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Why Start a Business in Romania?

Why Start a Business in Romania?

In the opinion of numerous foreign investors, Romania is currently amongst the top 3 countries in its region, suitable for starting a business. The reasons for which the country is a very attractive business market are given by its location, which grants an easy access to the Middle Eastern region, through the Black Sea, or by its resources (timber, oil, gas).

Of course, another reason is the population itself: Romania has the 2nd largest number of foreign language speakers after Holland. Through this article we would like to outline the main reasons why a foreign investor would prefer Romania as a destination of his investments. If you need further advice on the best business to start in Romania, you can address to our Romanian lawyers

Romania, advantageous geographical location for the transportation of goods

Romania is situated at the crossroads between the Europe and Asia (Middle East) and a very large part is of border is constituted by the Danube River. The best example would be the Constanta Port (which is both a maritime and a river port), having a very favorable geographic position, situated on the routes of three pan-European transport corridors.

These corridors are the Corridor IV, Corridor IX and Corridor VII (Danube) – which links the North Sea to the Black Sea via the Rhine-Main-Danube corridor. Constanta Port has a major role in the European transport network, favorably located at the intersection of trade routes linking landlocked country markets in Central and Eastern Transcaucasus region, Central Asia and the Far East.

A large number of natural resources in Romania

Romania is a rich country when it comes to its natural resources. Still, probably its most important potential remains agriculture: it is estimated that Romania could easily feed more than 80 mil people (its population is of approx. 20 mil).

Other important resources include oil, timber (Romania is known for its large forests and one the last virgin forests in Europe), mineral waters, natural gas, coal (resources of 9.7 billion tons), gold & silver (Roşia Montană, Certej şi Băiţa Crăciuneşti), salts, marble: 25 fields with 37 million cubic meters, of which exploitable reserve of 15 million cubic meters in 16 fields etc.

Low corporate taxes and a large number of double taxation treaties

Romania has one of the lowest corporate taxes in Europe, respectively 16% and an important number of double taxation avoidance treaties. This combination of factors makes it a very interesting destination for starting or moving a business from abroad (especially those businesses that are easily managed from abroad such as IT, transportation etc.).

Businessmen who want to open a company in Romania must also know that the tax regime for micro-companies is very advantageous, as the corporate tax is charged at a rate of 1% and 3%, tax rates that are considerably lower compared to the standard corporate tax. 

If you need additional information on the tax regime applicable in Romania, our Romanian law firm can provide more details. Depending on the economic sector that is of interest for foreign investors, other tax benefits may be available and you can rely on our team of lawyers in Romania regarding this matter. 

 Low costs for business operations in Romania

The fact that the income in Romania is one of the lowest in Europe has a bright side to it: it also implies one of the lowest costs in the EU for business operations. This means everything from office rents to the cost of an accountant and of course the salaries of employees (Romania arguably has the 2nd smallest salaries in the EU).

Foreign languages spoken on a large scale

Romania comes 2nd after the Netherlands for the number of people speaking a foreign language; however the diversity of spoken languages exceeds those of Holland: in Romania you will easily find a good number of people speaking English as well as French (Romania is member of the Francophonie (OIF), Italian and Spanish, Russian or even Turkish (especially in the South Eastern Romania).

This is one of the reasons for which Romania is one the top region for outsourcing companies. Apparently there are over 30,000 people working for the biggest outsourcing companies such as Genpact, HP, Microsoft, Office Depot, Oracle, Wipro and WNS.

Large number of different types of specialists

While Romania’s education system is often criticized by the local press, it does still seem to produce well-trained specialists in many fields; the best example probably being Romania’s renowned IT specialists. A good example of development in this field would the IT Technology Park in Cluj, a city which is lately known as “Romania’s Silicone Valley”. Other examples of valuable Romanian specialists would be constructors of vessels, workers in the car industry etc.

General openness to foreign investors

While this is a factor often overlooked by foreign investors, it’s very important in the long run. Romanian banks for instance are very open to new clients, state institutions are perhaps more careful to those companies owned by foreign shareholders and the largest Romanian firms are owned by foreign shareholders (companies or natural persons). Most clerks will do their best to speak English and generally foreign investors are very well seen by the population.

Are there any general downsides to starting a business in Romania?

While in the 90’s the most important hindrance was corruption in the view of foreign investors, things have changed. The top 3 problems would be: mediocre infrastructure (Romania has a slow process of building new roads) and high salary taxes (social security, medical etc. amount to approx. 60% of a salary). Of course one has to corroborate this to the amounts of Romanian salaries which are very low. 

Another issue is the confusing and unstable fiscal legislation (we definitely recommend hiring a competent accountant and financial expert for running your business in Romania). For any details related to how to start and how to a conduct business in Romania please contact our law firm.

Other reasons for starting a company in Romania

Besides the reasons that were presented above, investors can opt to set up a business in Romania due to other important matters – which can refer to the strategic location of the country, the tax benefits investors can obtain here and other aspects that can be of importance in this case. Our team of lawyers in Romania have prepared a short list that should be taken into consideration when starting a business here:

  • Romania is very close to important economic and cultural centers in Europe – Bucharest is 3 hours away from London and 2 hours away from Berlin (when traveling by plane);
  • the internet connection is very good in Romania – it occupies the 5th rank at a global level on the internet speed (37.4 Mb/s);
  • the country occupies the 6th place at a global level with regards to the IT specialists and those searching for the best business to start in Romania can easily select this sector;
  • although the country has various economic issues, in 2017 Romania had the fastest growing economy in the EU;
  • corporate taxes can be considered low – the standard corporate tax is of 16%, while micro companies enjoy a preferential tax regime, with very low taxes, of only 1% and 3%.

What types of companies can one register in Romania? 

With regards to the business forms investors can set up here, the limited liability company can be seen as the best business to start in Romania, due to the advantages that it provides to foreign investors, but also due to the low capital requirements. This company type can be incorporated with only RON 200 (which represents approximately EUR 45). 

Foreign investors will find here all the company types that are customarily in other EU states, such as the joint stock company, the limited and general partnership and the sole trader. Investors representing foreign companies have the possibility to register a branch office or a subsidiary, two entities that are created for companies expanding on foreign markets. 

Those who simply want to establish a business presence in this country, without developing a commercial activity, can open a representative office, though which they can develop certain non-commercial operations – such as establishing business partnership, meeting with clients and business partners, conducting marketing research for future business projects and others. 

For any of the company types that we have presented so far, our Romanian law firm remains at your disposal; our lawyers can provide advice on the best business to start in Romania and you can also request tax consultancy services, in order to evaluate which company type would be more suitable for your investment plans and which can provide the lowest tax framework. In the following section, you can discover few of the taxes charged here. 

What is the best business to start in Romania?

There isn’t just one activity that can be qualified as being the best business to start in Romania. The country provides certain advantages to various economic fields, along with other matters that should be of interest for a foreign businessman, such as the aspects presented above – the various beneficial tax regimes, the quality of the workforce and others. 

Thus, deciding which is the best business to start in Romania is a more complex issue. However, one can observe specific trends in the local market. For instance, persons who want to start their own business and who only need a very small team, can set up specific business activities. 

A business activity that seems to be very popular in the last years is owning a food truck. This trend has been observed in other European countries as well, and it became a very fashionable way to eating while being out in the city. Most of the food trucks are redesigned not only to accommodate the needs of a kitchen where one can prepare food, but they also have very attractive designs. 

Given that food trucks can be easily moved from one place to another, this can have a tremendous business advantage, as the truck will relocate based on the places where one can find numerous persons – such as the center of the city, and, lately (of course, not taking into consideration the pandemic restrictions of 2020 and 2021), at various music or food festivals. 

As we said above, one of the best business to start in Romania is in the IT sector. Although the market is very well represented by large international companies that have set up their business activities in Romania, the market can still receive numerous other companies and investors who want to venture their business ideas. 

Thus, although Romania is far behind other European countries in numerous economic fields, it is a thriving market for start-up businesses, as young entrepreneurs have numerous business ideas and innovative products which can enter mass production and be sold on foreign markets, if they receive the necessary investments. 

Another idea for a best business to start in Romania is opening a healthy food company. The interest in healthy food has increased in the last years, as a trend that opposes the processed foods that people were to eating in the last 2-3 decades. An online business can also be a good idea, especially in the context of Covid-19 pandemic, as businesses tried to find ways to reach their customers in a period where physical contact was avoided. 

Thus, creating a delivery food business can actually have very good financial results as this type of activity has had a very good response from the local consumer market, while restaurants and pubs were closed or had (and still have) a set of rules and restrictions that they must obey, including being open for a shorter period of time. 

Having an online business that delivers food implies a certain level of investments in technology, as most of people use their mobile phone and various apps, so in this case you will need to either have knowledge in this field, either to contact an IT specialist and design a reliable system. 

You must also have a website and this means that you will have to purchase a Romanian domain name. Our team of lawyers in Romania can assist you in this procedure, if you are not sure of the steps that you have to follow. Considering that this business activity involves dealing with food products, you will have to obtain various permits that allows you to prepare and sell food of any kind. 

In this respect, you can always address to our law firm in Romania for legal advice; our team can present the entire list of documents that you must prepare, as well as all the permits and licenses that you must own so that you can legally carry out this business activity. 

Another idea for a best business to start in Romania is entering the coaching and health industry. This has become an business activity that received a lot of attention from the local consumer market in the context of the pandemic, as most of people were obligated to stay at home, but also because most of the usual places where closed. 

Thus, persons who work as fitness or sport coaches and who promote various health habits had an increased number of clients in the last years. So, if you want to start a business of your own and you have the necessary qualifications in this field, this can became a very lucrative business activity. Please mind that you will also need to obtain licenses for your business and here, our Romanian law firm can be of service. 

What is the micro-company tax regime in Romania?

Above, we have mentioned that one of the tax advantages that investors can obtain in Romania is a very low corporate tax regime, that is applied for micro-companies. A micro-company in Romania is defined as a business with no employees or very few employees. In order to qualify for this, the company’s annual revenue must also be taken into consideration. 

Thus, companies hiring very few employees and which have a revenue of maximum EUR 1 million can qualify under this regime and such businesses can be taxed with a corporate tax of only 1% when they have at least one employee or they can be charged with the 3% corporate tax in the situation in which they do not have any employees. 

Having a micro-company can be the best business to start in Romania, especially for entrepreneurs who do not have a large capital to invest in a business; for more details on how to set up a business here, but also for advice on the reasons for opening a company here, we invite you to contact our law firm in Romania