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ROMANIA InfoBusiness
ROMANIA InfoBusiness 2011 ROMANIA InfoBusiness Romania InfoBusiness is based on data and information produced by relevant and authorized sources as they have been available at the moment of its compilation, and it will be periodically revised for editing twice‐a‐year updated versions. The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the Romanian Center for Trade and Investment (CRPCIS). Whilst every effort has been made to ensure the accuracy of the information contained in this publication, the Romanian Center for Trade and Investment (CRPCIS) cannot accept any responsibility for the data changes that may occur after its compilation or for the outcomes of using this publication. Any piece of information or data does not imply the endorsement of the Romanian Center for Trade and Investment (CRPCIS). Romanian Center for Trade and Investment Centrul Român pentru Promovarea Comerțului şi Investițiilor Străine ‐ CRPCIS Department for Market Research and Trade Publications 17 Apolodor Street, Bucharest 5, Romania Phone: +40 21 318 50 50 • Fax: +40 21 311 14 91 [email protected] • www.traderom.ro • www.arisinvest.ro April, 2011 Romania InfoBusiness Contents 1. Country Overview 1 2. Economic Outlook 2 3. International Trade 3 Foreign Trade 2008 ‐ 2010 3 Customs Legislation 5 4. Foreign Investments 8 Foreign Investment Flows 2008 ‐ 2010 8 Major State Aid Schemes for Investments 12 Industrial Parks and Free Zones 17 OECD ‐ Romanian National Contact Point 27 5. Setting‐up a Business 28 6. Taxation 30 7. Useful Links 36 Romanian Center for Trade and Investment Romania InfoBusiness 1. Country Overview Location In the Southeastern part of Central Europe, on either side of the Carpathians, on the lower course of the Danube (1,075 km), with exit to the Black Sea (coast line: 245 km); Boundaries: 3,150 km; Neighboring countries: Bulgaria, Hungary, Republic of Moldova, Serbia and Ukraine. Area 238,391 sq. km (ranking 12th in Europe); Land use: farmland 61.7% (of which 39.5% arable land), forest 28.4%, other 9.9%. Population 21.5 million inhabitants as of January 1st, 2009 (ranking 9th in Europe); Density: 90 inhabitants/sq. km; Urban: 54.9%; Ethnic breakdown: Romanians 89.5%, Hungarians 6.6%, others 3.9%; Administrative organization: 42 counties, including Bucharest Municipality (enjoying county status); 320 towns (103 municipalities) and 2,860 communes; Capital city: Bucharest (1.9 million inhabitants); National Day: December 1st; Official language: Romanian. Government Republic; The President is elected by universal vote for a five‐year mandate; Legislative body: Parliament (Senate and Chamber of Deputies); Executive body: government headed by Prime‐Minister (appointed by the President). Status NATO and European Union membership. Currency Romanian leu (RON); fractional coin: ban; Full convertibility; Exchange rate is set in the interbank forex market on a daily basis; Reference currency: EUR (EUR); RON/EUR = 4.2099; RON/USD = 3.1779 (average exchange rate, 2010). 1 Romania InfoBusiness Macroeconomic data 2010 GDP: EUR 121.9 billion (current prices, provisional annual data, unadjusted series); GDP annual real growth rate: ‐1.3% (current prices, provisional annual data, unadjusted series); GDP structure by sector: agriculture 6.0%; industry 26.4%; construction 8.9%; trade, hotels & restaurants, transport & telecoms 21.1%; services 26.4%; and net taxes on product 11.2%; Inflation rate (CPI, average rate): 6.09%; Unemployment rate (end of the year): 6.87%; Current account balance: EUR ‐4,969 million; Trade balance (goods & services, FOB‐FOB): EUR ‐5,905 million; Trade balance (goods, FOB‐CIF): EUR ‐9,508 million; Export (goods, FOB): EUR 37,294 million; Import (goods, CIF): EUR 46,802 million; Direct investment (net value): EUR 2,437 million; External debt balance: EUR 90,765 million; International reserves: EUR 35,950.7 million. 2. Economic Outlook After a major slump in economic growth in 2009 (‐7.1%), the Romanian economy remains mired by weak domestic demand in 2010 (European Commission, European Economic Forecast ‐ autumn 2010). The long duration of the recessionary period is mainly due to the unsustainable developments in the economy before the international crisis. The economic boom in the pre‐crisis period ‐ with real GDP growth averaging 6.8% in 2004‐08 ‐ was underpinned by strong domestic demand. Romania entered the recession with a budget deficit of 5.4% of GDP and a current‐account deficit of 12.7%. This vulnerable position created additional stress in local financial markets and limited the scope for any government stimulus to prop up the economy. With the onset of the crisis, Romania received medium‐term financial assistance in the form of a multilateral loan package totalling EUR 20 billion from the European Union, the International Monetary Fund, the World Bank, the European Investment Bank and the European Bank for Reconstruction and Development. This assistance is still ongoing and loan disbursements are conditional on implementing an adjustment programme which aims to bring down the budget deficit, promote structural reforms and restore stability in financial markets. The key economic reforms include a new pension system, a unified wage law for the employees in the budgetary sector and a fiscal responsibility law to ensuring the long‐ term sustainability of public finances. Thanks to the programme, pressures on the exchange rate have been reduced, financial stress has eased, and the international reserves position has improved. Despite these improvements, the recovery was delayed due to continued weakness in domestic demand. Economic growth was of ‐1.3% in 2010, but the economy is expected to turn around in 2011, with real GDP forecasted to increase by 1.5%. The contraction in economic activity led to an increase of the unemployment rate from 4.4% in 2008 to 7.8% in 2009. However, the registered unemployment rate continued to post a decrease in 2010 to 6.87% by the end of the year. The declining trend in inflation since mid‐2008 was halted by the 5% increase in the main VAT rate in July 2010. VAT and higher food prices pushed CPI inflation towards 7.96% by year‐end, compared to 4.74% in December 2009. The annual average CPI inflation was of 5.59% and 6.09% for 2009 and 2010, respectively ‐ rates relatively high compared to regional peers. In view of these inflationary pressures, the National Bank of Romania maintained its policy rate at 6.25% since June 2010. Annual inflation is projected to be within 2 Romania InfoBusiness the central bankʹs targeted tolerance band of 3% +/‐1 pp. in end‐2011 and throughout 2012. For end‐2011, the baseline scenario of the current projection places the annual CPI inflation rate at 3.6%. The inflation rate is foreseen to re‐enter the variation band around the 3% central target in the second half of 2011, after the first‐round effect of the VAT rate hike on the annual inflation is expected to have entirely faded. The inflation forecast for end‐2012 stands at 3.2%. The current account deficit improved from 13.5% GDP in 2007 to 5 percent of GDP (on a 12‐month basis) by September‐2010, driven by strongly shrinking trade deficit. Exports are gaining momentum with recovery in major trading partners (driven by manufacturing sector) while depressed domestic demand is limiting import growth. The current account deficit was estimated at around 5.5% of GDP in 2010, rising to near 6% by 2012. The macroeconomic scenario is subject to both positive and negative risks. A positive risk is that the recovery in the EU economy will be stronger than expected. This would lead to a stronger increase in external demand which can have positive spillovers on domestic demand. A negative risk is that fiscal consolidation will be weaker than planned. This could have a negative impact on household and business confidence and further delay the recovery of domestic demand. 3. International Trade Foreign Trade 2008 ‐ 2010 Exports of goods recorded a huge recovery in 2010 following the sharp decline during the previous year (an annual decrease of 13.8% versus 2008). Exports came in at EUR 37,294 million, up 28.2% against 2009, as a result of higher external prices, larger export volume and the shift in structure in favor of capital goods, as well as the depreciation of the domestic currency against the EUR and the US dollar in the second part of the year. Based on provisional data, the share of exports in GDP was estimated to rise from 25.1% in 2009 to 30.6% in 2010. Imports of goods stood at EUR 46,802 million CIF (or EUR 43,199 million FOB), up 20.1% versus 2009. The share of imports of goods in GDP was preliminary estimated to increase from 31.0% to 35.4% year on year. International Trade, 2008 ‐ 2010 2008 2009 2010* Annual changes 2009/2008 EUR millions 2010/2009 % Exports (FOB) 33,725 29,084 37,294 ‐13.8 28.2 Imports (CIF) 57,240 38,953 46,802 ‐31.9 20.1 ‐23,515 ‐9,869 ‐9,508 ‐58.0 ‐3.7 Trade balance (FOB‐CIF) ‐ % ‐ Share of exports in GDP 24.1 25.1 30.6 1.0 5.5 Share of imports* in GDP 37.8 31.0 35.4 ‐6.8 4.4 Share of trade balance* in GDP ‐13.7 ‐5.9 ‐4.8 7.8 1.1 Share of trade balance* in current account balance 118.3 139.9 118.8 21.6 ‐21.1 Coverage of imports* through exports 63.8 80.9 86.3 17.1 5.4 Economy openness* 61.9 56.1 65.9 ‐5.8 9.8 Note: * provisional data ** Balance of Payments data Source: National Bank of Romania; National Institute of Statistics; Romanian Center for Trade and Investment calculations. 3 Romania InfoBusiness Trade balance was of EUR ‐9,508 million FOB‐CIF (or EUR ‐5,905 million FOB‐FOB), down 3.7% year on year. The annual growth rate of exports outpaced that of imports by 8.1%, while the share of trade deficit in GDP decreased by 1.1% to 4.8%. The coverage of imports through exports and the openness of the Romanian economy increased in 2010 over the previous year by 5.4% and 9.8%, to 86.3% and 65.9%, respectively. Trade Structure by Products The outstanding export development in 2010 (an increase in value of EUR 8,210 million versus 2009) was mainly covered by external deliveries of machinery, equipment and transport means (EUR 3,336 million, or a share of 40.6% of total increase in export value), metal products (EUR 1,533 million, or 18.7%), chemicals, rubber and plastic products (EUR 1,039 million, or 12.7%), and agri‐foodstuffs, beverages and tobacco products (EUR 882 million, or 10.7%). The breakdown data on exports during 2008 ‐ 2010 indicated an expansion in the share of exports of machinery, and equipment and (up 3.3% to 27.2%), transport means (up 3.1% to 15.4%), agri‐foodstuffs, beverages and tobacco products (up 2.0% to 8.4%), chemicals, rubber and plastic products (up 0.2% to 9.5%) and paper and wood products (up 0.6% to 3.9%), along with a decline in the share of metal products (down 2.7% to 11.9%),textiles, apparel, footwear and leather goods (down 2.7% to 11.5%), and mineral products (down 3.8% to 5.5%). Export Product Structure, 2008 ‐ 2010 2008 2009 2010* Annual changes 2009/2008 EUR millions Exports ‐ total % 33,725 29,084 37,294 Agri‐foodstuffs, beverages and tobacco products 2,165 2,242 Mineral products 3,142 1,784 Chemicals, rubber and plastic products 3,139 Paper and wood products Textiles, apparel, footwear and leather goods Base metals and products thereof Machinery, equipment and transport means Others 2010/2009 ‐13.8 28.2 3,124 3.6 39.3 2,060 ‐43.2 15.4 2,506 3,545 ‐20.2 41.4 1,112 1,084 1,458 ‐2.5 34.6 4,782 3,924 4,304 ‐17.9 9.7 4,941 2,922 4,455 ‐40.9 52.5 12,200 12,553 15,890 2.9 26.6 2,244 2,069 2,458 ‐7.8 18.8 Note: * provisional data Source: National Institute of Statistics; Romanian Center for Trade and Investment calculations. During 2008 ‐ 2010, the demand for imports was upheld in a weight of about 83% by five commodity groups, as follows: machinery, equipment and transport means (a share of 35.9% of total imports in 2010), chemicals, rubber and plastic products (16.9%), mineral products (11.0%), metal products (10.9%), and agro‐food products (8.4%). Import Product Structure, 2008 ‐ 2010 2008 2009 2010* Annual changes 2009/2008 EUR millions Imports ‐ total 2010/2009 % 57,240 38,953 46,802 ‐31.9 20.1 Agri‐foodstuffs, beverages and tobacco products 4,347 3,823 3,915 ‐12.0 2.4 Mineral products 7,850 3,883 5,169 ‐50.5 33.1 4 Romania 2008 InfoBusiness 2009 2010* Annual changes 2009/2008 EUR millions 2010/2009 % Chemicals, rubber and plastic products 8,040 6,842 7,917 ‐14.9 15.7 Paper and wood products 1,566 1,274 1,360 ‐18.7 6.8 Textiles, apparel, footwear and leather goods 4,027 3,180 3,560 ‐21.0 11.9 Base metals and products thereof 6,501 3,794 5,116 ‐41.6 34.9 20,846 13,429 16,792 ‐35.6 25.0 4,063 2,728 2,973 ‐32.8 9.0 Machinery, equipment and transport means Others Note: * provisional data Source: National Institute of Statistics; Romanian Center for Trade and Investment calculations. In 2010 trade balance structure by main groups of goods registered surpluses under textiles, apparel, footwear and leather goods (EUR 745 million) and paper and wood products (EUR 99 million), and deficits under chemicals, rubber and plastic products (EUR ‐4,372 million), mineral products (EUR ‐3,109 million), machinery, equipment and transport means (EUR ‐902 million), agri‐foodstuffs, beverages and tobacco products (EUR ‐791 million), and metal products (EUR ‐661 million). Trade Structure by Country Partners The geographical orientation of the Romanian trade in 2010 was primarily focused on Europe (87.9% of total exports and 84.1% of total imports), followed by Asia (14.2% and 12.8%, respectively), Africa (2.7% and 0.6%, respectively), and America (2.4% of total exports and imports, as well). Within the European Union (EU), trade in goods amounted to EUR 26,914 million for exports (intra‐EU dispatches) and to EUR 33,924 million for imports (intra‐EU arrivals), representing 72.2% of total exports and 72.5% of total imports. The main markets for the Romanian goods (representing a cumulative share of 67.5% of total exports in 2010) were as follows: Germany (18.1% of total exports), Italy (13.8%), France (8.3%), Turkey (6.9%), Hungary (4.8%), United Kingdom (3.6%), Bulgaria (3.6%), Spain (3.0%), the Netherlands (2.8%), and Poland (2.6%). In the same time, the greatest part of the foreign supplies of goods into Romania (representing 67.7% of total imports in 2010) was covered by: Germany (16.7% of total imports), Italy (11.6%), Hungary (8.7%), France (5.9%), China (5.5%), Russian Federation (4.4%), Austria (4.1%), Poland (3.7%), Turkey (3.7%), and the Netherlands (3.5%). The recovery in the economies of major trade partners had a positive impact on external demand for the Romanian deliveries of goods: the exports volume saw renewed growth quarter on quarter, taking the annual dynamics back into positive trend and a prospective development Customs Legislation As an European Union (EU) member state, Romania applies the Community Customs Code (CCC) and the European Commission provisions for implementation of CCC from the accession date (i.e., 1 January 2007). Also, Romania adopted the EU Common Trade Policy and accepted the European Commission as a collective negotiating body for important international trade‐related matters, particularly negotiations within the World Trade Organization. The main provisions related to the Romanian customs matters are as follows (Ernst & Young Romania, Romania Business Passport 2011 edition ‐ excerpts): Community customs legislation As of 1 July 2009, the persons who perform activities which are regulated by the customs legislation must register for customs purposes. Also, the statute of authorized economic operator may be granted upon 5 Romania InfoBusiness request under certain conditions. The respective statute concedes certain administrative incentives to its holder. Common customs tariff The specific customs duties payable upon releasing the goods into free circulation, are established based on the Community Customs Tariff (adopted for each year by the Commission) and related preferential tariff measures. There is an online EU customs tariff database (TARIC) which comprises the following: The combined nomenclature of goods; The rates and other items of charge normally applicable to goods covered by the combined nomenclature, as regards customs duties and import charges laid down under the common agricultural policy, or under the specific arrangements applicable to certain goods resulting from the processing of agricultural products; The preferential tariff measures contained in agreements which the European Community has concluded with certain countries or groups of countries and which provide for the granting of preferential tariff treatment; Preferential tariff measures adopted unilaterally by the European Community in respect of certain countries, groups of countries, or territories; Autonomous suspensive measures providing for a reduction in, or relief from, import duties chargeable on certain goods; Other tariff measures provided for by other Community legislation. Customs duties are expressed as a percentage of the customs value of goods. Other taxes, duties and levies may be required to be paid upon import in addition to customs duties, such as excise duty, VAT, etc. The CCC and its Implementing Regulations include rules and provisions in respect of the status of the goods, customs valuation, amendment of customs declarations, binding origin information and binding tariff information, quota administration system, etc. Establishing the customs value of goods Where the goods to be imported into Romania as from the Accession date will be subject to a sale, the customs value should be based generally on the sale price increased with certain other costs that may have been incurred with purchasing the goods (e.g., insurance, transport, commissions, royalty and license fees). The cost of (i) transport and insurance of the imported goods, and (ii) loading and handling charges associated with the transport of the imported goods to the place of entering into the customs territory of the Community shall be added to the price actually paid or payable by the importer when declaring the customs value of the goods, to the extent that they are incurred by the buyer but are not included in the price actually paid or payable for the goods. Customs procedures As provided by the Community Customs regulations, the goods may be placed under one of the customs procedures, as follows: Release of goods for free circulation; Transit; Customs warehousing; Inward processing; Processing under customs control; Temporary admission; Outward processing; Exportation; Free warehouse; Free zone. 6 Romania InfoBusiness The release for free circulation confers non‐Community goods the status of Community goods. This means that the customs duties and charges have been paid and, as a result, the goods may freely move within the territory of the European Community from a customs perspective. The specific customs procedures suspending the payment of the import duties are generally subject to authorization from the customs authorities. The transit procedure allows the movement of non‐Community goods from one point to another within the customs Community territory, without such goods being subject to import duties and other charges or to commercial policy measures for a certain period of time. A customs warehouse is any place approved by, and under the supervision of, the customs authorities where goods may be stored under certain conditions. The customs warehousing procedure allows the storage in a customs warehouse of the following: Non‐Community goods, without such goods being subject to import duties or commercial policy measures; Community goods, where Community legislation governing specific fields provides that their placement in a customs warehouse attracts the application of measures normally used for export of such goods. The inward processing procedure provides non‐Community goods intended for re‐export from the territory of the Community in the form of compensating products, without application of import duties or commercial policy measures. This specific procedure is also applicable to goods released for free circulation with repayment or remission of import duties chargeable on such goods if they are exported from the territory of the Community as compensatory products. Processing under customs control procedure allows non‐Community goods to be used in the territory of the Community in operations which alter their nature or state, without application of import duties or commercial policy measures, and shall allow the products resulting from such operations to be released for free circulation at the rate of import duty appropriate to them. The temporary admission procedure allows the use in the customs territory of the Community, with total or partial relief from import duties and without them being subject to commercial policy measures, of non‐ Community goods intended for re‐export without having undergone any change except normal depreciation due to their use. The outward processing allows Community goods to be exported temporarily from the customs territory of the Community in order to undergo processing operations and the products resulting from those operations to be released for free circulation, with total or partial relief from import duties. The export allows Community goods to leave the customs territory and entails the application of exit formalities, including commercial policy measures. Free zones and free warehouses are parts of the customs territory of the Community or premises situated in that territory and separated from the rest of it in which non‐ Community goods are considered, for the purpose of import duties and commercial policy import measures, as not being on Community customs territory, provided they are not released for free circulation or placed under another customs procedure or used or consumed under conditions other than those provided for in customs regulations. 7 Romania 4. Foreign Investments InfoBusiness Foreign Investment Flows 2008 ‐ 2010 Foreign Direct Investment (FDI) net flows amounted to EUR 3,488 million in 2009 (National Bank of Romania, Foreign Direct Investments in Romania in 2009, November 2010). The foreign direct investors’ net equity stood at EUR 1,729 million (49.6% of net FDI flows) and net credit received from direct foreign investors, intra‐group loan included, ran at EUR 1,759 million, or 50.4% of net FDI flows. The FDI stock at end‐2009 reached EUR 49,984 million, 2.4% higher than the 2008 FDI final stock, the amount including revaluations due to the exchange rate or price developments and also accounting restatements. Equity stakes (reinvested earnings included) of direct investment enterprises at end‐2009 increased 2% versus the same year‐ago period, standing at EUR 35,600 million (71.2% of net FDI final stock). Total net credit received by direct investment enterprises from foreign direct investors, intra‐group included, reached EUR 14,384 million, up 3.4% year on year (28.8% of net FDI final stock). Net credit includes both the medium‐ and long‐term loans and the short‐term loans granted by foreign investors to their direct investment enterprises in Romania, either directly or through other nonresident members of the group. By economic activity (according to the statistical classification of economic activities NACE Rev.2), the bulk of FDI stock went to manufacturing (31.1% of total), out of which the largest recipients were: oil processing, chemicals, rubber and plastic products (6.3%), metallurgy (5.2%), transport means and equipment (4.7%), food, beverages and tobacco (4.1%),) and cement, glassware, ceramics (3.3%). Despite their large potential, certain sectors ‐ such as textiles, apparel, and footwear and leather goods ‐ still hold a rather small share, i.e. 1.6% of total FDI. Other activities that have attracted significant foreign direct investment are: financial intermediation and insurance, which include banks, non‐banks and insurance companies and account for 19.0% of total FDI stock, construction and real estate (12.9%), trade (12.3%), IT and communications (6.5%). Foreign Direct Investments, 2008 ‐ 2009 ‐ Stock distribution by main economic activity ‐ Value 2008 Share of total FDI 2009 2008 EUR millions Total FDI stock (as of end‐year) % 48,798 49,984 100.0 100.0 Industry, of which: 20,138 20,680 41.3 41.4 Mining 2,158 2,221 4.4 4.5 15,236 15,555 31.3 31.1 Food, beverages and tobacco 2,210 2,058 4.6 4.1 Cement, glassware and ceramics 1,762 1,629 3.6 3.3 Wooden products and furniture 891 962 1.8 1.9 Computer technology, electronics and optical devices 689 690 1.4 1.4 Manufacturing, of which: 2009 Machinery and equipment 967 943 2.0 1.9 Base metals and products thereof 3,391 2,577 6.9 5.2 Transport means and equipment 1,932 2,373 4.0 4.7 Oil processing, chemicals, rubber and plastic products 2,115 3,132 4.3 6.3 Textiles, apparel, footwear and leather goods 794 717 1.6 1.4 Other manufacturing 485 474 1.1 0.9 2,744 2,904 5.6 5.8 Electricity, natural gas, water 8 Romania InfoBusiness Value 2008 Share of total FDI 2009 2008 2009 EUR millions Administrative and support service activities % 1,617 2,299 3.3 4.6 707 552 1.4 1.1 Trade 6,060 6,164 12.4 12.3 Construction and real estate 6,155 6,453 12.6 12.9 181 213 0.4 0.4 3,283 3,235 6.7 6.5 10,026 9,510 20.5 19.0 Transports 500 684 1.0 1.4 Other activities 131 194 0.4 0.4 Agriculture, forestry and fishing Hotels and restaurants IT and communications Financial intermediation and insurance Source: National Bank of Romania From a territorial spread point of view, FDI went mainly to Bucharest ‐ Ilfov region (63.4%), other development regions benefiting from significant FDI inflows being Center region (7.4%), South region (7.2%), West region (6.2%) and South‐East region (5.9%). North‐East region was the least attractive to foreign investors, making up for a share of 1.9% of foreign direct investment. The analysis of regional FDI dispersion should also take into consideration that statistical research located FDI by registered office, which is not always the same as the business place. Foreign Direct Investments, 2008 ‐ 2009 ‐ Stock distribution by development regions ‐ Value 2008 Share of total FDI 2009 2008 EUR millions Total FDI stock (as of end‐year) 2009 % 48,798 49,984 100.0 100.0 30,594 31,699 62.7 63.4 Center 4,146 3,703 8.5 7.4 South 3,411 3,576 7.0 7.2 West 2,626 3,095 5.4 6.2 South‐East 3,551 2,938 7.3 5.9 South‐West 1,226 2,058 2.5 4.1 North‐West 2,108 1,940 4.3 3.9 North‐East 1,136 975 2.3 1.9 Bucharest Source: National Bank of Romania 9 Romania InfoBusiness Top five countries by the share of total FDI stock as at December 31st, 2009 were: the Netherlands (21.8% of total stock at the end of 2009, up from 17.2% in 2008), Austria (18.1%, down from 18.8% a year earlier), Germany (13.4%, down from 15.4%), France (8.5%, the same as in 2008), and Greece (6.6%, same share as a year ago). The analysis of the FDI stock distribution by country of origin took into account the country of origin of the direct holder of at least 10% in the resident direct investment enterprises’ share capital on an “immediate country basis”. Foreign Direct Investments, 2008 ‐ 2009 ‐ Stock distribution by top 15 countries of origin in 2009 ‐ Value 2008 Share of total FDI 2009 2008 EUR millions Total FDI stock (as of end‐year) 2009 % 48,798 49,984 100.0 100.0 The Netherlands 8,402 10,907 17.2 21.8 Austria 9,186 9,037 18.8 18.1 Germany 7,509 6,718 15.4 13.4 France 4,294 4,259 8.8 8.5 Greece 3,154 3,281 6.5 6.6 Italy 3,585 2,528 7.3 5.1 Cyprus 1,896 2,344 3.9 4.7 Switzerland 2,298 2,115 4.7 4.2 Belgium 233 1,115 0.5 2.2 USA 869 1,054 1.8 2.1 Spain 604 841 1.2 1.7 Hungary 878 810 1.8 1.6 1,107 638 2.3 1.3 Czech Republic 354 580 0.7 1.2 Turkey 578 569 1.2 1.1 Luxembourg Source: National Bank of Romania The flow of equity capital into FDI enterprises is divided into greenfield, mergers and acquisitions, and corporate development. During 2009, corporate development accounted for 98.3% of FDI equity (EUR 3,065 million), mergers and acquisitions (M&A) made up 1.1% of equity (EUR 34 million), while only 0.6% of FDI, i.e. EUR 19 million, went into greenfield investment. The accumulation of foreign direct investment in enterprises established as greenfield investment companies, called greenfield enterprises, was highlighted in order to assess the lasting impact of greenfield investment on the economy. 10 Romania InfoBusiness Foreign Direct Investments in Greenfield Enterprises, 2009 ‐ Stock distribution by main economic activities ‐ of which: FDI in greenfield enterprises Total FDI Value Share of total FDI Value Share of total FDI EUR millions % EUR millions % 49,984 100.0 25,375 50.8 Industry, of which: 20,680 41.4 6,565 13.1 Mining 2,221 4.5 224 0.4 15,555 31.1 6,067 12.1 Food, beverages and tobacco 2,058 4.1 922 1.8 Cement, glassware and ceramics 1,629 3.3 355 0.7 Wooden products and furniture 962 1.9 777 1.6 Computer technology, electronics and optical devices 690 1.4 371 0.7 Machinery and equipment 943 1.9 398 0.8 Base metals and products thereof 2,577 5.2 431 0.9 Transport means and equipment 2,373 4.7 1,036 2.1 Oil processing, chemicals, rubber and plastic products 3,132 6.3 916 1.8 Textiles, apparel, footwear and leather goods 717 1.4 589 1.2 Other manufacturing 474 0.9 272 0.5 2,904 5.8 274 0.6 2,299 4.6 1,643 3.3 552 1.1 454 0.9 Trade 6,164 12.3 5,339 10.7 Construction and real estate 6,453 12.9 5,137 10.3 213 0.4 105 0.2 IT and communications 3,235 6.5 2,095 4.2 Financial intermediation and insurance 9,510 19.0 3,342 6.7 Transports 684 1.4 522 1.0 Other activities 194 0.4 173 0.4 Total FDI stock (as of end‐year) Manufacturing, of which: Electricity, natural gas, water Administrative and support service activities Agriculture, forestry and fishing Hotels and restaurants Source: National Bank of Romania The overall activity of foreign direct investment enterprises had a positive impact on Romaniaʹs trade balance, contributing 69.8% to total exports and 60.1% to total imports. 11 Romania InfoBusiness International Trade of Foreign Direct Investment Enterprises, 2009 Exports (FOB) Total FDI enterprises (as of end‐year) Industry, of which: Manufacturing Trade Other economic sectors Imports (CIF) Value Share of total sector Value Share of total sector EUR millions % EUR millions % 19,643 69.8 22,525 60.1 17,264 79.3 15,155 76.5 16,440 79.7 14,423 78.8 1,827 51.7 6,214 45.4 552 19.3 1,156 29.0 Source: National Bank of Romania The export/import activities of FDI enterprises refer to companies investigated exhaustively (over 20 employees). Export/import data economy‐wide, taken into consideration in determining the relative size, are reported by enterprises having exceeded the reporting thresholds for 2009 set for Intrastat declarations. Exports and imports were aggregated by companies’ core business according to the statistical classification of economic activities NACE Rev.2, excluding exports and imports of divisions under headings “Public administration” and “Household activities”. In 2010, net direct investment totalled EUR 2,437 million, down 31.4 %, against 2009. Non‐residents’ direct investment in Romania worth EUR 2,695 million (as compared with EUR 3,488 million over 2009) covered 54.2% of the current account deficit in 2010. Major State Aid Schemes for Investments Romanian Government adopted a large number of state aid schemes stimulating economic growth by means of investment facilities granting. The general framework in the field of state aid was established by means of Government Emergency Ordinance No. 85/2008 regulating the principles of investment stimulation, investment fields, types of incentives and subsidies available, general eligibility conditions for both investor and investment project, etc. State aid can be granted to large, small and medium‐sized companies (including microenterprises), depending on the type of investment, the field in which the investment is implemented and the provisions of the state aid scheme applied for. Major state aid schemes supporting investments (Romanian Center for Trade and Investment, Department for Foreign Investments and International Relations, www.arisinvest.ro) are as follows: State aid scheme ensuring sustainable economic development (Government Decision no. 1680/2008, subsequently amended) The state aid scheme applies to the following 4 investment categories: ‐ initial investments between EUR 5 and 10 million and creating 50 jobs minimum; ‐ initial investments exceeding EUR 10 million and creating 100 new jobs minimum; ‐ initial investments exceeding EUR 20 million and creating 200 new jobs minimum; ‐ initial investments exceeding EUR 30 million and creating 300 new jobs minimum; Maximum aid ceiling / economic operator: ‐ EUR 22.5 million (RON equivalent), for investments carried out and new jobs created in the development region Bucharest‐Ilfov; 12 Romania ‐ InfoBusiness EUR 28.125 million (RON equivalent), for investments carried out and new jobs created as a result of initial investment in any of the other development regions in Romania (except region Bucharest‐Ilfov). Beneficiary’s financial contribution: at least 50% of the eligible expenses; the form of this contribution must not fall under any other state aid. Maximum total budget / scheme: EUR 1 billion (RON equivalent) / 5 years (2009 ‐ 2013). Annual average budget: EUR 200 million, not exceeding annual budget ceilings approved for the period of 5 years (Art 12(2) Government Decision no. 1680/2008, subsequently amended). Duration of the scheme: 2009 ‐ 2013. Provider: Ministry of Public Finance of Romania. Total number of companies estimated to be granted state aid under the scheme: 150; average number of beneficiaries / year: 30. State aid scheme supporting regional development by means of investment stimulation (Government Decision no. 753/2008) Beneficiaries: large enterprises meeting the following three conditions: ‐ initial investment exceeding EUR 100 million (RON equivalent); ‐ investment eligible costs of over EUR 50 million (RON equivalent); ‐ minimum 500 newly created jobs as a result of the initial investment. Aid intensity: calculated by adjusting the regional ceiling to the level of eligible expenses, according to the following formula A= R x (50+0.50B+0.34C), where: ‐ A is the maximum state aid amount; ‐ R is the unadjusted regional ceiling, that is 50% for all development regions in Romania, except region Bucharest‐Ilfov, where it reaches 40%; ‐ B is the eligible expenses amounting between EUR 50 million (RON equivalent) and EUR 100 million (RON equivalent); ‐ C is the eligible expenses exceeding EUR 100 million (RON equivalent). Beneficiary’s financial contribution to the investment must cover at least 25% from the eligible costs; the form of this contribution must not fall under any other state aid. Maximum total budget / scheme: EUR 575 million (RON equivalent). Annual average budget: EUR 115 million, not exceeding annual budget ceilings approved for the 5 years (Art 11 (2), Government Decision no. 753/2008). Duration of the scheme: 2008 ‐ 2012, with the possibility of extending this period until 2013. Provider: Ministry of Public Finance of Romania. Regional state aid scheme for renewable energy resources harnessing (Government Decision no. 750/2008, subsequently amended) Investment supported: initial investments harnessing renewable energy resources for the production of electric and thermal energy ‐ renewable energy sources: sun, wind, waves, micro‐hydro (systems with installed power <10 MW), biomass, biogas, geothermal, etc. Beneficiaries: large, medium sized and small enterprises Maximum aid intensity: ‐ 40% of the total eligible expenditure, for development region Bucharest‐Ilfov; ‐ 50% of the total eligible expenditure, for any of the other development regions in Romania (except region Bucharest‐Ilfov); ‐ intensity ceilings increase by 20% in case of small enterprises and by 10% in case of medium sized enterprises (exception: economic agents activating in the field of transport). 13 Romania InfoBusiness Beneficiary’s financial contribution: at least 30% of the investment eligible expenditure; this contribution must not come under any form implying public aid. Total budget/scheme: EUR 200,000,000 (RON equivalent); budget 2011: EUR 41.4 million (Art 17(1) Table 2, Government Decision no. 750/2008, subsequently amended).The scheme does not apply to projects with a total expenditure exceeding EUR 50 million. Duration of the scheme: 2008 ‐ December 31st, 2013. Provider: Ministry of Economy, Trade and Business Environment of Romania, through the Managing Authority of the Sectoral Operational Programme “Increase of Economic Competitiveness”. Horizontal state aid scheme for regional sustainable development and reduction of emissions (Government Decision no. 718/2008, subsequently amended) Investment supported: initial investments implemented in all industrial sectors and the energetic sector (with the exceptions provided by the law), concerning activities of electric and thermal energy production and consumption. Beneficiaries: large enterprises, SMEs (micro‐enterprises included). Aid under present scheme is not awarded for large investment projects (total expenditure exceeding EUR 50 million). Maximum aid intensity: ‐ 40% of the total eligible expenditure, for development region Bucharest‐Ilfov; ‐ 50% of the total eligible expenditure, for any of the other development regions in Romania (except region Bucharest‐Ilfov); ‐ intensities increase by 20% in case of small‐sized and micro‐enterprises, and by 10% in case of medium‐sized enterprises. Beneficiary’s financial contribution: at least 30% of the investment eligible expenditure; this contribution must not come under any form implying state aid. Total budget/scheme: EUR 318,800,000 (RON equivalent); budget 2011: EUR 65.9 million (Art 17(1), Government Decision no. 718/2008, subsequently amended). Duration of the scheme: 2008 ‐ December 31st, 2013. Provider: Ministry of Economy, Trade and Business Environment of Romania, through the Managing Authority of Sectoral Operational Programme “Increase of Economic Competitiveness”. Regional state aid scheme “Financing initial investment in research‐development and innovation” (Order no. 1293/2008 issued by the Minister of Economy and Finance, subsequently amended) The scheme corresponds to the following operations in the Sectoral Operational Programme “Increase of Economic Competitiveness”, priority Axis 2: Research, Technological Development and Innovation for Competitiveness: 2.3.2 Development of business R&D infrastructure and creation of new R&D jobs; 2.3.3 Promoting innovation in enterprises. Beneficiaries: ‐ enterprises with R&D activities mentioned in their Statute, implementing initial investments according to operation 2.3.2 Development of business R&D infrastructure and creation of new R&D jobs; ‐ productive enterprises not having R&D as main activity, implementing initial investments according to operation 2.3.3 Promoting innovation in enterprises. Form of financial support awarded: grants. Maximum aid intensity (% of the eligible expenses of the initial investment in tangible and intangible assets): ‐ 40% for the development region Bucharest‐Ilfov; ‐ 50% for any of the other development regions in Romania (except region Bucharest‐Ilfov); ‐ intensities can be increased by 20% in case of small‐sized enterprises and by 10% in case of medium‐ sized enterprises (except for aid awarded in the transport sector). 14 Romania InfoBusiness Beneficiary’s financial contribution: at least 30% of the investment eligible expenditure; this contribution must not come under any form implying public funds. Maximum allocated budget/scheme: EUR 180,000,000 (RON equivalent) ‐ the budget for operation 2.3.2 Development of business R&D infrastructure and creation of new R&D jobs has expired. Budget 2011: EUR 30,000,000 (Art 15, Order no. 1293/2008 issued by the Minister of Economy and Finance, subsequently amended). Duration of the scheme: 2008 ‐ December 31st, 2013. Provider: Ministry of Economy, Trade and Business Environment of Romania, through the Managing Authority of Sectoral Operational Programme “Increase of Economic Competitiveness”; intermediary organism National Authority for Scientific Research (ANCS). State aid scheme „Financing RDI projects by means of Sectoral Operational Programme “Increase of Economic Competitiveness” (Order no. 3388/2008 issued by the Minister of Economy and Finance, subsequently amended) The scheme corresponds to the following operations in the Sectoral Operational Programme “Increase of Economic Competitiveness”, priority Axis 2: Research, Technological Development and Innovation for Competitiveness: 2.1.1 R&D projects in partnership between universities/ research institutes and enterprises; 2.1.2 R&D projects (high scientific level) with foreign participation, 2.3.3 Promoting innovation in enterprises. Beneficiaries: large enterprises and SMEs, having or not R&D as main activity. Specific category: young innovative enterprises (small enterprises, less than 6 years old at the moment of aid being awarded, with registered R&D expenses amounting at least 15% of the total operation costs during at least one of the 3 years preceding aid granting ‐ Order no. 3388/2008, art. 8 lit l). Form of financial support awarded: grants. Aid intensity (% of the eligible expenses): ‐ industrial research: 50%; ‐ experimental development: 25%; ‐ these intensities increase by 10% in case of medium sized enterprises and by 20% in case of small‐sized enterprises (micro‐enterprises included); ‐ activities within projects developed by young innovative enterprises: 100% for the period of time the beneficiary meets the conditions of young innovative enterprise, but not more than EUR 1 million. Maximum aid quotas (brief presentation): Eligible activities / Type of the enterprise large medium small Industrial research 50% 60% 70% Experimental development 25% 35% 45% Feasibility studies preparatory to experimental development 40% 50% 50% Obtaining and validation of industrial property rights (for industrial research) ‐ 60% 70% Obtaining and validation of industrial property rights (for experimental development) ‐ 35% 45% Innovation support and consulting services ‐ max. EUR 0.2 million per 3 years (1) Lease of highly qualified personnel ‐ 50% (2) Activities for enterprises ‐ ‐ 100% (3) Notes: (1) If the service provider does not have a national or European certification, the aid covers a maximum of 75% of the eligible expenses maximum. (2) For a period of maximum 3 years / beneficiary / temporarily hired employee. (3) But no more than EUR 1 million. 15 Romania InfoBusiness Types of eligible projects: Operation SOP IEC(1) Project type Eligible activities 2.1.1. Projects developed by research institutions on behalf of an enterprise ‐ Industrial research ‐ Experimental development ‐ Obtaining and validating the industrial property rights 2.1.2 R&D projects (high scientific level) ‐ Industrial research ‐ Experimental development ‐ Obtaining and validating the industrial property rights 2.3.3. Innovative technology projects ‐ Experimental development ‐ Obtaining and validating the industrial property rights ‐ Technical feasibility studies preceding experimental development ‐ Contracting innovation support and consulting services ‐ 3 year lease of highly qualified personal from research organizations or large enterprises, for RDI activities Projects for young innovative enterprises ‐ All activities concerning products/ services being in process of production, manufacturing and marketing. Maximum aid per project ‐ EUR ‐ 1,000,000 2,000,000 5,000,000 1,000,000 Beneficiaries Enterprises not having R&D as main activity Enterprises with R&D activities (2) Enterprises not having R&D as main activity Young innovative enterprises not having R&D as main activity Notes: (1) Sectoral Operational Programme “Increase of Economic Competitiveness”. (2) The budget for operation 2.1.2 R&D projects (high scientific level) with foreign participation has expired. Regional state aid scheme supporting investment in industrial parks (Order no. 296/2007 issued by the Minister of Interior and Administrative Reform) Aid under present scheme is not awarded for large investment projects. Aid intensity shall not exceed the regional aid ceiling of: ‐ 40% for the development region Bucharest‐Ilfov; ‐ 50% for any of the other development regions in Romania (except region Bucharest‐Ilfov); ‐ intensities can be increased by 20% in case of small‐sized and micro‐enterprises, and by 10% in case of medium‐sized enterprises (except for aid awarded in the transport sector). Beneficiary’s financial contribution: at least 25% of the investment eligible expenditure; this contribution must not come under any form implying state aid. Form of financial support awarded: fiscal incentives: (a) building tax exemption; (b) land tax exemption; (c) exemption from the taxes payment on changing the land destination belonging to industrial parks; (d) exemption from the taxes payment on the land withdrawal from agricultural use belonging to the industrial park. Exemptions (a) and b) are granted by the territorial administrative unit where the industrial park is located, in the limit of intensity ceilings in the scheme, for those investment projects that beneficiaries are interested to implement according to legal conditions in the scheme. Maximum allocated budget/scheme: RON 268,681,461. 16 Romania InfoBusiness Budget 2011 (Art. 20(1), Order no. 296/2007 issued by the Minister of Interior and Administrative Reform): ‐ land tax exemption: RON 653,520.8; ‐ building tax exemption: RON 47,872,000; ‐ exemption from the payment of taxes on modifying the destination of the land belonging to industrial parks / on the withdrawal of the land belonging the industrial park from agricultural use: RON 1,150,000. Duration of the scheme: 2007 ‐ December 31st, 2013. Industrial Parks and Free Zones Industrial Parks The Government Ordinance No. 65/2001 concerning the establishment and work of the industrial parks and Law No. 490 of July 11th, 2002 regulates the establishing and working regime for industrial parks. The Ministry of Administration and Interior is the public authority entitled to establish the title of an industrial park for a period of not less than 15 years, based on request of interested parties. According to legislation in force, industrial parks are well‐defined areas where economic, scientific research, industrial production activities and services, as well as activities assessing scientific research and/or technological development are carried out, within a regime of specific facilities, by using human and material potential available in the area. Industrial parks regime allows commercial companies to develop their activity within relevant areas, to have access to infrastructure required for performing economic activities. Establishment of an industrial park is based on the association in participation, between central and local public administration authorities, economic agents, research institutes and/or other interested partners. Purposes of setting‐up industrial parks are to stimulate economic and social development, to perform the transfer of technology, to induce investment inflows and turn to best account the human resources in the area. Industrial park license may be granted only to companies acting solely in the industrial parks field, called the managing companies. Industrial park set‐up and operation The initiative to set‐up an industrial park may come from local public authorities, chambers of commerce and industry, employers’ associations, professional organizations, as well as joint‐stock companies with their registered office in Romania and whose sole object is the administration of industrial parks. The land covered by industrial park along with the buildings and infrastructure related to the existing utilities at the moment of establishment has to comply cumulatively with all the following conditions: To ensure access to national or European roads; To have an area of at least 10 ha; To be owned or used for at least 30 years by the association requesting the industrial park license; To lack any encumbrance; Not to make the object of any pending litigation in respect of its legal status; To fulfill all the technical requirements in respect of the environmental protection; If more than one incentive regime is applicable to an investment, the company performing it has to explicitly choose one of them. 17 Romania InfoBusiness The title of industrial park is granted through an order of the Minister of Administration and Interior. In order to obtain an industrial park title, the association submits to the Ministry of Administration and Interior an application accompanied by the following documents: proof of fulfilling the conditions stipulated above concerning the land designated to the industrial park, including buildings and infrastructure of existing utilities; feasibility study for industrial park building up, including description of infrastructure within the park and of systems connected to utilities exterior to the park, required; agreement of the local government on building up the infrastructure afferent to industrial park and related utilities; list with economic agents initially proposed and economic activities scheduled to be developed within the industrial park, in compliance with provisions of art.1 par. (2). Incentives for Investment in Industrial Parks Companies operating in the industrial parks benefit from the following incentives stipulated by the Government Ordinance No. 65/2001 as further amended by the Law No. 490/2002 and reinforced by the Fiscal Code: exemption from the payment of the fees levied for the modification of the destination or for the withdrawal of the land from the agricultural circuit related to the industrial park, for the association owning the title of industrial park; deduction from the taxable profit of 20% from the value of the investments made in the industrial park, after the date of the coming into force of the Law No. 490/2002, for the association that makes such investments in constructions or rehabilitations of constructions and in the internal infrastructure or of connection to the public network regarding the utilities, taking into account the legal provisions in force on the classification and the standardized duration of the fixtures operation. The deduction is calculated in the month in which the operation of the investment is performed, according to the provisions of Law No. 15/1994 on the depreciation of fixed capital in tangible or intangible assets, republished with further amendments, only from the fiscal point of view, through its subscription at the deductible amounts stipulated in the tax return. If a fiscal loss is made, it shall be recovered from the taxable profits obtained in the following 5 years; postponement of the period of the setting up the respective investment, until the industrial park is put into operation, according to the regulations in force, respectively until the 25th of the month following the date of the putting into operations of the industrial park, of the payment of the value‐added tax for the materials and equipment necessary for installing the system of utilities from inside the park, as well as of the connections of the park at the main lines or at the existing networks of public utilities, at their suppliers, and the postponement of the right to deduct the respective value‐added tax until the same date that the economic entities make the investment; tax reduction granted by the local government based on the decision of the local or district councils in the administrative territorial jurisdiction in which the industrial park is located, for real estate and lands transmitted for the use of the industrial park; other facilities that may be granted, according to the law, by the local government. If an investment does not fulfill the conditions in order to benefit from the same facilities granted by many laws, the economic entity will have to choose explicitly only one regime of facilities stipulated in one law. The title of industrial park shall not be granted to those commercial companies falling under one of the following categories: companies that are subject to voluntary or compulsory liquidation or bankruptcy procedures; companies that did not fulfill their obligations, assumed previously, in the operation of another industrial park; companies that are behind with their taxes and other sums due to the budget, the local budgets and the special funds budgets. 18 Romania InfoBusiness The holder of the title of industrial park has the following obligations: to develop and operate the industrial park in keeping with the feasibility study and the business plan presented in the offer documents; to produce, by March 31st of the following year, an annual report on the activity of the industrial park; wherever its funding is granted, from budgetary and extra‐budgetary funds, earmarked for the development of industrial parks to produce a financial report every three months, by the 25th of the following month, as well as an annual audit report, by March 31st of the following year, regarding the way the funds have been used. The holder of the title of industrial park has the right to represent the economic actors operating within the industrial park in obtaining the authorizations required for the development of specific activities. Notwithstanding the legal provisions in force, the assets, either public or private property of the state or of territorial and administrative divisions included within an industrial park, shall be subject to a concession or sub‐concession contract, respectively, or lease or sublease contract, respectively, by direct entrusting. In case of a sub‐concession or sublease contract, notwithstanding the legal provisions in force, no agreement of the owner is required. Industrial parks are operated by commercial contracts concluded between titleholders and the beneficiaries of the specific activities to be developed therein, Romanian or foreign legal persons, selected, as the case may be, by public tenders. The holder of the title of industrial park can also be the contractor of the construction and erection works, commissioning, repair and maintenance of the relevant objectives can supply services and public utilities, as well as the services related to park operation. Technological Parks Based on Government Ordinance No. 14/2002, as amended by Law No. 50/2003, scientific and technological parks are seen as strictly delimited areas where education and research activities are performed, as well as the technological implementation of the results for the purpose of their utilization in economy. A scientific and technological park may be set up based on a partnership agreement between an accredited university and/or another research and development unit and a consortium of companies, associations or individuals, Romanian or foreign. Upon setup, a scientific and technological park needs to be authorized by The Ministry of Education and Research, who is further entitled to monitor the activities of the scientific and technological park. The park is administered by a Romanian company, designated by the consortium, called the administrator‐company. Compliance Conditions Land related to scientific and technological park has to comply cumulatively with the following conditions: To lack any encumbrance; Not to make the object of any pending litigation in respect of its legal status. Facilities of scientific and technological park have to comply cumulatively with the following conditions: To have location conditions in compliance with Authorization and Suspension Methodology To have the adequate facilities in order to perform its object of activity. Incentives for Investment in Technological Parks For their establishment and operation, scientific and technological parks benefit from the following incentives: Tax reduction granted by the local authorities for the fixed assets and land given to the park for its use, as well as other incentives, which may be granted according to the law, by the public local authority; Exemption from payment of taxes for modifying the land destination or land withdrawal from the agricultural use for the land used in the scientific and technological parks; 19 Romania InfoBusiness Deferred payment of VAT for materials, equipment and connecting to the public utilities during the investment period until the opening of the park; Development programs for infrastructure, investment and providing equipment granted by the central and local public administration, private companies and foreign financial assistance; Donations, concessions and structural funds for development. Companies operating within scientific and technological parks benefit from the following incentives: Favorable location conditions and infrastructure and communication use, by payment on installment basis, ensured or facilitated by the administrator for a determined functioning period Tariff reduction or free of charge services offered by the administrator. Free Zones Free Zones (FZs) are special areas within the customs territory of the Community. Goods placed within these areas are free of import duties, VAT and other import charges. FZ treatment applies to both non‐ Community and Community goods. Non‐Community goods stored in the zone are considered as not yet imported to the Customs territory of the Community whereas certain Community goods stored in the free zones can be considered as already exported. On importation, free zones are mainly for storage of non‐Community goods until they are released for free circulation. No import declaration has to be lodged as long as the goods are stored in the free zone. Import and export declarations have only to be lodged when the goods leave the free zone. In addition, there may be special relieves available in free zones from other taxes, excises or local duties. These will differ from one zone to another. The free zones are mainly a service for traders to facilitate trading procedures by allowing fewer customs formalities. The Member States define the entry and exit points of each free zone or free warehouse. The construction of any building in a free zone requires the prior approval of the customs authorities. The perimeter and the entry and exit points of free zones, except the free zones designated in accordance with Article 168a (Commission Regulation 2454/1993/EEC concerning the application of the Community Customs Code), and of free warehouses are subject to supervision by the customs authorities. Persons and means of transport entering or leaving a free zone or free warehouse can be subjected to a customs check. Access to a free zone or free warehouse can be denied to persons who do not provide every guarantee necessary for compliance with the rules provided for in this Code. The customs authorities may check goods entering, leaving or remaining in a free zone or free warehouse. To enable such checks to be carried out, a copy of the transport document, which shall accompany goods entering or leaving, needs to be handled to, or kept at the disposal of the customs authority by any person designated for this purpose by such authorities. Where such checks are required, the goods will be made available to the customs authorities. There is no limit to the length of time goods may remain in free zones or free warehouses. For certain goods referred to in Article 166 (b) of Regulation 2454/1993/EEC which are covered by the common agricultural policy, specific time limits may be imposed in accordance with the committee procedure. Any industrial, commercial or service activity, under the conditions laid down in Community Customs Code, is authorized in a free zone or free warehouse. The carrying on of such activities will be notified though in advance to the customs authorities. The customs authorities can impose certain prohibitions or restrictions on these activities, having regard to the nature of the goods concerned or the requirements of customs supervision. Without prejudice to special provisions adopted under customs legislation governing specific fields, goods leaving a free zone or free warehouse can be: exported or re‐exported from the customs territory of the Community, or brought into another part of the customs territory of the Community. 20 Romania InfoBusiness There are two types of free zones. Control type I free zones have a perimeter fence so that goods placed there, which is supervised by customs, are automatically under this regime. The rules for control type II free zones are essentially the same as those governing customs warehouses. This means that, unlike with traditional‐ style free zones, the goods are subjected to a declaration in order to be able to benefit from the arrangement. Romania has six FZs of control I type, namely: Sulina, Constanța, Galați, Brăila, Giurgiu and Curtici‐Arad. There are no transitional rules governing the free trade zones and warehouses in Romania. This means that Customs Code and the Rules of Application of the Customs Code are mandatory for the new member states (Romania and Bulgaria) starting January 1st, 2007. Any other legal authorization or provision that doesn’t comply with the Community regulations will not be valid from this day on. On the other hand, free zones and free warehouses established according to the Community legislation in force will continue to function as they are now. For the Romanian FZs there has been established a five years period of transition, until December 31st, 2011, regarding the exemption from royalty payment to free zones administration for operators within the free zones which had already closed trade contracts with this administration before July 1st,2002. As far as free zones are concerned, Romanian customs legislation took over the Community provisions to a great extent. Also, provisions referring to free zones are included in the Law No. 84/1992 regarding the free zones regime. Law No. 84/1992 has been completely harmonized with the Community customs legislation Customs control and is applicable only at the borders of FZs, which have to be strictly delimited. Goods and other merchandise are admitted into FZs without country of origin‐based restrictions, provided that import of such goods is not prohibited. Explosives, drugs, arms, ammunitions, psychotropic substances, radioactive and toxic substances, as well as any other substance or material prohibited by Romanian and Community laws are forbidden to enter the free trade zones. The activities which may be carried out within FZs are: handling, storing, sorting, measures, packing, conditioning, processing, assembling, manufacturing, testing, auctioning, buying, selling, renting and concession of land and buildings (concession may be done for a period up to 50 years), quantitative and qualitative control of goods, surveying, repairing, dismantling, exhibitions, stockʹs exchange operations, commercial‐financial operations, inner or international transports or forwarding, brokerage, agency and ship handling services, as well as other FZs specific activities. All mentioned activities may be carried out by any natural or legal persons, foreign or Romanian, based on a license issued by Free Trade Zone Administration. On January 1st, 2007, Romania’s free trade zones were included in Annex 108 of EEC Regulation 2454/1993 concerning the application of the Community Customs Code. Sulina is the first free trade zone established in Romania, having: Over 340 lm river quay; Over 450 lm maritime‐transit basin quay; Over 70,000 m2 of platforms, fenced and equipped for open storage; More than 5,000 m2 covered area, in warehouses, fit to accommodate any general cargo; 3 floating cranes of 16 ft capacity, provided also with grabs; 2 floating cranes of 32 ft capacity, perfectly fit for 20 ft and 40 ft containers; 2 river pushers, of 840 HP each and one sea‐river tugboat of 630 HP capacity; 2 covered river barges Europe 2A‐type of 1500 MTS capacity each; Several 3.5 ‐ 10 ft forklifts, bobcats for bulk cargo trimming, tractors and trailers, etc., all deserving 5 operational berths. 21 Romania InfoBusiness Within Sulina FZ there may be carried out the following activities: Handling, storage, sorting, measuring, packing, conditioning, processing, assembling, fabrication, marking, testing, auctioning, sale‐purchase, expertise and dismantling of merchandises, inner and international transports forwarding; Organizing exhibitions; Organizing stock exchange and financial banking operations; Organizing canteens and restaurants, as well as retail or wholesale shops within FZ perimeter; Renting or conceding land and buildings within FZ area; Quantitative and qualitative merchandises control; Ship chandlery of all vessels or any other means of transport operating in FZ or transiting Sulina Channel; Services, including any other FZ’s specific activities All the above mentioned activities may be carried out by any economic agent, legal or natural persons, Romanian or foreigner, with the acknowledgment and based on a license issued by Sulina Free Zone Administration. Constanța‐South Free Zone is situated in South‐Eastern area of Constanța city, 24 km away from downtown. One of the biggest Black Sea ports, Constanța provides the link between Northern Sea and Black Sea, through Rhine‐Main‐Danube Channel. Constanța‐South, a large and complex port, represents an old Constanța port expanding. During 1997, Constanța Port has been extended to Basarabi Harbor, becoming Constanța‐South and Basarabi Free Zone. Constanța‐South is accessible by: Road – modern access road connected to DN 39; Rail – there is a railway branch of South‐Constanța harbor entering enclosure 1; Sea – free zone berths 119,122,123,124,125,126,127,128,129,131,137 with depths alongside between ‐12.5 m and 16.5 m fitted for sea and river vessels; River – Danube‐Black Sea Channel; Air – Mihail Kogălniceanu International Airport (about 35 km from FZ) and Tuzla Heliport (about 10 km from FZ); Description of enclosures: 1A – total area of 20.2 ha; one berth with ‐13.5 m depth alongside; leased for storing activities on covered and uncovered spaces, processing and distribution; 1B – total area of 6.33 ha; will be endowed with all infrastructure facilities in the near future; will be leased for storing activities on covered and uncovered spaces, processing and distribution; 2 – total area of 10.55 ha; partly leased for industrial production, commercial and banking activities; 3 – total area of 97.55 ha and berths with ‐14.5/ ‐16.5 m depths alongside; leased for construction of terminal for oil and chemical bulk products, containers and suitable for industrial and commercial activities performance, too. Following activities may be carried out within Constanța‐South FZ: Handling, storage, sorting, measuring, processing, assembling, manufacturing of goods; Testing, auctioning, selling and purchasing; Stock exchange, financial and domestic operations; Leasing or renting buildings, storage areas; Chartering, brokerage All these activities may be performed by Romanian or foreign, natural or legal persons, subject to a license issued by Constanța‐South Free Zone Administration. Regarding investments opportunities, in order to 22 Romania InfoBusiness expand its activities, Constanța‐South Free Zone Administration sets forth several strategic proposals to foreign investors: Traffic of goods: terminal for oil products ‐ enclosure 3, wharf II; terminal for containers ‐ enclosure 3, wharf II; terminal for cereals ‐ enclosure 3, root of wharf II; terminal for carriage of general goods, automobiles and processing products – enclosure 3, wharf III and IV. Banking and financial activities: banking and business centers ‐ enclosure 2; Commercial activities: distribution park for general merchandise ‐ enclosure 1B and 2; Industrial activities: processing raw materials originated from Romania and neighbor countries (Ukraine, Serbia, Moldova) ‐ enclosure 2. Galați Free Zone was established in 1994, being located in Eastern area of Galați city, near Moldova and Ukraine borders. Galați FZ is delimited by Basarabia Road to East, by Lunca channel to North, by Danube to South and West. FZ can be directly accessed by: Water transport – access to Danube River, with mooring berths fitted with all the loading/downloading facilities in close proximity; Railway transport – FZ is the terminal point of a large railway line from former USSR countries, being directly connected to the national railway network; Road transport – modern access road from FZ to Basarabia Road, connected to former USSR countries via Giurgiuleşti Customs. Administration of Galați FZ manages a 136.98 ha area, divided in 2 platforms: Platform I – 130 ha area; Platform II – 6.98 ha area, located in the harbor perimeter, and including 300 lm of vertical wharf and 120 lm of bank). Development of new industries in the area will allow local economic profile diversification of two main industrial branches in the region: iron and steel industry, and ship building sector. Brăila Free Zone covers an area of 114.418 ha and consists of 4 distinct sites: Site 1 – located in downstream berth area, in vicinity of the projected container terminal, between Danube and protection embankment. Site extents over 22.5 ha and is bordered by Danube to East, transshipping platform – shipyard to South, rail switch yard‐port and access road to the buildings to West and suburb minor sewer to North. Berth operating capacity is 190,000 t a year for general goods and 350,000 t a year for bulk goods. A terminal for sea‐going and river ships will be provided downstream. Operating sector has two‐ton shore‐cranes, which provide an annually working capacity of 140,000 t containers. Storage and processing platform has a storage area of max. 100,000 m2. Rail access is granted from switchyard, which deserves whole port area. Site 1 is designed for light industry activities: food processing, woodworks, textiles, footwear, building materials, finishing and packaging operations for iron and steel products, etc. Site 2 – industrial estate in Vărsătura area of 34.3 ha. Site limits are provided by access road to production base on North‐East, access road to operation base to South‐East, Brăila‐Slobozia DN21 on North‐west and access road vertical to DN21 on South‐West. Considering the accessibility (road, river and rail transport means) and activities suitable to be developed in the area, this site is also known as Export Processing Zone. Close to main road network, site benefits from short junctions accessible from DN21 and DN26. The range of activities proposed for Site 2 includes: fruit and vegetable processing and canning, pastry and sweets production, beverage and alcohol bottling, brewery, textiles, cosmetics and other consumer goods production. 23 Romania InfoBusiness Site 3 – located downtown Brăila city, between Harbor Station and Fishery. Site’s area is of 8.3 ha, limited by access road to production base on North, access road to operation base on South‐East, Brăila‐ Slobozia DN21 on South‐West and access road vertical to Brăila‐Slobozia DN21 on South‐West. Platform has a rail network disposed between the Debarcader Street and quay which deserves berth operations fronts from dock basin. It boasts warehouses, buildings that can be used as area for storage and processing goods and products. Cargo working is carried out either by floating equipment or by mobile equipment on the access platform to ships. Site 4 – located near Site 1, area of 4.018 ha. Site is limited by Danube to East, Brăila Customs to North, Hercules Company to South and West. Main goals for Brăila FTZ is attracting foreign investments, promoting foreign trade and introducing modern industrial technology. Specific infrastructure facilities for Brăila FTZ comprise access for vehicles of any tonnage; access to railways; access for sea‐going ships or river vessels; various possibilities of cargo handling (loading, downloading, sorting, etc.); storage capacities on open platforms or in warehouses; customs and technical assistance; water and sewage systems, energy. Giurgiu Free Zone has as main objectives attracting foreign investments and stimulating production for export, along with its traditional gravitational centre function for international trade flows. Its location and existent industrial enterprises grant it a specific character and advantages. Giurgiu is located nearly Bucharest (61 km), Romania’s capital, the most important industrial and commercial center of the country. Also, Giurgiu is one of the most important Danube ports, standing at some main and waterways crossing points that ensure connection between all European regions, as well as connection to Middle East countries. Starting 1993, Danube‐Main‐Rhine Channel provides connection to North Sea through Rotterdam port. Giurgiu FZ lies on 153.56 ha, bordered by water on three sides. Giurgiu FZ benefits of: Infrastructure works (banks, platforms, roads and railways access) Superstructure works, both for commercial and industrial production area Electricity connection Communication infrastructure Two machine building production companies are working within Giurgiu FZ: Şantierul Naval SA and ICMUG SA. Şantierul Naval SA is specialized on building and repairs of river and sea cargo and passenger ships. Same time, ICMUG SA is specialized on low and medium depth drill equipment, mining, oil and chemical equipment and 20/40 feet containers production. Giurgiu FZ runs an oil terminal with a 350 m landing berth. Terminal provides 50,000 tones storage capacity for diverse oil products. Curtici‐Arad Free Zone, the newest free zone of Romania, has been established in western region of country, within one of the most important European railway corridor (Berlin‐Istanbul‐Salonic, corridor No. 4). Curtici‐Arad FZ consists of two sites: first one has an area of 75 ha right in the town of Curtici and the second one has an area of over 15 ha area within the Arad International Airport premises. Curtici‐Arad FZ is the first Romanian free zone placed exclusively on a European overland transport route, and it’s the first free zone placed on a European main line, nearby three‐road transport frontier connections, together with air ones. Therefore, carriage in and out the free zone is based on rail transport works through Curtici marshalling yard for going out and by internal main lines for going inside the country. The road transport uses the following main lines: North‐South highway (Trans‐European) on the Budapest‐Szeged‐Arad‐Deva‐Piteşti‐Bucureşti‐ Constanța variant Air transport shall be done using Arad International Airport 24 Romania InfoBusiness Industrial Parks (IP) and Free Zones (FZ) IP with title granted by Minister Order IP established by Government Decisions IP set up by Government Emergency Ordinance no 115/2003 Applications for granting IP title under evaluation PHARE Infrastructure projects Other IP FZ Bacau - - - - Hemeiusi PHARE 2000 - - Neamt Ceahlau IP - - - - - - - - - - Iasi - - - - Iasi PHARE 2000 (Tehnopolis Science & Technology Park) Suceava - - - - Siret PHARE 2000 (Bucovina Economic Center) Botosani Botosani IP - - - - - - Covasna - - - - - - - Harghita - - - - - - - Prejmer IP Pro Roman IP Brasov IP Euro Sand Vladeni IP Zarnesti IP Fagaras IP Victoria IP Metrom IP Carfil IP - - - - - Sibiu Medias IP Sibiu IP Sibiu-Sura Mica IP - - - - - - Alba Cugir IP - - - - - - Brasov 25 Romania Mures Timis Caras Severin Hunedoara IP with title granted by Minister Order Mures IP IP established by Government Decisions - IP set up by Government Emergency Ordinance no 115/2003 - Applications for granting IP title under evaluation InfoBusiness PHARE Infrastructure projects Other IP FZ - - - - - - - Aton 1 Sanandrei IP - - - Timisoara PHARE 2000 (Timisoara Technological & Industrial Park - PITT) - - - - Caransebes PHARE 2001 - 2002 - Hunedoara IP - - - - - - Arad OHARE 2000 - Curtici – Arad FZ - - - Arad UTA 2 IP - - Bucuresti Metav IP Sema IP - Faur IP - Dolj Craiova IP - - - - - - Olt Corabia IP - - - - - - Gorj Gorj IP - - - - - - Arges Pitesti IP - - - - Campulung IP - Dambovita Moreni IP Mija IP Racari IP - - Corbii Mari IP - - - Prahova Prahova IP Ploiesti IP Brazi IP Plopeni IP - - - - - Ialomita Fetesti IP - - - - - - Giurgiu Bucuresti IP North Giurgiu IP - - - - - Giurgiu FZ - - - - Turnu Magurele PHARE 2001 - - - - - - Galati FZ Braila - - - - Braila PHARE 2000 Braila FZ Tulcea - - - - - Sulina FZ - - - - - Teleorman Galati Constanta Galati IP Rompetrol IP Mangalia IP Source: Romania Center for Trade and Investment, Department for Foreign Investments and International Relations, www.arisinvest.ro 26 Romania InfoBusiness OECD ‐ Romanian National Contact Point National Contact Point for encouraging the observance of the OECD Guidelines for Multinational Enterprises proposed by Organization for Economic Cooperation and Development (OECD) is established according to Government Decision No. 420/2005. The attributions of the Romanian National Contact Point (RNPC), presented in OECD Guidelines for Multinational Enterprises refer to: Promotion of the OECD Guidelines for Multinational Enterprises; Analyzing the questions on aspects regarding the OECD Guidelines for Multinational Enterprises and contributes to their solving; Disseminating the information regarding the experiences of the adhering countries to the OECD Declaration in applying the OECD Guidelines; Preparing an annual report for OECD Investment Committee about its activities. In providing the assistance, the Romanian National Contact Point: Makes an initial assessment of whether the issues raised merit further examination and responds to the party or parties raising them. Where the issues raised merit further examination, provides good offices to help the parties involved to resolve the issues. For this purpose, the RNCP consults with these parties and where relevant: - Seeks advice from relevant authorities, and/or representatives of the business community, employee organizations, other non‐governmental organizations, and relevant experts; - Consults the National Contact Point in the other country or countries concerned; - Seeks the guidance of the OECD Investment Committee if it has doubt about the interpretation of the Guidelines in particular instances; - Offers, and with the agreement of the parties involved, facilitates access to consensual and non‐ adversarial means, such as conciliation or mediation, to assist in dealing with the issues. The specific instance request may be addressed to the Romanian National Contact Point by any individual or legal person and should contain the direct reference to the OECD Guideline that is considered to be infringed as well as the argumentation/documentation for this assumption. Within the specific instance request should be mentioned if the case is or was presented in a court of law. The Romanian National Contact Point provides a forum for discussion and assists the business community, employees’ organizations and other parties concerned to deal with the issues raised in an efficient and timely manner and in accordance with applicable law. Technical Secretariat of the OECD Romanian National Contact Point is located within Romanian Center for Trade and Investment (Centrul Român pentru Promovarea Comerțului şi Investițiilor Străine, CRPCIS) Contact details: Address: 17 Apolodor Street, District 5, Bucharest 050741, Romania Phone: (+40) (21) 318.50.50; Fax: (+40) (21) 311.14.91; Email: [email protected] OECD Guidelines for Multinational Enterprises The OECD Guidelines for Multinational Enterprises are recommendations addressed by governments to multinational enterprises, voluntary principles and standards for responsible business conduct consistent with applicable laws. The OECD Guidelines for Multinational Enterprises aim to ensure that the operations of these enterprises are in harmony with government policies, to strengthen the basis of mutual confidence between enterprises and the societies in which they operate, to help improve the foreign 27 Romania InfoBusiness investment climate and to enhance the contribution to sustainable development made by multinational enterprises. The OECD Guidelines for Multinational Enterprises cover issues such as: (1) Employment and industrial relations, (2) Environment protection, (3) Human rights, (4) Combating bribery, (5) Consumer interests, (6) Competition, (7) Taxation, (8) Science and technology, and (9) Corporate disclosure. The OECD Guidelines for Multinational Enterprises were adopted in 1976, being revised last time in 2000 in order to make them more relevant to modern business practice. The up‐dated versions have been made based on an extensive dialogue with business environment, unions and non‐governmental organizations and covered the main elements of the sustainable development ‐ economic, social and environment protection areas. The last up‐dated version of the OECD Guidelines for Multinational Enterprises is available at: www.oecd.org/document/28/0,3343,en_2649_201185_2397532_1_1_1_1,00.html Other useful documents: Policy framework for Investment www.oecd.org/dataoecd/1/31/36671400.pdf OECD Risk Awareness Tool for Multinational Enterprises in Weak Governance Zones www.oecd.org/dataoecd/26/21/36885821.pdf 5. Setting‐up a Business There are no specific investment approvals required for setting up a business in Romania. The procedure requires fulfilling certain legal formalities such as registering with the Romanian Trade Registry and the Fiscal Administration. Forms of Business Organization (Ernst & Young Romania, Romania Business Passport, 2011 edition): Limited Liability Company (SRL) The shareholder liability is limited to the amount subscribed as participation to the company’s share capital. The share capital of a SRL must be at least RON 200 (approximately EUR 47, calculated at the exchange rate of RON 4.2/EUR), divided into shares with a minimum face value of RON 10 each. A SRL may be formed by a minimum of one shareholder and a maximum of fifty. These shareholders may include individuals and/or legal entities. A person, either natural or legal, cannot be the sole shareholder of more than one SRL. If a person intends to form several companies, it is necessary for a minimum of one share to be held by another person or entity. Moreover, an SRL cannot have, as sole shareholder, another limited liability company that is also owned by a single shareholder. The shareholder liability is in general limited to the amount subscribed in the company’s share capital. A SRL is managed by one or more administrators who may have full or limited powers and who may be Romanian or foreign nationals. There is no distinction between companies operating with or without foreign share capital. For US tax purposes, SRL is a check‐the‐box entity. Joint Stock Company (SA) The minimum statutory capital for a joint stock company is RON 90,000 (approximately 21,428, calculated at the exchange rate of RON 4.2/EUR). Shares must be held by a minimum of two shareholders, 28 Romania InfoBusiness individuals and/or legal entities (there is no maximum limit), and can be open to either public or private participation. The minimum face value of one share is RON 0.1. Pursuant to recent amendments, company shareholders may empower the administrators to increase the share capital by a specified amount, provided it does not exceed half of the value of the existing share capital. Two options have been provided for administration of joint stock companies: the unitary system and the dualist system. Unitary system ‐ the company is managed by one or several administrators, always in an odd number, organized as a Board. The Board can assign management of the company to one or several directors. For those companies whose financial statements are subject to auditing, such an assignment is compulsory and the minimum number of administrators is three. Dualist (two‐tier) system ‐ the management of the company is ensured by a Directorate and a Supervisory Board with the following duties: ‐ The Directorate carries out the activities and management of the company and reports to the Supervisory Board; ‐ The Supervisory Board exerts permanent control over the Directorate and reports to the General Meeting of Shareholders. Administrators and other members of the Directorate and the Supervisory Board may not conclude a labor agreement with the company; a management agreement is required instead. Representative Office A representative office is usually set up by foreign companies in Romania to carry out non‐commercial activities, such as advertising and market research, on behalf of the parent company. Representative offices cannot carry out commercial activities in Romania. In order to register a representative office, company officials should apply to the Ministry of Economy, Commerce and Business Environment and pay an annual fee of the RON equivalent of USD 1,200 for the license. Upon authorization, the representative office must be also registered with the Ministry of Public Finances, and with the Romanian Chamber of Commerce and pay an annual income tax of the RON equivalent of EUR 4,000. Branch of a foreign company A branch of a foreign company does not have its own legal personality or share capital. Being a unit of the parent company, branch activities cannot exceed the scope of activity of the parent company. Partnership Partnership as a legal form is seldom used in Romania. The three kinds of partnerships provided by law that lead to the creation of an entity with legal personality are: (1) General partnership (societate în nume colectiv), (2) Limited partnership (societate în comandită simplă), and (3) Partnership limited by shares (societate în comandită pe acțiuni). The partners in a general partnership and the active partners in a limited partnership have unlimited liability with respect to the obligations of the partnership toward third parties. Among themselves, each partner is individually and collectively responsible for these obligations. The minimum capital is stipulated only for a partnership limited by shares (i.e., RON 90,000, equivalent of approximately EUR 21,428, calculated at the exchange rate of RON 4.2/EUR). No capital requirements are provided for the other forms of partnerships. Consortium Domestic legislation allows for the conclusion of a joint venture agreement (contract de asociațiune în participațiune). Under this agreement, parties act together for the accomplishment of a common business goal. This form of doing business in Romania does not create a legal entity. Generally, one party is in charge of the bookkeeping of the joint venture. Economic Interest Group (EIG) An EIG is an association of two or more individuals or companies set up for a definite period. Its main objective is the development of the activities of the members; the development of the EIG itself is 29 Romania InfoBusiness secondary. An EIG is allowed a maximum of 20 members. A key feature of EIGs is the unlimited joint liability of its members and the fact that it may not, directly or indirectly, own shares in one of its member companies or in another EIG. An EIG is not allowed to issue shares, bonds, or other negotiable instruments. European Economic Interest Group (EEIG) An EEIG is similar to an EIG; it can be set up in any EU member state and may function in Romania through subsidiaries, branches, representative offices, or other non‐legal entities provided these comply with domestic legislation. The subsidiaries and branches of an EEIG are subject to the same registration procedure as EIGs. Societas Europaea (SE) A SE may be created on registration in any of the EU member states in accordance with the EC Regulation 2157/2001. European law requires member states to treat a SE as if it is a public limited company formed in accordance with the law of the member state in which it has its registered office. By using the SE, businesses operating in several member states can establish themselves as a single company, rather than following different rules for each country in which they have subsidiaries. SEs are only suitable for large companies. Entities commonly used by foreign investors Limited liability companies are the most popular vehicles for business in Romania because of their simple administrative requirements, greater flexibility compared to other types of companies, and low capital requirement. However, joint stock companies remain an attractive option for investors which plan to list their companies on the stock exchange. 6. Taxation Depending on the type of taxpayers, the fiscal legislation of Romania provides the following main rules (Ernst & Young Romania, Romania Business Passport, 2011 edition ‐ excerpts). Corporate taxes The Fiscal Code came into effect on 1 January 2004. The code has integrated key tax legislation and provides the basis for a more stable framework of tax legislation by requiring amendments to follow a specific juridical route. Tax rates at a glance (as of July 22, 2010 and applicable as of January 1, 2011) Profits tax rate (%): 16 Capital gains tax rate (%): 16 Branch tax rate (%): 16 Withholding tax (%) ‐ Dividends: 0/16 ‐ Interest: 0/16 ‐ Royalties: 0/16 ‐ Services: 16 ‐ Commissions: 16 ‐ Entertainment and sports activities: 16 ‐ Proceeds from liquidation: 16 ‐ Branch remittance tax: N/A Net operating losses (years) ‐ Carry‐back: N/A ‐ Carry‐forward: 7/ 5 30 Romania InfoBusiness Fiscal year In Romania, the fiscal year is the calendar year. Profits tax Resident entities as well as legal entities having their headquarters in Romania, but incorporated as per the European legislation (i.e., European companies) are subject to tax on worldwide income. An entity is resident in Romania if it is incorporated according to the Romanian legislation, if it is a foreign legal person having its place of effective management in Romania or if it is a legal entity having its headquarter in Romania and it is incorporated according to the European legislation. Associations or consortia between Romanian legal entities, which do not qualify as legal persons, are taxable in Romania separately at the level of each partner. For such associations between a Romanian legal entity and individuals or foreign entities, the tax must be computed and paid by the Romanian legal entity on behalf of the individuals or its foreign partners. Non‐resident companies are subject to tax on their Romanian‐sourced income only. Sale of shares held in Romanian companies by non‐resident companies, and sale of real estate located in Romania, are also subject to profits tax in Romania. A permanent establishment in Romania may be constituted inter‐alia by: an office, a branch, a factory, a mine, land for oil and gas extraction, or a building site that exists for a period exceeding six months. Also, a permanent establishment includes the place where an activity continues using the assets and liabilities of a Romanian legal entity undergoing a restructuring process (e.g., merger, spin‐off) involving entity/entities from other member state of the European Union (EU). Romanian legal entities should register with the relevant tax authorities any contracts signed with non‐ resident legal entities or individuals performing in Romania construction and assembly works, surveillance, consultancy, technical assistance or any other activity performed in Romania if such activities could give rise to a permanent establishment of the non‐resident in Romania. The contracts should be registered by submitting a declaration within 30 days from the date they were concluded. The form and content of the respective declaration is approved by order of the National Agency of Fiscal Administration (ANAF). Rates of profits tax The standard profits tax rate is 16%. Profits tax payable by companies earning revenues from bars, nightclubs, discos, casinos and sports bets, including revenues from an association agreement, is computed at the standard 16% rate, provided the tax amount is not less than 5% of the total declared revenue. In case the profits tax payable is below this threshold, the taxpayer is liable to pay profits tax computed at 5% of the declared revenue from such activities. If certain conditions are met, companies may opt for the micro enterprise regime, under which a 3% income tax rate is applied to revenues derived by the company (in 2010 this regime was cancelled but reintroduced from 2011). Representative offices are taxed on a yearly basis at a lump sum of the RON equivalent of EUR 4,000, payable in two equal installments, until 25th of June and 25th of December. Capital gains tax No separate capital gains tax is payable by resident entities. Capital gains of nonresident entities from the sale of immovable property in Romania, or from sale/transfer of shares held in a Romanian legal entity, are taxed at the standard corporate tax rate of 16%. During the period 1 January ‐ 31 December 2009, profits derived by non‐resident legal entities from transactions with participation titles held in Romanian companies and traded on the regulated market in Romania were treated as non‐taxable. 31 Romania InfoBusiness Dividends Dividends distributed/paid by resident legal entities or by European companies to their shareholders (namely, Romanian legal entities, EU resident legal entities and legal entities from the countries of the European Free Trade Association, i.e., Iceland, Norway, and Lichtenstein) are exempt from withholding tax in Romania, provided some conditions are met, including the condition that the shareholders own a minimum 10% of the share capital of the Romanian legal entity for an uninterrupted two years period ending at the date of dividend payment. Unless the above conditions are met, a 16% tax rate applies to dividends paid by resident entities to other resident entities, as well as dividends paid to any non‐resident legal entities (or a tax rate available under a tax treaty, if favourable). Starting from 2010, the dividends distributed by the Romanian legal entities to voluntary pension funds or to private pension funds, as well as to public administration bodies exercising the rights and obligations arising from the quality of state shareholder of the respective Romanian legal entities are exempt of dividend tax. In order to benefit of the more favourable provisions of the double tax treaties and the EU legislation, non‐ residents have to provide to the income payer a tax residency certificate as well as a statement on the fulfillment of the income beneficiary condition. If the condition of the shareholding period is fulfilled at a later stage, the dividend beneficiary is entitled to exemption and may request reimbursement of the tax withheld in Romania. Dividends paid by a Romanian entity to individual shareholders are subject to a 16% withholding tax rate. Dividends reinvested beginning with 2009 with the purpose of securing and creating new jobs for the business development of the Romanian legal entities are exempt from dividend tax. Dividends invested in the share capital of another Romanian legal entity in order to create new jobs or aiming at the development of its activities are exempt from dividend tax. Payments made by a Romanian legal entity to any of its shareholders for goods or services provided by the latter, in excess of the market value of the transaction, are assimilated to dividends from a tax point of view. The same tax treatment applies to payments made for the supply of goods and services used for personal purposes by the company’s shareholders or associates. The dividend tax must be withheld and paid to the state budget by the 25th of the month following the distribution/ payment of dividend. In case of dividends distributed, which were not effectively paid by the end of the year, the dividend tax must be paid by 25 January of the following year. Value‐Added Tax (VAT) Regime The Romanian VAT system is harmonized with EU VAT Directive. Tax rates The following rates apply in Romania: 24% standard rate, which is applicable to supplies of goods and services not subject to VAT exemptions or to the reduced rate; 9% reduced rate, which is applicable to the supplies of certain goods/services specifically enumerated in the Fiscal Code, such as sale of medicines, hotel accommodation, books, tickets for museums, cinemas, etc; 5% reduced rate, which is applicable to supplies of social housing, including related land (certain conditions have to be fulfilled for applying this provision). 32 Romania InfoBusiness Taxable base VAT is assessed on the total amount received or to be received by the supplier as consideration for the supply of goods or services; this includes taxes, commissions, packaging, transport and insurance expenses. Certain elements such as price discounts are not included in the taxable base. Exempt operations Supplies within the scope of VAT are classified as taxable operations and exempt operations. Exempt operations are divided as follows: Exempt supplies with credit for input tax (e.g., exemption for intra‐Community supplies of goods under certain conditions, exports and other similar supplies, international transportation, as well as specific exemptions related to international traffic of goods, etc.); Exempt supplies without credit for input tax (e.g., healthcare services, educational services, financial and banking services, supply of immovable property, except for new buildings, lease and renting of immovable property with certain exceptions); Exemption for import and intra‐community acquisitions of goods whose local supplies are exempted. The Fiscal Code provides specific rules on goods benefiting from special customs regimes. The following transactions are VAT exempt with credit for input tax: supply of goods placed under a bonded warehouse customs procedure; goods introduced in free zones; goods under an inward processing procedure, etc. Excise duty Excise duty is a consumption tax payable on certain categories of goods including alcoholic beverages, gasoline, tobacco products, coffee, electricity and certain other items. The tax is payable on import and sales of locally produced items on the domestic market and is set as fixed EUR amount per unit (“specific excises”) or as a percentage of a specified taxable base. Local taxes Local taxes in Romania are regulated by the Fiscal Code. Local taxes represent a distinct category of taxes set by the local administration, which are payable by both individuals and entities in Romania. The local councils may annually increase local taxes over the level established for any local tax provided by the Fiscal Code up to 20%, with a few exceptions. The legislation also provides for some exemptions, for example local councils may grant building and land tax exemptions to legal entities, provided these are in line with the state aid legislation. These local taxes include: Building tax Building tax is payable by owners of buildings located in Romania, regardless of their residence. Starting 1 July 2010 the tax rate ranges between 0.10% and 0.40% for individuals (previously between 0.10% and 0.20%. For legal entities it is between 0.25% and 1.50%. For buildings not revaluated three years prior to the concerned year, the tax payable by legal entities may vary between 5% and 10%. The tax is applied to the value of the building (established values are provided) for individuals and to the book value of the building for legal entities. The tax must be paid annually, in two equal installments by 31 March and 30 September. Land tax Land tax is payable by owners of land. Generally, the tax is established as a fixed amount per hectare, depending on the location of the land within certain determined zones, towns or villages and depending on land use. The tax is payable annually, in two equal installments, by 31 March and 30 September. 33 Romania InfoBusiness Vehicle tax Vehicle tax is payable by owners of land/water vehicles, which should be registered in Romania. The tax depends on the engine capacity or vehicle characteristics (e.g., number of axles, suspension system, weight, etc.). The tax is payable annually, in two equal installments, by 31 March and 30 September. Tax for construction authorizations The tax is established as a percentage on the construction value and is payable upon obtaining the construction authorization. Publicity and advertising tax Advertising tax is payable by the 10th of each month during the execution of the contract by the suppliers of publicity and advertising services rendered in Romania, except for publicity and advertising services through audio, video and the print medium. The tax rate is established by the local councils and ranges between 1% and 3%. It is applied to the value of the publicity and advertising services. Users of outdoor advertising must pay an outdoor media advertising tax computed as a fixed amount established by the local councils per square meter, depending on the surface used for advertising. Such tax should be paid in four equal installments by 15 March, 15 June, 15 September, and 15 November. Resort tax The tax is payable by individuals over 18 years for their stay in resorts and is included in the accommodation tariff. The tax rate is established by local councils and ranges between 0.5% and 5% on the accommodation tariff. Show tax Show tax is payable by individuals and entities for public performances at a rate of between 2% and 5% of revenues, or a fixed fee depending on the surface area of the premises. The show tax is payable monthly, in arrears by the 15th of the month following the performance. Other local taxes The local councils may impose a daily fee for temporary use of public places and for admissions to museums, memorials, or historical, architectural, and archaeological monuments, and also for the ownership or use of equipment that is held for the purpose of obtaining income using public infrastructure, as well as fees for activities with an impact on the environment. Stamp duty Stamp duty is payable on most judicial claims, issue of certificates and licenses, and documentary transactions which require authentication. Individual taxation Romanian citizens domiciled in Romania are considered to be Romanian tax residents and are taxed in Romania on their worldwide income. Foreigners and Romanian individuals without a Romanian domicile may be subject to taxation in Romania on worldwide income under certain circumstances. Residence An individual is considered to be a Romanian tax resident if he/she fulfils at least one of the following conditions: (1) individual is domiciled in Romania, (2) individual’s centre of vital interest is located in Romania, (3) individual is present in Romania for a period or periods exceeding in aggregate183 days during the 12 months to the end of the calendar year concerned, or (4) individual is a Romanian citizen working abroad as an employee of the Romanian state. 34 Romania InfoBusiness Taxpayers Individuals liable to income tax fall into the following two categories: Residents, Romanian individuals domiciled in Romania for income obtained from any source, both from Romania and abroad, and residents other than Romanian individuals domiciled in Romania ‐ only for Romanian ‐ sourced income; Non‐residents, who either: ‐ Carry out independent activities through a permanent establishment in Romania, for the net income attributable to the permanent establishment, or ‐ Carry out dependent activities in Romania, for the net income from such dependent activities, or ‐ Earn other types of income. If a non‐resident individual complies with the second or third condition, mentioned in the Residence section above, for a period of three consecutive years, he/she becomes subject to taxation on worldwide income starting from the fourth year. Until the end of the three year period, the respective individual is subject to Romanian income tax only for Romanian‐sourced income. Individuals who are tax residents in countries that have signed double tax treaties with Romania may benefit from a reduced tax rate or a tax exemption under the terms of the respective treaties. Individuals who are tax residents in countries that have not entered into a double tax treaty with Romania may become subject to Romanian taxation from the first day of presence in Romania. Also, foreign individuals working in Romania less than 183 days may become taxable herein for income from dependent activities if they cannot present a tax residency certificate. Categories of income subject to taxation A flat income tax rate of 16% applies to the following categories of income: Income from independent activities Salary income Rental income Pension income Prizes Agricultural income Income from other sources Income whose source was not identified The Fiscal Code provides special tax rates in case of income obtained from gambling, and transfer of real estate from personal patrimony. Income from other sources includes, inter alia: Insurance premiums borne by a freelancer or any other entity on behalf of an individual who is not an employee of the respective freelancer/entity. Such income is taxable in the hands of the recipient at 16%, through withholding, the tax being final. Income received by pensioners who are former employees arising out of the employment contracts concluded with their former employers or based on certain special laws, in the form of price differences for certain goods, services or other rights. Such income is taxable in the hands of the recipient at 16%, through withholding, and the obligation for the calculation and withholding rests with the payer of such income. Tax on income from other sources is payable by the 25th of the month following the realization of the income. Starting with 1 January 2011, any income whose source was not identified should be subject to 16% income tax applied to the taxable base adjusted according to the procedures and indirect methods of reconstitution of revenues and expenses. The income tax and late payment penalties will be computed by the tax authorities. 35 Romania InfoBusiness 7. Useful links Ministry of Economy, Trade and Business Environment ‐ www.minind.ro Ministry of Foreign Affairs ‐ www.mae.ro Ministry of Public Finance ‐ www.mfinante.ro Ministry of Justice ‐ www.just.ro Ministry of National Defense ‐ www.mapn.gov.ro Ministry of Administration and Interior ‐ www.mai.gov.ro Ministry of Transport and Infrastructure ‐ www.mt.ro Ministry of Education, Research, Youth and Sports ‐ www.edu.ro Ministry of Labor, Family and Social Protection ‐ www.mmuncii.ro Ministry of Agriculture and Rural Development ‐ www.madr.ro Ministry of Health ‐ www.ms.gov.ro Ministry for Environment and Forestry ‐ www.mmediu.ro Ministry of Culture and National Heritage ‐ www.cultura.ro Ministry for Regional Development and Tourism ‐ www.mdrl.gov.ro Ministry of Communication and Information Society ‐ www.mcsi.gov.ro National Customs Authority ‐ www.customs.ro National Office of Trade Register ‐ www.onrc.ro National Agency for Fiscal Administration ‐ www.anaf.ro National Bank of Romania ‐ www.bnr.ro National Institute of Statistics ‐ www.insse.ro National Commission for Prognosis ‐ www.cnp.ro Romanian Commodities Exchange ‐ www.brm.ro Romanian Stock Exchange ‐ www.bvb.ro National Authority for Consumer Protection ‐ www.anpc.ro Competition Council ‐ www.competition.ro State Office for Inventions and Trademarks ‐ www.osim.ro Romanian Centre for Trade and Investment ‐ www.traderom.ro; www.arisinvest.ro Chamber of Commerce and Industry of Romania ‐ www.ccir.ro 36 Romanian Center for Trade and Investment Centrul Român pentru Promovarea Comerțului şi Investițiilor Străine ‐ CRPCIS Promote national trade and foreign direct investment in Romania Show‐case the Romania’s economic potential and investment environment before the international business community Provide professional assistance to develop investment projects in Romania and to promote business partnerships with foreign participation Provide trade and investment information and services Develop long‐lasting cooperation with international, regional and national trade promotion organizations, and public authorities from countries with significant potential to invest abroad Trade & FDI Promotion Trade fairs, exhibitions and economic missions abroad under the National Programme for Export Promotion Trade & FDI meetings, events and info stands Assistance and support for investments Greenfield projects in Romania National legal and regulatory framework ‐ incentives and major state aid schemes for investments Detailed information about suitable locations and on‐site visits for FDI projects submitted Meetings with local authorities and prospective partners as of investment projects requirements Investment project development and post‐implementation FDI flows in the national economy CRPCIS Endorsement The Romanian Center for Trade and Investment issues the technical endorsement for foreign citizens requesting the long‐stay visa for doing business activities in Romania Trade‐related Information and Support Business opportunities, international bids and foreign partnerships for the national producers and exporters Top Romanian exporters database Statistical data reports on Romania’s international trade International trade statistics, market analysis and working papers National economic overviews by sectors and industries Directories of Romanian producers and exporters Promotion‐related publications and leaflets Romanian National Contact Point ‐ OECD The Romanian Center for Trade and Investment is currently in charge of the Technical Secretariat of the Romanian National Contact Point for encouraging the observance of the OECD Guidelines for MNCs. Business Journal ‐ weekly economic magazine International business opportunities and partnerships Foreign markets news and information Trade‐related legislation and policies International market prices and quotes Worldwide trade fairs, exhibitions and economic events National economic and trade briefs Partnership and cooperation International Trade Centre, ITC/UNCTAD/WTO Organization for Cooperation and Economic Development, OECD ‐ Committee for Investment and MNCs World Association of Investment Promotion Agencies, WAIPA European Trade Promotion Organization, ETPO Balkan Regional Center for Trade Promotion, BCTP National Trade Promotion Organizations from more than 50 countries National Investment Promotion Organizations from China, South Korea, Slovakia, Jordan and Egypt Local and regional authorities Trade & Investment‐ related national institutions, industry organizations and business associations Romanian Center for Trade and Investment 17 Apolodor Street, Bucharest 5, Romania • Phone: +40 21 318 50 50 • Fax: +40 21 311 14 91 [email protected] • www.traderom.ro • www.arisinvest.ro Romanian Trade and Investment Center 17 Apolodor Street, Bucharest 5, Romania Phone: +40 21 318 50 50 Fax: +40 21 311 14 91 E‐mail: [email protected] www.traderom.ro; www.arisinvest.ro
