Business Guide to Romania* - Bayern - Europa

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Chapter 3 Foreign Investment, Privatisation and Foreign Trade ■ Foreign and domestic investments enjoy equal treatment ■ 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 Registry. 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 intermediaries. 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
Page 1 and 2: Business Guide to Romania* 2005 Edi
Page 3 and 4: Contents Chapter Page 1. Romania: a
Page 5 and 6: ■ Unions 30 6.2 Working Condition
Page 7 and 8: ■ VAT Compliance 48 10.2 Customs
Page 9 and 10: Chapter 1 Romania: a Profile ■ Ro
Page 11 and 12: upgrades made by Moody's and Fitch
Page 13 and 14: All visitors to Romania require pas
Page 15 and 16: nearly one-third of Romania's banki
Page 17: Mortgages are created under authent
Page 21 and 22: Chapter 4 Banking, Finance and Insu
Page 23 and 24: ■ Taking deposits; ■ Making loa
Page 25 and 26: tried to bring more transparency an
Page 27 and 28: Chapter 5 Corporate and Business La
Page 29 and 30: EUR 25,000 by 31 December 2005). Pa
Page 31 and 32: Chapter 6 Labour Relations and Soci
Page 33 and 34: employment contract with an occupat
Page 35 and 36: Chapter 7 Accounting and Audit Requ
Page 37 and 38: Chapter 8 Taxation of Corporations
Page 39 and 40: exempt from paying profit tax throu
Page 41 and 42: ■ Other salary and/or similar exp
Page 43 and 44: - revenues obtained from management
Page 45 and 46: Income Subject to 16% Flat Tax Rate
Page 47 and 48: ■ Income from sale of movable and
Page 49 and 50: similar function, cinema tickets, a
Page 51 and 52: guarantee import duties could be ob
Page 53 and 54: are transported between tax warehou
Page 55 and 56: also stipulates the elements that s
Page 57 and 58: elationships with key contacts, inc
Page 59: Appendices
Page 62 and 63: Appendix II Appendix II Major Banks
Page 64 and 65: Appendix III Restaurants Phone ■
Page 66 and 67: Appendix IV 481- 482 Internal Settl
Page 68 and 69:
Appendix VI Appendix VI Accountants
Page 70 and 71:
Appendix VII (b) Appendix VII (b) W
Page 72 and 73:
Appendix IX Appendix IX Customs Dut
Page 74:
Appendix XI Appendix XI Excise Tax
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Business Guide to Romania* - Bayern - Europa

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