling by non-residents;

■ 15% (16% as of 1 January 2006) withholding tax on

other revenues derived from Romania, such as:

- royalties;

- dividends*);

- revenues from services if performed in Romania,

except for revenues from international transport


- revenues obtained from management, brokerage or

consultancy services, irrespective where the services

are performed;

- commissions;

- interest, other than mentioned under point 1 above.

Since 1 January 2005, income from brokerage services

supplied outside Romania is not subject to Romanian

withholding tax.

Revenues derived from interest on demand

deposits/current accounts opened with banks or other

credit institutions in Romania are tax exempt only if the

interest rate is lower than or equal to the reference

interest rate quoted on the inter-bank market for one

month time deposits, denominated in the relevant


Withholding tax due on payments in foreign currency

must be made at the exchange rate valid on the day the

tax is withheld.

Double Taxation Treaties signed by Romania may reduce

the withholding tax rate on the payments listed above,

based on a fiscal residence certificate made available by

the non-resident beneficiary of the payment. The reduced

rates vary according to the country to which the

payments are made, and according to the Double

Taxation Agreement applicable (see Appendix VII (a) and

VII (b)).

The notarised Romanian version of the tax residence

certificate can be submitted in the year when income is

derived or in the following year. The failure to provide the

tax residence certificate entails taxation as per the Fiscal

Code; settlement of the related tax (as per the conditions

of the relevant DTT) will be performed when the certificate

is provided. In practice, this procedure appears to be very


*) The 15% dividend withholding tax applicable for both

non-resident individuals and companies is reduced to the

most favourable rate provided under the DTT and 10% if

the fiscal residency certificate is made available.

The following categories of income derived from Romania

by non-residents are exempt from withholding tax:

■ bonds issued by the Romanian government or


■ revenues from consultancy, technical assistance and

similar services financed by means of non

reimbursable funds and loans granted to the

Chapter 8 - Taxation of Corporations

Romanian state, or loans guaranteed by the

Romanian state;

■ prizes paid from public funds.

Property Tax

Building Tax

Building tax ranges between 0.5% and 1% of the

accounting value. This percentage is increased to

between 5% and 10% if the building has not been

revaluated in the last three years. It is recommended that

one always observes this provision when drawing up the

annual accounts and, if necessary, revaluates the


Land Tax

Owners of land are subject to land tax which is

established at a fixed amount per square metre,

depending on location. Land located outside urban areas

will be subject to a tax of ROL 10,000/ha (approximately

0.25 EUR), irrespective of its category of usage and area.

Companies are not subject to land tax on land that is

used to host buildings or special constructions used for

agricultural activities. The land tax should be paid


Health Tax

The providers of advertising services for products such as

tobacco and alcohol pay a 12% health tax. The tax is

applied on the value of cashed advertising revenues.

There is also a 2% health tax due from legal entities who

obtain revenues from the production of alcohol (except for

producers of wines), as well as from traders who obtain

revenues from promoting products such as tobacco,

cigarettes and alcohol. This tax does not apply for beer


Advance Tax Ruling

Companies qualifying as major taxpayers may request an

advance tax ruling issued by the Central Fiscal

Committee. The criteria and necessary documentation for

obtaining an advance tax ruling can be found in a

Government Decision.

Other taxpayers can request an advance tax ruling from 1

January 2007 onwards.

PricewaterhouseCoopers - Business Guide to Romania 2005 41

Chapter 9

Taxation of Individuals

■ A 16% flat tax rate applies on most individual

income types

■ Romanians domiciled in Romania are subject to

taxation on their worldwide income (except for

salaries received from abroad for services

performed abroad)

■ Romanians not domiciled in Romania and foreign

individuals, regardless of their domicile, are subject

to Romanian taxation only for income sourced in

Romania (from 2007 foreign individuals may be

taxed on their worldwide income if specific criteria

are met)

■ Foreign individuals are required each month to

calculate, declare and pay individual income taxes

for income from personal services performed in


■ Salary tax exemption for software engineers if

certain conditions are fulfilled

■ Dividends are subject to a 10% withholding tax

(15% for nonresidents)

■ Domestic interest income is subject to 1% until 31

May 2005, 10% until 31 December 2005, 16% after

1 January 2006

■ Capital gains derived from shares and real estate

transactions are taxed at different rates, depending

on conditions

9.1 Individual Income Taxpayers

Romania's individual income tax legislation defines

taxpayers as:

■ resident natural persons;

■ non-resident natural persons conducting independent

activities through a permanent establishment in


42 PricewaterhouseCoopers - Business Guide to Romania 2005

■ non-resident natural persons conducting dependent

activities in Romania;

■ non-resident natural persons deriving specific income.

Criteria for qualifying as a resident are the following:

■ Domiciled in Romania, or

■ Centre of vital interests in Romania, or

■ More than 183 days in 12 consecutive months ending

in the calendar year concerned*.

* Residents (for second and third criteria above) for three

consecutive years are taxable on worldwide income as of

their fourth year of stay.

9.2 Taxable Income and Method of


The following income is subject to Romanian income


■ Income subject to 16% flat tax rate

a) Salary income

b) Income from independent activities

c) Income from transfer of usage rights

d) Pensions income (over ROL 9,000,000~EUR 250)

e) Income from agricultural activities

f) Income from prizes

(over ROL 6,000,000~EUR 167)

g) Other income subject to 16% flat tax rate

■ Income subject to other tax rates

h) Income from investments

i) Income from real estate transactions

j) Income from gaming.

Income Subject to 16% Flat Tax Rate

a) Salary Income

Salary is income in cash and/or in kind received by an

individual based on an employment agreement.

Income relating to salaries includes indemnities received

by members of the General Meeting of Shareholders and

of the Board of Directors and taxable benefits expressly

stipulated by specific Romanian legislation, which include

private use of company car and telephone.

The following individuals are considered taxpayers:

■ Employees of Romanian companies, branches and

representative offices of foreign companies; the

employer is liable to calculate, withhold and transfer

salary taxes, on a monthly basis;

■ Foreign individuals performing services in Romania

based only on a foreign employment agreement; they

are liable to submit a monthly tax declaration and pay

monthly income tax based on salary sourced in


b) Income from Independent Activities

Income from independent activities includes:

1) income from freelance activities (authorisation


2) income from intellectual property rights;

3) income from commercial mandate and commission


b.1) Freelance Activities

Income from freelance activities is assessed on the basis

of entries in the single entry bookkeeping ledgers that

providers of independent activities are obliged to keep.

Net income is computed as gross income less deductible


For freelancers (both Romanians and foreigners), the

following are non deductible: fines, late payment penalties

(other than contractual penalties), donations, sponsorship,

and protocol expenses in excess of upper limits set by

law, per diem and other expenses exceeding limits

provided by current law.

Alternatively, certain categories of freelancers are taxed

on the basis of an income quota, as communicated yearly

by the Romanian Ministry of Finance.

Freelancers earning income from independent activities

have the obligation to make equal quarterly provisional

tax payments during the fiscal year.

b.2) Intellectual Property Rights

Chapter 9 - Taxation of Individuals

The payers of royalties must compute, withhold, and pay

a quota of 10% advance tax. The income is adjusted at

the end of the year, when the provider may deduct

expenses in a quota of 40% of the gross amount.

b.3) Commercial Mandates and Commission Agreements

A 10% withholding tax also applies for commercial

mandates or commission agreements. The income is

adjusted at the end of the year.

c) Rental Income

Gross annual income represents the income earned by

the owner during the year as stipulated in the rental

agreement registered with the Romanian tax authorities.

Net income is determined by deducting a 25% expense

quota from the gross income.

Individuals earning income from these types of activities

have the obligation to make quarterly provisional tax

payments during the fiscal year.

d) Income from Pensions

Pensions are taxable only for the amount that exceeds

ROL 9,000,000 (~EUR 250) per month.

e) Income from Agricultural Activities

The following activities are considered agricultural


■ flowers and vegetables farming and selling, in

greenhouses and/or in an irrigated system;

■ farming and selling of shrubs, decorative plants and


■ vineyard farming.

f) Income from Prizes

Tax on income from prizes in excess of ROL 6,000,000

(~EUR 167) is withheld at source

g) Other Income Subject to 16% Flat Tax


The following types of taxable income are included in this


■ insurance premiums incurred by a payer that has no

employment relationship with the beneficiary of the


■ gains received from insurance companies as a result

of the insurance contract concluded between the

PricewaterhouseCoopers - Business Guide to Romania 2005 43

Chapter 9 - Taxation of Individuals

parties on "depreciation drawings" (trageri de


■ income granted to pensioners in the form of discounts

for certain goods, services and other entitlements,

under the clauses in the employment agreement or

under special laws;

■ income derived by natural persons in the form of fees

from commercial arbitration fees.

Income Subject To Other Tax Rates

h) Income from Investments

■ dividends

- 10% until 31 December 2005

- 16% after 1 January 2006

■ interest income:

- 1% until 31 May 2005

- 10% for deposits made as of 1 June 2005

- 16% for deposits made as of 1 January 2006

■ gains from transfer of securities:

- 1% in the following situations:

- on the capital gain derived from the transfer of

securities acquired before 31 May 2005,

respective of the date they are sold;

- on the capital gain derived from the transfer of

securities acquired and sold during the period

1 June 2005 - 31 December 2005;

- on the capital gain derived from the transfer of

securities acquired after 1 June 2005 and held

for at least 365 days;

- 16% on the earning obtained from the transfer of

securities acquired after 1 June 2005, sold after 1

January 2006 and held for less than 365 days.

As of 1 January 2006 capital gain from sale of securities

will be taxed at 16%, except for shares held at least 365

days or aquired before 31 May 2005 wich will be taxed

at 1%.

Starting 2006, the income in the form of capital gains

derived from the transfer of shares in listed companies will

be adjusted for capital losses at the end of the year.

■ capital gains derived from foreign exchange based

future contracts, as well as from any other similar


- 1% until 31 May 2005

- 10% as of 1 June 2005

44 PricewaterhouseCoopers - Business Guide to Romania 2005

- 16% as of 1 January 2006

i) Income from Real Estate Transactions

Taxable income from real estate transactions is

determined by subtracting the base value (price) of the

real estate property from its sales value. A 10% tax rate

applies as of 1 June 2005.

The income derived from the following real estate

transactions is tax exempt:

■ sale of residential real estate properties owned by the

seller for more than three years;

■ contribution in kind of real estate against share


■ sale of real estate properties obtained through the

state restitution process;

■ sale of real estate properties obtained by inheritance

or donation;

■ exchange of real estate properties.

As of 1 January 2006 income from real estate

transactions will be taxed at 16%.

j) Income from Gaming

Tax on income from gaming is determined by levying 25%

on the gross income, 20% for amounts up to ROL

100,000,000 (~EUR 2800).

The tax calculated and withheld upon disbursement is


9.3 Tax-exempt Income

The main categories of tax-exempt income are:

■ Allowance for maternity leave, maternity risk and for

child care leave (up to 2 years) paid from SSC budget;

■ Salaries obtained by seriously disabled individuals;

■ Meal tickets;

■ Stock option plan advantages, at the moment of their

grant and exercise;

■ Amounts received for covering transport and

accommodation expenses incurred during


■ Salary income related to the design and creation of

software (certain criteria needs to be observed);

■ Sponsorship and donations;

■ Inheritance;

■ Income from sale of movable and immovable assets

(with the exception of shares described as "capital

gains"), if not regularly made.

9.4 Deductions from the Annual

Income Tax

■ For the main job, in order to compute the taxable

income from salary, the following amounts are to be

deducted from the gross income:

- social security contributions;

- personal and family related deductions calculated as

per law;

- contributions to optional occupational pension

schemes, within the ROL equivalent of EUR 200


- trade union membership fees paid in accordance with

the relevant laws.

■ For each of the secondary jobs, the taxable income is

assessed as the difference between the gross income

and the social security obligations.

Taxpayers may dispose upon the destination up to 2% of

the annual income tax due for charitable purposes


9.5 Taxation of Non-residents

Chapter 9 - Taxation of Individuals

Non-resident individuals are also subject to taxation in

Romania on Romanian source income, other than

personal service income. The following withholding taxes

are applicable on payments made abroad, unless a

relevant double tax treaty states otherwise:

■ 10% on interest;

■ 15% on dividends, royalties, commissions,

management services, etc.;

■ 20% on income from gaming.

If the income is paid to a resident of a country with wich

Romania has concluded a Double Tax Treaty, the more

favorable treaty rate may immediately be applied if the

beneficiary provides a residence certificate.

PricewaterhouseCoopers - Business Guide to Romania 2005 45

Chapter 10

Indirect Taxation

Value Added Tax

■ The standard VAT rate is 19% and the reduced VAT

rate is 9%

■ VAT payment exoneration for import of equipment

and certain raw materials (included in a list)

■ No physical payment for VAT reverse charge

■ Simplification measures for certain transactions

■ Only companies registered for VAT purposes in

Romania are entitled to reclaim VAT

■ VAT reimbursement within 45 days

Excise Tax

■ Tax warehouseas suspensive regime

10.1 Value Added Tax (VAT)

Scope of VAT

The operations included in the scope of VAT are those for

which the following conditions are fulfilled:

■ They represent the supply of goods or services in

return for a payment or an operation assimilated


■ The deemed place of supply is in Romania;

■ They are performed by taxable persons;

■ They result from economic activities.

The import of goods is also within the scope of VAT.

A taxable person is any person conducting economic

activities anywhere in an independent manner, irrespective

of the purpose or result of those activities.

46 PricewaterhouseCoopers - Business Guide to Romania 2005

Customs and International Trade

■ Romania has adopted the Harmonised System for

the denomination and classification of goods (HS),

which is a six-digit code nomenclature and detailed

at eight-digit codes in line with the Combined

Nomenclature applied by EU countries

■ Romania is an associate member of the EU, EFTA

and CEFTA and has signed free trade agreements

with Albania , Bosnia-Herzegovina, Israel,

Macedonia, Moldova, Serbia and Montenegro and


■ A wide range of products can be imported or

exported without an import/export license.

Nonetheless, import licenses are required for

commodities such as oil, certain chemical products,

and weapons

■ Import of goods with preferential origin (i.e. EU) are

not subject to customs duties

Place of Supply

The rules for establishing the place of supply for goods

and services (and therefore the place of VAT taxation) are

similar to those stipulated in the EU 6th VAT Directive.

Taxable Regimes

Standard rate

The standard VAT rate is 19% and is applied to all

supplies of goods and services, including imports, not

qualifying for an exemption (with or without credit) or for

VAT reduced rate.

Reduced rate

The reduced VAT rate is 9% and is applied to medicine

for human and veterinarian use, books, newspapers and

periodicals, accommodation in hotels or in areas with a

similar function, cinema tickets, admission fees at

museums, historical monuments, zoos and botanical

gardens, fairs and exhibitions, supply of school manuals,

supply of prostheses and orthopaedic products.

Exemption with credit

There are also operations that are exempt with credit

(deduction right) for input VAT:

■ export of goods, transport and related services;

■ goods sold through duty-free shops;

■ international transport of passengers;

■ certain operations performed in free trade zones and

free harbours;

■ supply of goods to a bonded warehouse and related


■ services provided in connection with goods placed

under customs suspensive regimes;

■ supply of goods and services under projects financed

through grants, and supplies to diplomatic missions.

Exemption without credit

VAT exemption applies to a range of activities including

banking, financial, insurance, lease of certain real estate

properties. The exemption also applies for medical,

veterinary, and social assistance and educational activities

if provided by the licensed entities.

Import VAT

Import of goods

Supply of foreign goods, which are placed under

suspensive customs regimes, is an operation outside the

scope of VAT.

VAT on imported goods is due at the date of their

customs clearance. In certain circumstances, the

companies can benefit from VAT payment exoneration -

see below.

The taxable amount for VAT purposes for imported goods

is the customs value, to which are added customs duties,

customs commissions, excise duties (if applicable) and

accessory expenses, such as commissions, packing,

transport and insurance costs occurring subsequent to he

entry of goods into Romania until their first destination.


Services provided by offshore entities to Romanian

companies with a deemed place of supply in Romania,

are subject to Romanian VAT. A reverse charge

mechanism applies if non-residents do not opt to appoint

a fiscal representative. The VAT reverse charge should not

be physically paid, but only shown in the VAT return as

both input and output tax, provided that the beneficiary is

registered as a VAT payer.

The beneficiaries registered as VAT payers are also

required to issue self-invoices for VAT purposes for the

services subject to VAT reverse charge.

Fiscal Representation

Offshore entities can appoint a fiscal representative for

VAT purposes in Romania if they provide services to

Romanian entities with a deemed place of service supply

in Romania, except for the services that have the place of

supply at the beneficiary's headquarters (e.g. consultancy,

marketing services).

Once registered, output VAT charged on the goods and

services supplied in Romania are accounted for through a

monthly VAT return submitted by the fiscal representative.

A foreign business can recover input VAT charged by the

local suppliers in the monthly VAT returns.

If the non-resident does not appoint a fiscal

representative in Romania then the Romanian beneficiary

has to apply VAT under the reverse charge mechanism.

Non-residents are required to appoint a fiscal

representative in Romania for any supply of goods in


VAT Incentives

The VAT payers can benefit from VAT payment

exoneration in customs for the import of industrial

machinery, technological equipment, installations,

equipment, measurement and control devices,

automations imported for investments, as well as farming

machinery, means of transportation and certain raw

materials (included in a list issued by the Ministry of

Public Finance). VAT exoneration can be applied only

based on a VAT exoneration certificate issued by the local

tax authorities where the VAT payer is registered.

Simplification Measures

Chapter 10 - Indirect Taxation

In the case of sale-purchase transaction with land,

buildings or part of buildings, wasted materials, scrap iron

and non-ferrous metals, and wood, between VAT payers,

VAT is not actually paid. This VAT will only be shown by

both the seller and the buyer in the VAT return and VAT

ledgers as both output and input tax.

PricewaterhouseCoopers - Business Guide to Romania 2005 47

Chapter 10 - Indirect Taxation

Taxable Amount

The VAT payers are allowed to adjust the output VAT if the

counter value of the goods or services supplied cannot be

cashed because of the declared bankruptcy of the client.

The initial output VAT can also be adjusted for price

decreases or increases and for return of goods.

Non-deductible Input VAT

VAT related to goods and services that are not purchased

for the purpose of business is not deductible.

If the VAT payer performs both taxable and exempt

operations, the 'input VAT' can be recovered based on the

following criteria:

■ the input VAT directly attributable to VAT-able

transactions is fully deductible;

■ the input VAT directly attributable to exempt

transactions is fully non-deductible;

■ the input VAT related to both VAT-able and exempt

transactions is subject to pro rate.

VAT Compliance

Taxable persons must keep complete and detailed

records for the computation of VAT liability.

As a general rule, the fiscal period is the calendar month

but for VAT payers with previous year-end turnover did

not exceed EUR 100,000, the fiscal period is the calendar


VAT returns should be submitted to the tax authorities by

the 25th of the month following the fiscal period; the VAT

is due by the same date. The VAT return should be

submitted using an electronic carrier (floppy disk).

Taxable persons not registered as VAT payers are required

to pay VAT and to submit a special statement on services

received from non-residents, which have the deemed

place of supply in Romania. These obligations must be

fulfilled by the 25th of the month following the one when

the services were supplied.

If a company is in a VAT reimbursable position, it must

tick the VAT refund box on the VAT return to request the

refund. Alternatively, the balance can be carried forward

against VAT liabilities reported in future returns. The

refund requests must be processed by the tax office

within 45 days from submission. Large tax payers (as

classified by the law) are entitled to obtain a refund on

request, with a subsequent inspection (i.e. a "fast

refund"). Other taxpayers may be entitled to a "fast

48 PricewaterhouseCoopers - Business Guide to Romania 2005

refund" (i.e. without prior inspection) but only after a

complex risk analysis.

If the VAT is not reimbursed within the legal term

(i.e. 45 days) taxable persons would be entitled to ask for

interest, currently standing at 0.06% per delay.

10.2 Customs and International Trade

Customs Duties

The Romanian Customs Import Tariff is based on the

Harmonised System for the denomination and

classification of goods, and is in line with the Combined

Nomenclature adopted by EU member states (eight-digit


Customs duties are expressed as a percentage applied to

the customs value - i.e. they are ad valorem taxes.

With the exception of agricultural and food products,

which have a specific tariff regime, the rates of customs

duties vary from 0% to 30% depending on the type and

characteristics of the goods. Examples of rates are given

in Appendix IX.

Preferential customs duty rates apply for goods

originating in EU, EFTA and CEFTA countries, as well as

with countries with which Romania has signed bilateral

free trade agreements (Albania, Bosnia&Herzegovina,

Israel, Macedonia, Moldova, Serbia&Montenegro and

Turkey). The trend is heading towards the elimination of

customs duties for goods originating in these trade blocs

or countries. However, in order to benefit from

preferential customs duties, importers have to present at

the customs office a valid proof of preferential origin.

Also, preferential customs duty rates apply for certain

goods originating in developing countries that are

members of P16 and GSTP.

Temporary Import Relief

Inward Processing Regime (IPR): If raw materials,

components or accessories are imported into Romania for

processing and subsequent re-export of the finished

products, customs duty relief is available through IPR.

Processing covers the full assembling and manufacturing

process. Under this regime importers can opt either for a

duty suspension system (no payment is due for the import

duties, but generally, the customs debt has to be

guaranteed) or for a duty draw-back system (the import

duties are to be paid at the import date, but the customs

duties are reimbursed when the finished products are reexported).

Also, an exemption from the obligation to

guarantee import duties could be obtained under the first

option (i.e. the IPR with duty suspension system).

Outward Processing Regime (OPR): The OPR customs

regime allows for the export of raw materials to be

processed abroad and subsequent re-import of the end

products with partial or full customs duty relief. This

regime also applies for goods or equipment sent abroad

for repair and/or modernisation.

Bonded Warehouse Regime (BWH): The BWH is a

customs regime allowing for temporary suspension of

payment of import duties on foreign goods stored in

warehouses until the date they are taken out of the

warehouse. Both goods owned by foreign entities, and

goods purchased initially by the Romanian titleholder of

the BWH authorisation, can be placed under the BWH

customs regime.

If the ownership over the foreign goods remains with a

foreign entity when the goods are introduced into the

BWH, and subsequently the goods are sold to Romanian

customers, the customers will become importers

responsible for customs import formalities, and liable for

the related import duties. If the goods are sold by the

foreign owner to customers outside Romania and reexported,

no import duties are due in Romania.

If the Romanian titleholder of the BWH authorisation

becomes the owner of foreign goods introduced into the

BWH, he has to perform the customs import formalities

and pay the related import duties before removing the

goods from the BWH.

No import duties are due however if the goods placed

initially in a bonded warehouse are placed under other

suspensive customs regimes (IPR, OPR, temporary

admission, transit, etc).

Generally, a guarantee is requested by the customs

authority in order to assure the effective payment of

import customs duties. However, this is not compulsory

for certain products, as an exoneration in this respect

could be obtained based on specific documentation.

The BWH regime also allows for storage of Romanian

goods intended for export, until they are effectively taken

out of the country.

Temporary Admission Regime (TA): Goods that are

introduced into Romania in order to be temporarily used

and later returned to the foreign owner are granted total

or partial relief from customs import duties. Total relief

means no payment or guarantees are requested by the

customs authorities in connection with the customs

import duties (i.e. customs duties, VAT and excise duties,

if applicable). Partial relief means the customs authorities

will levy a monthly portion of 3% of the customs duty and

the importer should provide a guarantee covering the


Customs Duties Incentives

Direct Investment Incentives

As mentioned in Chapter 8, direct investments of at least

USD 1 million are subject to customs duty exemption for

specific new tangible and intangible goods imported as

part of the investment. Examples of approved goods are

listed in Appendix X.

Goods contributed to share capital

Import duties (i.e. customs duties, VAT and excise duties,

if applicable) exemption applies to capital assets and

equipment upon the transfer to Romania of a business

activity that has ceased abroad, provided that certain

conditions are fulfilled. Generally, the assets must have

been effectively used for at least 12 months prior to the

cessation of the activities in the country from which they

have been transferred, and the assets have to be

imported into Romania within 12 months from the

cessation of the activity outside Romania.

Leasing Regulations

Chapter 10 - Indirect Taxation

Details of the corporate and withholding tax implications

of leasing are found in Chapter 8.

Current assets introduced into Romania by Romanian

lessees based on financial or operational leasing

contracts concluded with foreign leasing companies are

assigned, from a customs perspective, Temporary

Admission customs regime with total import duty relief

(including excise tax, if applicable), and, consequently, no

payment or guarantees are requested by the customs

authorities in connection with import duties.

Romanian leasing companies benefit from import duties

exemption on import of current assets based on leasing

contracts concluded with Romanian beneficiaries.

However, under both of these alternatives, the import

duties become payable at the end of the leasing

agreement, computed according to residual value. The

leasing legislation provides, for import duty purposes, for

a minimal residual value of 20% of the entry/acquisition

value of the goods. Specific provisions apply in relation to

the excise duties for leased cars - i.e. the taxable amount

for excise duties is the entry value of the entry/acquisition

value of the cars.

The duration of the leasing contract should be at least

one year and it cannot exceed seven years.

PricewaterhouseCoopers - Business Guide to Romania 2005 49

Chapter 10 - Indirect Taxation

Parts and components imported by Romanian leasing

companies and used for manufacturing products that are

subsequently subject to domestic leasing agreements,

benefit from import duty exemption upon importation.

Verification of the Declared Customs Value

The customs value is determined and declared by

importers in accordance with the provisions of the WTO

Customs Valuation Agreement (i.e. the Agreement

pertaining to the implementation of Article VII of the GATT


The customs authorities have implemented a procedure of

control of the declared customs value of imported

commodities, basically using certain risk criteria (such as

geographical criteria, sensitive products criteria). If the

goods meet one of these risk criteria, the importer is

allowed to remove the goods from the customs office,

provided that the import duties are paid on the declared

customs value and guaranteed up to a level established

by the customs authorities based on statistical values.

The customs authorities may perform the control of the

customs value either during the customs clearance

process (as mentioned above) or during a post-import

audit (the customs authorities are entitled to perform such

an audit during a five-year period from the date of import

- i.e. the prescription term for customs operations).

Import Restrictions

In an attempt to liberalise import-export transactions,

Romania does not generally impose specific measures,

values or quantitative quotas on imports and exports from

or to other countries (except for certain agricultural and

food products). Therefore, a wide range of products can

be imported/exported without a license being required or

other commercial measures being imposed.

However, import/export licenses from relevant authorities

are required especially for commodities that are

considered as potentially dangerous for human health or

for the environment (such as certain chemical products,

certain types of waste and scrap) for commodities the

end-use of which is controlled (such as explosives) or for

products which could conceivably have a dual use (i.e.

both civil and military).

Customs Regime for Individuals

Imports: Exemption from import duties (i.e. customs

duties, VAT and excise duties, if applicable) is granted

under certain conditions for personal belongings brought

50 PricewaterhouseCoopers - Business Guide to Romania 2005

by foreign individuals who change their residence or

domicile in Romania, or who establish a secondary

residence in Romania. The exemption is also granted for

personal goods brought in Romania as a result of

marriage or legacy.

Travellers - either Romanian or foreign individuals - are

allowed to bring into the country the following items

without payment of import duties: limited quantities of

pharmaceuticals, personal jewellery, books, publications,

one litre of alcoholic drinks which exceed 22% by volume

or 2 litres of other alcoholic drinks, 2 litres of wine, 200

cigarettes or 50 cigars, 50 ml of perfumes, 250 ml of eau

de toilette and any other goods for personal use with a

total value of less than EUR 175. For quantities exceeding

those mentioned above (except for alcoholic drinks,

tobacco and perfumery items which must not exceed the

mentioned quantities), import duties become payable and

the applicable rates are those provided by the Romanian

customs import tariff.

Exports: Romanian and foreign individuals are also

allowed to take the items specifically mentioned above

out of the country without payment of customs duties.

10.3 Other Indirect Taxes

Excise Duties

There are two categories of products: products for which

the excise regulations are harmonised with EU legislation

(i.e. alcohol, cigarettes, mineral oils, electricity) and other

excisable products (i.e. coffee, natural furs, jewellery,

perfumes and some electrical domestic appliances such

as microwave ovens, video cameras, and air conditioning

units). Examples are listed in Appendix XI.

The first category of excisable products can be produced,

transformed, held, received or dispatched under a duty

suspension arrangement only in a tax warehouse, which

should have prior approval from the tax authorities. Tax

warehouses for storage purposes can be authorised only

for alcoholic beverages subject to marking and for areas

for oil sea terminals and warehouses for mineral oil

producers, provided that the ownership of the mineral oil

remains with the producers.

The movement of these excisable products under a duty

suspension arrangement has to be made based on the

administrative accompanied document (AAD).

The production, holding and movement of excisable

products under duty-free suspension arrangements is

subject to guarantee, except when the excisable products

are transported between tax warehouses belonging to

the same authorised tax warehouse keeper.

The current excise tax rates for alcohol, cigarettes and

mineral oils are below the minimum mandatory levels

established by the EU legislation but will be gradually

increased to these minimums by the EU Accession date.

Transitional periods have been agreed for certain products

(e.g. cigarettes, unleaded oil, diesel oil).

Clearance Fees

Chapter 10 - Indirect Taxation

A customs commission of 0.5% is applied to the declared

customs value of imported goods. However, the 0.5%

customs commission has been eliminated for imported

goods originating in EU, EFTA, and CEFTA countries, as

well as for goods originating in Albania, Bosnia and

Herzegovina, Israel, Lithuania, Serbia and Montenegro

and Turkey, and it has been reduced to 0.25% for goods

originating in Macedonia.

PricewaterhouseCoopers - Business Guide to Romania 2005 51

Chapter 11

Fiscal Procedure

Provided by David & Baias, correspondent law

firm of PricewaterhouseCoopers in Romania

■ New principles introduced such as: the rule of good

faith, the right of the taxpayer to express its point of

view, the confidentiality of information

■ Tax registration within 30 days from the

incorporation date

■ For 2005 the late payment penalties 0.5%/month

and late payment interest 0.06 %/day

A new Fiscal Procedure Code entered into force on 1

January 2004 that unifies former legislation regulating tax

audits, collection of budget receivables, as well as

legislation on tax returns, tax assessment and tax

jurisdiction. It applies to taxes and duties payable both to

the state budget and local budgets, as well as to custom

duties and payables from contributions, fines and other

amounts treated as revenues to the state budget or other

budgets. The Romanian Government has also issued

norms containing detailed legal provisions for the

implementation of the Fiscal Procedure Code.

The Romanian Parliament has also enacted a new law

governing the procedure for challenging administrative

acts (including those of the tax authorities), which entered

into force at the beginning of 2005.

11.1 General Principles

Several important principles governing the relations

between taxpayers and tax authorities have been

enacted. These principles are the rule of good faith, the

right of the taxpayer to express its point of view, tax

secrecy (confidentiality of information) and the active role

of the tax authorities in advising taxpayers on the correct

application of tax legislation.

52 PricewaterhouseCoopers - Business Guide to Romania 2005

The fiscal legislation is to be construed in a uniform and

non-discriminatory manner. To this end, the Central Fiscal

Commission has been established as the only entity

empowered to issue official interpretations of the tax


As a rule, revenues are subject to taxation regardless of

whether they are generated by legal or illegal activities.

Liability of Other Persons

Shareholders, directors, managers and other persons may

be held liable for the duties of the taxpayer under certain

circumstances (e.g. persons provoking the insolvency of

the debtor by transferring the ownership over the debtor's

assets or hiding such assets; persons acquiring in bad

faith the debtor's assets within three years of the debtor's

insolvency). As a general rule, the liability of the

shareholders may not extend beyond the value of their

contribution to the share capital (except for the cases

listed in this code).

Rules Governing Evidence

Specific rules apply insofar as burden of proof is

concerned. Taxpayers should thus produce evidence

sustaining the facts included in tax declarations, whilst tax

authorities should base their tax decisions on a factual

and legal perspective.

Persons bound to provide relevant information to the tax

authorities and persons who may refuse to provide

information are also mentioned in the Fiscal Procedure

Code. Special obligations are imposed on the banks that

are required to communicate on a monthly basis data

regarding the names of individuals opening or closing


Fiscal Administrative Acts

Specific rules apply to the preparation and serving of acts

issued by the tax authorities to the taxpayers. The code

also stipulates the elements that should be included in the

fiscal administrative acts.

Fiscal Domicile

The concept of fiscal domicile is defined, as applying to

both individuals and legal persons. This concept is

essential in defining both the tax jurisdiction and tax

registration obligations.

Tax Jurisdiction

The deadline allowed for submitting objections against

fiscal administrative acts is now 30 days. If the fiscal

administrative act fails to meet certain formal

requirements, the deadline is three months. The plaintiff is

allowed to withdraw the complaint without losing the right

to file a new complaint within the legal deadlines. If the

taxpayer is not satisfied with the solution of the tax

authorities, it may file a claim with the court within six

months from the day the solution was announced. The

deadline may be extended on serious grounds up to one

year from the day the solution was issued.

Other Rules

Any request by the taxpayer must be processed and

answered by the tax authorities within 45 days. Should

the authorities fail to answer within this deadline the tax

payer may file court claim for such a failure.

11.2 Specific Tax Procedures

Tax Registration

The categories of persons required to perform tax

registration within 30 days from the date of incorporation.

The form and contents of the tax registration applications

are regulated.

Tax Returns and Tax Assessment

Another fundamental change is that penalties for failing to

submit tax returns in due time (computed previously as a

percentage of the due tax) have been eliminated.

Chapter 11 - Fiscal Procedure

The new form and contents of the tax returns,

specifications in the tax assessment decisions and the

limitation period applicable to the assessment of tax

liabilities have also been established.

The status of limitations for tax authorities assessing

additional tax liabilities is five years as of 1 January of the

year following the one when the taxable events occurred.

Tax Audit

The procedure for conducting tax audits is also regulated.

The control minutes finalising the procedure have been

replaced with tax audit reports, based on which the tax

assessment is made. The tax audit report is

communicated to the tax payer along with the tax


Collection of Budgetary Receivables

Detailed rules apply to the payment methods, payment

deadlines, the applicable penalties and interests, the

enforcement of budgetary receivables and complaints

against the enforcement procedure. The off set between

the taxpayer's receivables against the budget and the

budgetary receivables prevails over restitution. The off set

is allowed for liabilities to or from different budgets,

provided that a certain off set order is observed.

For 2005 the late payment penalties are 0.5%/month and

late payment interest is 0.06%/day. The Government can

establish the level of the late payment interest every year

based on the reference interest rate published by the


The status of limitations for collecting budgetary liabilities

is five years from the year following the one when the

right to collect the relevant liabilities had arose.

PricewaterhouseCoopers - Business Guide to Romania 2005 53

Chapter 12


in Romania

Coopers & Lybrand and Price Waterhouse established

their Romanian operations in 1991 and 1993, respectively,

and at the time of their global merger in 1998 had

developed substantial practices. Having continued to

expand its services and knowledge of Romania's

business environment, today PricewaterhouseCoopers

provides the highest level of professional services to

international and Romanian enterprises. Overseen by

eight partners and employing 450 specialists and support

staff, PricewaterhouseCoopers operates in Romania and

Moldova from a network of four offices in Bucharest,

Timisoara, Cluj-Napoca and Chisinau.

The combination of local experience and a one-firm

culture enables PricewaterhouseCoopers to provide

advice that is consistent. In addition, its global standards

are responsive to local conditions and requirements.

Engagements are generally staffed by a combination of

Romanian specialists, with knowledge of local conditions

and regulations, and international consultants, who have

expertise in tackling issues faced by international

enterprises and who are practised in dealing in the

Romanian environment. The key element of

PricewaterhouseCoopers' success in Romania is the

quality of its staff, to whom partners are committed to

providing the most up to date management training

throughout their careers.

Service lines include:

■ Assurance Services: external and internal audit,

financial and accounting reviews and investigations;

regulatory consulting; training courses;

■ Advisory Services includes:

- Performance Improvement: Internal Control & Risk

Management, Compliance with Regulation and

Standards, Optimisation of Business Processes and

Organisational Structure, Sustainability Solutions,

Reporting and Performance Management Systems, IT


54 PricewaterhouseCoopers - Business Guide to Romania 2005

- Transactions: financial due diligences, feasibility

studies and preparation of business plans, mergers

and acquisitions, project finance and privatisation,

valuation and strategy, post-deal services;

- Crisis Management: business restructuring, judicial

reorganisation and bankruptcy, voluntary liquidations,

dispute analysis and investigation services;

■ Tax Services: all aspects of inbound investment into

Romania, corporate structuring of investments and

trading activities, international tax planning, indirect

taxation (customs and VAT), individual taxation and

human resources advisory;

■ Legal Services are provided by David & Baias, the

correspondent law firm of PricewaterhouseCoopers in

Romania, who advise on all significant areas of law,

including corporate law, mergers and acquisitions,

project finance and privatisation, and litigation


Assurance Services

The Assurance Services practice comprises

internationally-trained Romanian and foreign auditors. All

Assurance Services staff are familiar with local and

international accounting practices. As part of our longterm

development strategy, PricewaterhouseCoopers

Romania requires its local auditors to obtain an

internationally recognised professional qualification in

accounting (UK ACCA) to enhance their understanding of

International Financial Reporting Standards.

PricewaterhouseCoopers' knowledge and experience

gained over the period of reform in all of the former

Eastern European countries, enables its specialists not

only to advise on audit and non-audit matters, but also to

put them in context and to advise on the likely impact that

the pace and direction of economic and financial change

will have on a commercial activity in Romania.

As a result of its long-term presence,

PricewaterhouseCoopers Romania has developed strong

elationships with key contacts, including government

ministries and leading professional organisations. These

relationships enable the firm to be well placed to assist in

resolving queries on accounting, reporting and related

regulatory issues.

Available services include:

audits in accordance with IFRS or other recognised,

generally accepted auditing standards; compilation of

financial statements in accordance with International

Financial Reporting Standards (IFRS) or other recognised

accounting standards (US or UK GAAP); compliance

audits (Security Commission and National Bank of

Romania); regulatory consulting; internal audit; training in

IFRS, Statutory Accounting Rules and others.

For further information please contact:

Vasile Iuga (

Dinu Bumbacea (

David Fuller (

Alexandru Lupea (

Advisory Services

The Advisory Services practice provides three types of


Performance Improvement: The Performance

Improvement Department within PricewaterhouseCoopers

is dedicated to helping clients improve their financial and

operational performance. Our Group works closely with

other advisory practices in the firm to assist clients in

meeting their most pressing challenges. The Performance

Improvement Department numbers over 7,000 experts in

90 countries and over 30 people in Romania, all of them

having extensive knowledge of the local business


The assistance we provide is targeted at strengthening

management control, increasing operational effectiveness

and thereby increasing shareholder value. We know from

experience that improving performance requires

companies to focus on four distinct aspects: business

model, financial drivers, management system and value

creation system.

In our experience, projects are judged a success when

the expected business benefits are clearly defined up

front and when the project is managed to demonstrate

achievement of those business benefits. By employing

this principle in our methodologies, the PwC Performance

Chapter 12 - PricewaterhouseCoopers in Romania

Improvement team strives to provide superior value to our


Transactions: Transaction Services refers to assistance

with and executing all types of financial transactions,

providing advice on mergers and acquisitions,

privatisations, financial and operational due diligence,

value advisory and business valuation including real

estate and asset valuation, feasibility studies and

business plans, market analysis, project finance (including

Public-Private Partnership schemes), finance raising and

post-deal services.

PricewaterhouseCoopers provides a full range of services

to guide clients through complex business transactions,

and supports companies through every aspect of a

transaction, from identifying the appropriate acquisition or

divestiture candidates to assisting with deal structuring

and capital sourcing. A wide range of privatisation

services including lead advisory, target identification,

company profiles, analysis of privatisation options, and

transaction support are available, as well as assistance

and support for companies seeking new capital, or

companies involved in an acquisition, divestiture,

restructuring or shareholder buyout. Services in relation

to transactions, such as identification and evaluation of a

transaction through due diligence, structuring services,

market analysis and post-deal services are provided.

The Transactions Department numbers over 4,700 experts

worldwide and around 10 in Romania.

Crisis Management: Crisis Management services involve

corporate recovery and turnaround, optimised exits,

insolvency/liquidation, as well as dispute analysis and


PricewaterhouseCoopers was Romania's first Big Four

consulting firm to develop a dedicated team of

professionals specialised in business recovery and

insolvency. It advises on and implements a complete

range of solutions for business recovery situations,

corporate bankruptcy and implementation of large-scale

turnarounds for underperforming corporations. The

practice has extensive experience in the management of

underperforming loan portfolios, as well as in divestment

of the underperforming assets of a business (optimised

exits) in order to extract or preserve the optimum value for


Dispute analysis and investigations practice involves

corporate investigations, fraud risk management,

background research of entities, computer forensics and

cybercrime investigations, as well as investigations of

insolvency and bankruptcy, together with intellectual


PricewaterhouseCoopers - Business Guide to Romania 2005 55

Chapter 12 - PricewaterhouseCoopers in Romania

The Crisis Management network accounts for over 2,500

experts worldwide and around 10 in Romania.

For further information please contact:

Dinu Bumbacea (

Emilian Radu (

Tax Services

PricewaterhouseCoopers Romania's tax advisory practice

comprises international and local tax experts, and

customs, VAT, individual taxation and human resources

specialists. This is the country's largest tax consultancy,

with specialists in all areas of tax, including:

Corporate Taxation. The Team has extensive experience

in advising clients based on Romanian laws and their

interpretation by tax authorities, as well as their

interrelation with international regulations and treaties.

PricewaterhouseCoopers' specialists are highly qualified

to advise on all aspects of inward investments in

Romania, and the structuring of those investments in

terms of profit tax, withholding tax, dividend tax and local

tax regulations. The team provides proactive advice on

international tax planning and structuring; mergers and

restructuring, and undertakes company health checks and

due diligence projects, as well as assistance with tax

authorities (during tax inspections, and lodging of


Indirect Taxation. With group members that include

specialists from Romania's Finance and Foreign Affairs

ministries, as well as the Customs Department,

PricewaterhouseCoopers' indirect tax specialists have

extensive experience in resolving complex issues related

to indirect taxes, customs procedures and foreign trade.

Services available include VAT consultancy and tax

reviews; VAT planning and efficiency schemes for

domestic and cross-border operations; assistance with

standard and fast VAT refund procedures; assistance

during tax inspections; support and advice during

appeals. Customs consulting includes tax planning for

minimising import duties; implementation of temporary

customs regimes; authorised exporter status and

simplified customs procedures implementation; use of

bonded warehouses and customs-free trade zones;

intellectual property rights; obtaining import/export

licences; assistance during customs clearance and audits;

support during customs litigation or complaints.

56 PricewaterhouseCoopers - Business Guide to Romania 2005

Human Resources Services. PricewaterhouseCoopers

HRS brings together all of the professionals working in the

human resource consulting arena - specialists in

individual tax, payroll, benefits, assessment, education,

equity, reward, staffing, regulatory, legal, and process

management - offering clients an unmatched breadth and

depth of local and global expertise. Available services

include individual advice, ranging from assistance with

obtaining work and residence permits, to advice and

assistance with all matters regarding Romania's personal

income taxation legislation; salary surveys; outplacement,

and human resources audit.

Legal Services

Legal Services are provided to clients by David & Baias,

PricewaterhouseCoopers correspondent, but fully

independent, law firm. Its lawyers are qualified to give

advice in a multitude of areas that include advising

multinational companies and local businesses on how to

structure their investments and activities in Romania, inter

alia foreign investments, banking, securities and financing,

privatisation, mergers and acquisitions, legal audit,

corporate structures, competition, trade practices,

intellectual property, and employment.

For further information please contact:

Rene Bijvoet (

Mihaela Mitroi (

Edwin Warmerdam (


Appendix I Government Ministries

Minister Ministry Phone Fax

Calin Constantin Anton Popescu - Tariceanu Prime Minister 313 1450 312 2436

Mihai Razvan Ungureanu Foreign Affairs 230 2071 230 7489

Ene Dinga European Integration 301 1502 336 8509

Ionel Popescu Public Finance 410 3400 312 2509

Monica Luisa Macovei Justice 410 7272 312 4023

Teodor Atanasiu National Defence 410 3400 410 6876

Vasile Blaga Administration and Interior Affairs 310 3072 313 0423

Gheorghe Barbu Labour, Social Solidarity and Family Affairs 313 6267 312 5268

Ioan-Codrut Seres Trade and Economic Affairs 231 0262 312 0513

Gheorghe Flutur Agriculture, Forestry, Waters and Environment 307 2424 307 8554

Sulfina Barbu Waters and Environment 410 0215 410 0282

Gheorghe Dobre Transport, Constructions and Tourism 222 3636 312 0772

Mircea Miclea Education, Research and Youth 315 5099 315 5099

Monica Octavia Musca Culture and Religious Affairs 222 3723 223 4951

Mircea Cinteza Health 307 2500 314 1526

Zsolt Nagy Communications and Information Technology 336 1961 336 1961

Calls from outside Romania should be prefixed by the international dialling code, then 40 for Romania and 21 for


Appendix I

PricewaterhouseCoopers - Business Guide to Romania 2005 59

Appendix II

Appendix II Major Banks Operating in Romania

Bank Phone

■ ABN Amro Bank Romania 202 0400

■ Alpha Bank Romania 209 9999

■ BCR (Romanian Commercial Bank) 312 1678

■ Banca Comerciala Ion Tiriac 302 5600

■ Banca de Export Import a Romaniei EXIMBANK 336 4185

■ Banca Romaneasca 312 1601

■ Banca Romana pentru Dezvoltare - Groupe Societe Generale 301 6100

■ Banca Transilvania 40 264 407 150

■ Banc Post 336 1124

■ Banque Franco Roumaine, Paris - Bucharest branch 223 3040

■ CEC (Romanian Savings Bank) 311 1119

■ Citibank Romania 210 1850

■ EBRD (European Bank for Reconstruction and Development) 330 2900

■ Egnatia Bank 303 2100

■ Emporiki Bank Romania 310 3955

■ Finansbank Romania 301 7100

■ Frankfurt Bukarest Bank AG, Frankfurt am Main - Bucharest branch 250 1003

■ HVB Bank Romania 203 2222

■ ING Bank N.V Amsterdam - Bucharest branch 222 1600

■ National Bank of Greece, Athens - Bucharest branch 330 5661

■ Piraeus Bank 303 6900

■ Raiffeisen Bank 323 0031

■ UniCredit Romania 330 2900

■ Volksbank Romania 303 9300

Calls from outside Romania should be prefixed by the international dialling code, then 40 for Romania and 21 for


60 PricewaterhouseCoopers - Business Guide to Romania 2005

Appendix III Hotels and Restaurants

Bucharest has seen a significant increase in the number of hotels and restaurants in recent years. Here is a


Hotels Phone

■ Athenee Palace Bucharest Hilton (*****) 303 3777

■ Crowne Plaza Bucharest (*****) 202 1000

■ Intercontinental (*****) 310 2020

■ JW Marriott Grand (*****) 403 0000

■ Howard Johnson Grand Plaza (*****) 201 5000

■ Bucuresti (****) 312 7070

■ Continental (****) 638 5022

■ Sofitel (****) 224 3000

■ Class (****) 233 2814

■ Gallery (****) 411 4185

■ Lebada (****) 255 0281

■ Lido (****) 314 4930

■ Majestic (****) 310 2720

■ Parliament (****) 411 9990

■ Dalin (***) 335 5541

■ Erbas (***) 232 6856

■ Helvetia (***) 223 0566

■ Ibis (***) 222 2722

■ Minerva (***) 311 1550

■ Opera (***) 312 4857

■ Sky Gate (***) 203 6500

■ Caro (***) 208 6100

■ Best Western Parc (***) 224 2000

■ Ambasador (***) 315 9080

■ Duke (***) 212 5344

■ Still (***) 233 3971

■ Rembrandt (***) 322 9491

Calls from outside Romania should be prefixed by the international dialling code, then 40 for Romania and 21 for


Appendix III

PricewaterhouseCoopers - Business Guide to Romania 2005 61

Appendix III

Restaurants Phone

■ Al Casolare (Italian) 225 4186

■ Amsterdam Grand Cafe 313 7580

■ Aquarium 211 2820

■ Barka Saffron (Indian/International) 224 1004

■ Basilicum (Italian) 222 6779

■ Bistro Atheneu (International) 313 4900

■ Bistro de l'Institut Francais (French) 212 0853

■ Byblos (International) 313 2091

■ Balthazar (French/Asian) 212 1460

■ Cafe Royal Brasserie (International) 303 3777

■ Casa Caragiale (French/International) 211 1518

■ Casa Doina (Romanian/International) 222 3179

■ Casa Vernescu (Romanian/International) 231 0220

■ Casa M (Italian) 233 2632

■ Casa Di David (Italian) 232 4715

■ Capriciosa (Italian) 230 1192

■ Cucina (Italian) 403 1902

■ Die Deutsche Kneippe (German) 679 2363

■ Darclee (French) 224 3000

■ Gallery (Greek) 211 5899

■ Jaristea (Romanian) 335 3338

■ Kiraly Csarda (Hungarian) 230 4203

■ McMoni's (International) 224 2676

■ Mesogios (Mediterranean) 313 4951

■ Noblesse (French) 230 5406

■ Piccolo Mondo (Middle Eastern cuisine) 222 5755

■ La Provence (French) 243 1777

■ Silviu's (Italian) 410 9184

■ Trattoria Il Calcio (Italian) 0722 134299

■ Trattoria Roma (Italian) 210 8157

■ Tandoor (Indian) 222 1855

■ La Villa (French) 224 1505

■ White Horse (English/International) 231 2795

Calls from outside Romania should be prefixed by the international dialling code 40 for Romania and 21 for


62 PricewaterhouseCoopers - Business Guide to Romania 2005

Appendix IV Chart of Accounts* - for companies applying

OMF 94 or OMF 306/2002

Class 1 Capital Accounts

101- 107 Capital and Reserves

117 Retained Earnings

121; 129 Profit for the Year; Profit Distribution

131 Subsidies

151 Provisions for Risks and Expenditures

161- 169 Long-term Loans and Associated Accrued Interest

Class 2 Fixed Assets Accounts

201- 208 Intangible Assets

211- 214 Tangible Assets

231- 234 Assets in Construction

261- 269 Financial Investments

280- 281 Accumulated Depreciation for Fixed (Intangible and Tangible) Assets

290- 296 Provisions for Fixed Assets Depreciation

Class 3 Inventories Accounts

301- 308 Raw Materials and Materials Inventory

331- 332 Work in Process

341- 348 Products

351- 358 Inventory Held by Third Parties

361- 368 Animals

371- 378 Goods for Resale

381- 388 Packaging

391- 398 Provisions for Depreciation of Inventories and Work in Progress

Class 4 Third Party Accounts

401- 408 Accounts Payable and Similar Accounts

409- 419 Accounts Receivable and Similar Accounts

421- 428 Personnel and Similar Accounts

431- 438 Social Security Funds and Other Similar Accounts

441- 445 State Budget, Special Funds and Other Similar Accounts

446- 448 Other Debts and Claims on State Budget

451- 458 Intercompany and Associates

461- 462 Sundry Debtors and Creditors

471- 473 Adjustment Accounts

Appendix IV

PricewaterhouseCoopers - Business Guide to Romania 2005 63

Appendix IV

481- 482 Internal Settlements

491- 496 Provisions for Bad and Doubtful Debts

Class 5 Treasury Accounts

501 Short-term Financial Investments

502- 509 Marketable Securities - Shares and Bonds

511- 519 Bank Accounts and Short Term Loans

531- 532 Cash and Equivalents

541- 542 Letters of Credit and Advances

581 Cash in Transit

591- 598 Provisions for Depreciation of Treasury Accounts

Class 6 Expense Accounts

601- 608 Cost of Raw Materials, Materials and Goods

611- 628 Cost of Services Performed by Third Parties

635 Taxes, Duties and Similar Disbursements

641- 645 Personnel Expenses and Associated Costs

654- 658 Other Operating Expenses

663- 668 Financial Expenses

671 Exceptional Expenses

681- 688 a Depreciation and Provision Expenses Including Inflation Adjustment Expenses

691- 698 Income Tax Expenses

Class 7 Revenues Accounts

701- 708 Turnover: Revenues from Sales of Products, Goods and Services Performed and Others

711 Inventory Variation

721- 722 Revenues from Fixed Assets Production

741 Revenues from Operating Subsidies

754- 758 Other Operating Revenues

761- 768 Financial Revenues

771 Exceptional Revenues

781- 788 a Revenues from Provisions and Inflation Adjustment Gains

791 Revenues from Deferred Income Tax

* Several accounts included below are optional.

a - Inflation adjustment expenses and revenues are not included in the simplified chart of accounts under Order


64 PricewaterhouseCoopers - Business Guide to Romania 2005

Appendix V Major Differences between OMF 94 (for filing with

the Ministry of Public Finance) and IFRS

Accounting Component/Principle OMF 94 differences to IFRS

1. Accounting for hyperinflation

1.1 Hyperinflation ■ Not applied. However, Romania is no longer considered to be

hyperinflationary from 1 July 2004.

2. Consolidation

2.1 Basis of consolidation ■ Not applied for 2003 and 2004 financial statements.

Major differences between RAR and IFRS

Accounting Component/Principle OMF 306 differences to IFRS

1. Accounting periods ■ All financial years are based on calendar year. The accounting

Law provides that the Government could approve, based on a

Ministry of Finance proposal, another period for the financial


2. Consolidation ■ Annual financial statements incorporate results of an individual


3. Fixed Assets

3.1 Property, plant and equipment ■ Up until the end of 2004, carrying amount could be subject to

revaluation according to Ministry of Finance norms.

Subsequently, Companies may perform revaluations as

prescribed by IFRS, however these no longer carry a tax


3.2 Depreciation ■ Useful lives are fixed under law.

4. Investments ■ Usually carried at historical cost with no fair value adjustment.

5. Accounting for deferred taxation ■ Not required.

6. Accounting for hyperinflation ■ Not required.

7. Related party disclosure and ■ Usually not included in practice.

contingency disclosure

8. Financial instruments ■ IAS 39 is not applied; financial assets are shown at cost less

impairment provision.

Appendix V

PricewaterhouseCoopers - Business Guide to Romania 2005 65

Appendix VI

Appendix VI Accountants and Law Firms

Accountancy firms and tax consultants Phone

■ PricewaterhouseCoopers 202 8500

■ Audiconsult 336 9088

■ BDO Conti Audit 335 3364

■ Deloitte & Touche 222 1661

■ Ernst & Young 402 4000

■ KPMG 336 2266

Law firms Phone

■ David & Baias 202 8770

■ Linklaters, Miculiti, Mihai & Asociatii 307 1500

■ Salans 312 4950

■ Musat & Asociatii 223 3717

■ Nestor Nestor Diculescu Kingston Petersen 201 1200

■ Popescu & Asociatii (Stephenson Harwood) 312 2425

■ Gide Loyrette Nouel 223 0310

■ Stoica & Asociatii 336 7010

■ Voicu & Filipescu 314 0200

■ Wood, Dumitrescu & Asociatii (Hall Dickler) 222 8888

Calls from outside Romania should be prefixed by the international dialling code, then 40 for Romania and 21 for


66 PricewaterhouseCoopers - Business Guide to Romania 2005

Appendix VII (a) Double Taxation Agreements

Double Taxation Agreements to which Romania is a party:













Costa Rica



Czech Republic













* - Not yet in force.

** - In force from 1 January 2005.

*** - Applicable for Serbia & Montenegro.










Korea (Republic)
















North Korea







Russian Federation



South Africa


Sri Lanka










United Arab Emirates

United Kingdom

United States





Chapter X -

Appendix VII (a)

PricewaterhouseCoopers - Business Guide to Romania 2005 67

Appendix VII (b)

Appendix VII (b) Withholding Tax Rates of Some Major DTAs

Country Commissions (%) Dividend (%) Interest (%) Royalty (%)

Non Treaty 15 15 5/15 15

Australia X 5/15 10 10

Austria X 15 0/10 10

Belgium 5 5/15 10 5

Bulgaria X 10/15 15 15

Canada X 5 10 5/10

Cyprus 5 10 10 5

Czech Rep X 10 7 10

Denmark 4 10/15 10 10

Estonia* 2 10 10 10

Finland X 5 5 2.5/5

France X 10 10 10

Germany X 5/15 0/3 3

Greece 5 20/45 10 5/7

Hungary 5 5/15 15 10

Ireland X 3 3 3

Israel X 15 10/15 10

Italy 5 10 10 10

Japan X 10 10 10/15

Korea 10 7/10 0/10 7/10

Luxembourg 5 5/15 0/10 10

Malta 10 5/30 5 5

Moldova X 10 10 10/15

Netherlands X 0/5/15 0 0

Norway 4 10 10 10

Poland 10 5/15 10 10

Portugal X 15 10 10

Russia X 10/15 15 10

Singapore X 5 5 5

Slovakia X 10 10 10/15

South Africa X 15 15 15

Spain 5 10/15 10 10

Sweden 10 10 10 10

Switzerland X 10 10 0

Turkey X 15 10 10

Ukraine X 10/15 10 10/15

UK 12.5 10/15 10 10/15

US X 10 10 10/15

*Estonia DTA will enter into force during 2005; X - Not stipulated.

68 PricewaterhouseCoopers - Business Guide to Romania 2005

Appendix VIII Individual Income Tax Calculation

Monthly calculation of individual income tax and social security contributions due on

local employment contracts:


Gross Salary (assumed) a 40,800,000 1,000

Benefits in Kind (assumed) 8,160,000 200

Total Gross Salary 48,960,000 1,200


Due Social Security Contribution b (capped - 9.5%) 4,375,225 107.24

Health Fund Contribution (6.5%) 3,182,400 78

Unemployment Fund Contribution (1%) 408,000 10

Total Social Security Contribution due by Employee 7,965,625 195,24

Deductions 0 0

Taxable Salary 40,994,000 1,004.75

Individual Income Tax 6,559,040 160.76

Retaining of Benefits in Kind 8,160,000 200

Net Salary (cash) 26,275,335 644


Due Social Security Contributions (capped - 22%) 10,132,100 248.34

Unemployment (3%) 1,468,800 36

Health Fund Contribution (7%) 3,427,200 84

Accident Risk Fund (0.5%) 244,800 6

ITM (0.25%) 122,400 3

Total Social Security due by the Employer 15,395,300 377.34

Total Costs Incurred by the Employer 64,355,300 1,577.34

a - The exchange rate used in this calculation is EUR 1 = ROL 40,800.

b - The Social Security Contribution is capped at five times the average national salary estimated for 2004

(amounting to ROL 9,211,000, or EUR 225).

Appendix VIII

PricewaterhouseCoopers - Business Guide to Romania 2005 69

Appendix IX

Appendix IX Customs Duties

Rates applicable to:

Product or Standard Reduced Preferential rates a applicable for products originating in:

Group of Products Rate [%] Rate


in 2005

IT equipment ex b ex ex ex ex ex ex ex ex ex ex ex ex


■ cc 1,000-3,000 cm 30 ex ex ex ex ex ex ex ex ex ex ex ex

■ cc over 3,000 cm 30 ex ex ex ex ex ex ex ex ex ex ex ex

Office equipment

■ Office items made

of plastic materials

20 ex 8 ex ex ex ex ex ex 15 ex 8 ex

■ Envelopes, boxes, etc. 15 ex ex ex ex ex ex ex ex ex ex ex ex

Telecommunications 0 - 8 ex ex ex ex ex ex ex ex ex ex ex ex

Coffee 50 5; 25 5;25 ex ex ex 5;25 ex 5;25 5;25 ex ex 5;25

Beer 280 110 110 110 77;110 110 110 55;110 110 110 ex 110 110

(Only applicable within a quota)

Chocolate products 206 45 45 45 45 45 45 43..2 45 ex ex 15 45

Pharmaceuticals -

containing vitamins

10 5 2 ex ex ex ex ex ex 3.8 ex ex ex

Exploration and

exploitation equipment

■ Plastic flexible piping 20 20;ex ex ex ex ex ex ex ex ex ex ex ex

■ Pumps for liquids 10 10;ex ex ex ex ex ex ex ex ex ex ex ex

■ Components of

drilling equipment

10; 15 ex ex ex ex ex ex ex ex ex ex ex ex

a - Indicates customs duties applicable to the goods that have their origin in the places shown.

b - Exemption.

70 PricewaterhouseCoopers - Business Guide to Romania 2005





CCzzech Rep..













Appendix X Import Duty Exemptions

Description of equipment

1 Water tube boilers

2 Furnaces and ovens

3 Machinery for filling, closing, sealing or labeling bottles, cans, boxes; machinery for capsulling; machinery

aerating beverages

4 Packing or wrapping machinery

5 Lifting, handling, loading or unloading machinery, specially designed for underground use (mining


6 Milking machines

7 Bakery machinery; bakery and biscuit ovens

8 Brewery machinery

9 Machinery for the preparation of tea or coffee

10 Machinery for the preparation or manufacturing of drinks

11 Machinery for finishing paper or paperboard

12 Printing machinery

13 Machines for extruding, carding, combing, spinning and twisting textile materials; dry-cleaning machines

14 Machine tools of a kind used in the manufacture of semiconductor wafers or devices

15 Machine-tools for drilling, boring, milling, threading or tapping

16 Machine-tools for working metal by forging, hammering, or die-stamping

17 Machine-tools for working stone, ceramics, concrete, asbestos-cement or like mineral materials;

concrete or mortar mixers

18 Machines for making optical fibres and pre-forms thereof

19 Machinery for working rubber or plastics or for the manufacture products of these materials

20 Machinery for preparing or making up tobacco

21 Rope or cable-making machines

22 Concrete mixer-lorries, concrete-pumping vehicles

23 Instruments and appliances used in medical, surgical, dental sciences; x-ray apparatus; medical or

laboratory sterilisers

24 Gas, liquid or electricity supply or production meters

25 Automatic regulating or controlling instruments and apparatus

26 Machine tools for working wood, cork, hard rubber, hard plastic or similar hard materials

27 Radio, TV emitters and antennas

28 Satellite communications devices and spare parts

29 Radio relays

30 Electrical motors

Appendix X

PricewaterhouseCoopers - Business Guide to Romania 2005 71

Appendix XI

Appendix XI Excise Tax for Domestic and Imported Products


No Products or Group of Products Excise Rate

1 Beer EUR 0.74 hl/1 degree Plato

3 Sparkling wines EUR 34,05/hl of product

4 Intermediate products EUR 51,08/hl of product

5 Cigarettes EUR 9,10/1,000 cigarettes +30%

minimum value is

EUR 19,92/1000 cigarettes

6 Smoking tobacco EUR 29,51/kg

7 Green coffee EUR 680/ton

8 Roasted coffee EUR 1,000/ton

9 Natural fur clothes (excepting rabbit, sheep, goat) 45%

10 Crystal products 55%

11 Jewellery made of gold and platinum, exclusive of wedding rings 25%

12 Premium, regular and normal fuel EUR 480/ton

13 Unleaded fuel EUR 425,06/ton

14 Diesel fuel EUR 307,59/ton

15 Electricity for commercial purposes EUR 0,14/MWh

16 Electricity for non-commercial purposes EUR 0,30/MWh

17 New cars:

■ gas fuel 1 - 11%

■ diesel 1 - 11%

Second - hand cars

■ gas fuel 2,5 - 32%

■ diesel 2,5 - 32%

18 Perfumery products 10% - 35%

19 Video players or recorders and audio racks 20%

20 Tape recorders or CD players 20%

21 Video cameras 30%

22 Digital photo cameras 30%

23 Microwave ovens 20%

24 Air conditioning equipment 20%

25 Weapons 100%

26 Yachts 50%

27 Motor boats 30%

72 PricewaterhouseCoopers - Business Guide to Romania 2005


Your worlds Our people*

More magazines by this user
Similar magazines