The Romanian Club - Doing Business in Romania

Registering Romanian Property

2009-02-16T05:03:00.000-08:00

The Romanian Land Registry contains a title, indicating its number and the name of the respective area of the property, and 3 other parts.

There are 3 types of entries with the Land Registry:
- the definitive registration of ownership rights (intabulare);
- temporary registration of the ownership rights under the condition of ulterior motivation;
- noting, having as object the registration of the personal rights and legal facts referring to the state and capacity of the persons, actions and legal ways of attack related to the properties in the Land Registry.

The request to register in the Land Registry shall be filed with the territorial office and shall have attached the original document or its certified copy through which the proof of legal status is made.In the case the Registry admits the request, it decides to definitively or temporary register it if the documents respects the following conditions:
- it is in accordance with the form stipulated by Law;
- it indicates the name of the parties;- it uniquely identifies the property;
- a certified translation is attached, if the document is not signed in the Romania language;
- a copy of Land Registry is attached, used for authentication.

For more information please visit www.RomanianLawOffice.com

Employing in Romania

2009-02-10T04:11:00.000-08:00

The web contains few information in English on the matter of Labor regulations in Romania, although this is something of great interest to any foreign investor in the country. Without proper knowledge in this respect, the employer will risk important fines.

Hiring Romanian employees implies signing an Individual Labor Agreement and depending on certain factors, a Collective Labor Agreement. An Individual Labor Agreement shall contain clauses related to the following issues:a) Duration of Contract – The rule is to conclude the Labor Agreement for an undetermined period of time, however signing Agreements for determined periods of time can be done as an exception;b) Working Location – City and Unit where actual work takes place;c) Type of Work;d) Working Conditions;e) Salary;f) Working Hours.

If an employer has at least or more than 21 employees then the employer must start negotiations for the signing of the Collective Labor Agreement with the employees for determining working conditions, payment and other rights and obligations resulted from labor relationships.

For more information please visit www.RomanianLawOffice.com

Foreign Investment Incentives in Romania

2009-02-10T04:05:00.001-08:00

One of the most recent and important legislation in effect is the OUG 85/2008, having as purpose the creation of a legal background for the stimulation of foreign investment in Romania. The methods to stimulate these kinds of investments are facilities offered by the Romanian State:
- Non-reimbursable funds for the purchase of assets;
- Granting financial contributions from the State budget for the newly created jobs;
- Granting interest benefits when contracting certain credits as well as other types of benefits;

These measures instituted on the basis of the above-mentioned legislation are destined to those investments which:
- are taking places in regions of weak economical activity, respectively with a PIB/person of under the country’s average;
- are taking place in counties with an unemployment rate higher than the country’s average;
- contribute to infrastructure projects or modernizing already completed infrastructure;
- contain projects related to research and development and innovation or imply the use of high standard technology;- result in the improvement of energy efficiency, the use of the ecological energy;- insures the protection and rehabilitation of the environment;
- insures the development of human resources in the region

For more information you can visit www.RomanianLawOffice.com

Understanding Romania's Legal System

2009-02-10T03:55:00.000-08:00

It is my personal belief that any important foreign investor should have at least a minor understanding of the Romanian Legal System and its Courts. This could prove to be very useful in the Romania's current sometimes risky business environment.

Romania has the following Courts of Law: Romanian legislation stipulates the following Courts of Law: - High Court of Cassation and Justice;- Courts of Appeal;- Tribunals;- Specialized Tribunals;- Military Courts;- Regional Courts;- Arbitrary Court. Activity of Romanian Courts is performed by respecting the principles of the aleatory file case distribution and continuity, with the exceptions of the situations in which the Judge cannot participate to the trial because of objective reasons. Other principles include: - Court proceedings are public with certain exceptions;- Decisions are pronounced in public with certain exceptions;- The Bailiff maintains records on proceedings (declarations by the parties and the Romanian Judge).

For more details you can visit www.RomanianLawOffice.com

Taxation

2008-11-17T08:36:00.000-08:00

Taxation in Romania

Contracts - Romanian Fiscal regulation

2007-12-11T12:57:00.000-08:00

Order no. 1415 of the president of the National Agency for
Fiscal Administration regarding the procedure for recording the
contracts concluded between Romanian legal entities and
foreign individuals or legal entities was published by the
Official Gazette no. 699/ 17.19.2007.

The main provisions are:
The Romanian legal entities, receiving services provided by
a non-resident have the obligation to register those contracts
with the fiscal authorities (the obligation was already
provided by point 21 of the Norms to apply the Fiscal Code,
as per the modification entering into force starting from
01.01.2007;
The term to register the contracts is 15 days from the date
when the contract was signed or form the date of any
modification of the contract, using a form provided by the
present document ;
The fiscal authorities will organise the data base of the
contracts.

Article by Simona Bodiut (www.safecont.ro).

Top Romanian real estate agents

2007-11-23T03:49:00.000-08:00

Per a very recent article published in the English version of Ziarul Financiar, the top 2 leading Romanian Real Estate agencies are Colliers and respectively Eurisko. Ziarul Financiar also specifies that the 2 agencies have increased their figures from to 22 million euros and 12 million euros respectively. Other 2 Romanian real estate agencies in the top five are Cushman & Wakefield and DTZ Echinox, with figures around 5 million.

Usually top real estate agents in Romania handle the sale of the biggest office and residential developments in Romania such as off-plan apartments etc, area which practically exploded this year. Although according to Ziarul Financiar, the top 2 real estate agencies in Romania plan to a growth of 30% or even more in 2008, there still has to be seen the effect on the market of the new law changing the VAT payment regulations for Romanian real estate properties.

VAT to be paid when purchasing property via a Romanian company

2007-11-06T07:16:00.000-08:00

It seems that the Fiscal Romanian Law has changed (again) for the worse from the point of view of local and foreign real estate investors. From now on Romanian companies will have pay Value Added Tax when purchasing Romanian property from another local company.
Also for all those foreign investors who already purchased off-plan apartments through a Romanian company and have not already paid the entire amount, will have to pay 19% VAT for the remaining amounts.

The only hope we have is that the law will ... change. Again. Which actually is quite realistic.

The guide to middle and small-sized foreign investors in Romania

2007-11-05T05:50:00.001-08:00

Making a decision to invest or not to invest a new Eastern European EU member such as Romania is obviously not a problem for large investors. They have the financial power and the logistics to gather information from a variety of sources, including special attention from the local authorities.Things tend however to get more complicated when it comes to small and middle-sized foreign investors. These investors have limited means of gathering information vital for making taking a decision to expand or not to expand to the new Romanian market. This article is a short guide for those who need to find out how they can obtain information about Romania in order to take the right business decision.If you are just thinking about expanding to Romania , then you can start by reading some official documentation on the country on http://www.arisinvest.ro, the website of the Romanian Agency for Foreign Investment. There is some interesting information on public-private partnerships, taxation, information about existing infrastructure, human resources and statistics of foreign direct investment in Romania .Of course, the website only contains general information. Another more useful resource would be http://www.aneir-cpce.ro, the Foreign Trade Promotion Centre S.A., a non-governmental trade promotion organization. This website contains an economic profile of Romania , statistical information on Romanian wages, business environment information and some important Romanian laws in English (such as the Romanian Company Law no. 31/1990). Another place you can find Romanian commercial laws translated in English is http://www.lexadin.nl/wlg/legis/nofr/eur/lxwerom.htm including Romanian Trade Register laws.And that’s about it with official or semi-official resources, time to get some practical help! Once you have a basic idea on how you want to proceed then it’s probably time make a few contacts who help you with the Romanian start-up. An idea would be to visit www.RomanianLawOffice.com, the website of a Romanian Law Firm specialized in assisting foreign investors in the country. Their website also contains quite a few articles on Romanian legislation. Whatever their website does not contain you can probably obtain by dropping them a quick email. They would be able to advise you about on-going costs when owning a Romanian business and related legal aspects. There is also the need of hiring a local Romanian accountant ( send us an email at theromanianclub@yahoo.com to recommend you an accounting company with important experience dealing with foreign investors). There is also another matter to take into account: for some activities the Romanian law requires certain permits from different authorities. An example would be the establishment of recruiting companies in Romania . Obtaining these type or permits is almost never a straightforward experience so it would probably be advisable to hire a Law Firm to handle interactions with the respective authorities.

Obtaining an office address in Bucharest, Romania

2007-11-05T05:49:00.000-08:00

Romanian Law requires having a Romanian office address for the formation of any Romanian company, no matter if the shareholders are locals or foreigners. This address obviously has influence on where the company is registered (for example it’s impossible to register a company outside Bucharest with a Bucharest address) and it also has influence over the respective tax administration offices.Downtown Bucharest probably represents the best location for your office if planning to have activity implying interaction with customers. Victoriei Plaza, Romana Plaza, Universitatii Plaza, Unirii Plaza, Constitutiei Plaza (where the “House of the People” is located).
The headquarters may be established in any location (based on a rent, sub-rent, purchase etc).
The Romanian Trade Register will require a number of documents related to your registered office in Bucharest such as: sale-purchase contract, rental or sub-rental contract or a contract of commodate. It depends on the specific type of building whether they will ask for more when incorporating your company, but if you’re renting or buying in a residential block, you will also have to provide an approval from the building’s administration and approvals from your top/below/left/right neighbors.Usually the rent in Bucharest for older apartments is around 350 EURO / month. Downtown, the price goes higher from 500 up to 2000 EURO. Another choice could be renting an office space in a new building. The starting price for this is about 10 EURO / sqm, and goes up to 20 EURO / sqm in downtown.
If you don’t have the possibility buy or rent a location for your registered head office your Romanian legal counsel can provide this (E.g.: www.RomanianLawOffice.com), in a contract valid for one year. At the end of that year the contract can be prolonged for another year and so on.

Quick guide when purchasing Romanian real estate

2007-11-05T05:48:00.000-08:00

Investing in real estate in a foreign country always implies thorough planning. There are quite a lot of decisions to be taken and many of them have to taken in a short amount of time, often after only one visit to the respective country. There is also not much time to find and compare prices for similar property thus there is a risk of buying an over rated piece of property (among many other risks). It would probably be best to explain the process one step at a time:Choosing the type of real estate. You know you want to buy Romanian property, but you are not yet sure if it’s going to be land for future development, an apartment, a house etc.This depends on a multitude of factors; the most important being how much money you have available. At this type probably the most financially beneficial investment would be building a block of flats or a suburban development somewhere near Bucharest or another large city like Cluj, Iasi etc. Another good investment for the future would be purchasing one or more apartments – off-plan or not - (especially in Bucharest ) or even an old house in the city center for future renovation. Of course all this depends on how much time you are willing to invest in the Romanian project(s).Another decision that has to be taken is what agent you are going to work with. There is the possibility of working with a Romanian real estate agency, a Romanian branch of an international agency or a foreign real estate consulting company. There are quite a few Romanian agents available online through a simple Google search or just check our link page here. A Romanian branch of a foreign agent (like www.colliers.ro) would have the advantage of being trustworthy and more experienced in working with foreigners. The third choice would be working with a foreign consulting company. There are more and more of those working on the Romanian market (an example would be http://www.romanianpropertiesltd.co.uk ). Most of these have the advantage of already having local contacts such as agents, lawyers or even local employees. Obviously the disadvantage is that these intermediaries will charge an extra fee (mostly a percentage of the purchase price). The third decision that would have to take is choosing local lawyers to assist or represent you in the purchase. We can recommend Ionita, Enescu & Cuc for both incorporating a Romanian company and actual assistance. You must note that the presence of the buyer in Romania is not necessary when signing the sell/purchase contract; a lawyer would be able to sign in your name with the help of an official Power of Attorney. Once the contract is signed you will still have to find a local accountant to handle bookkeeping for your Romanian company and decide what to do next with your property. You can email us to provide you with contact details of a local accountancy firm; while deciding how to proceed regarding your property depends on the your type of property:- land for development: supposing you already made due diligence before you purchased the land and know details such as percentage of the land which can be built upon, height limitations (if not you can contact a Romanian real estate Law Firm here) la etc., you will have search for Romanian constructions companies to give you fee quotations. We believe it would be absolutely necessary to travel to Romania and meet with more than a few constructors as prices might significantly differ- apartment in a block of flats: you should probably contact a Romanian real estate management company, they could rent the apartment for you and you could start gaining profit. A company offering this service is http://www.therightmoveabroad.co.uk. - Old house situated in the city center: you would still have to contact a construction company for renovation or even reconstruction of old architectural elements. This latter procedure would prove to be expensive but very much worth it in the near future.

Recruiting Romanian personnel

2007-11-05T05:46:00.000-08:00

There probably are 3 important types of foreign investors in Romania: those interested in real estate, those interested in Romania’s market potential and those looking to reduce costs by expanding into low salary zones such as Eastern Europe. For this last type of investor there are some questions to be raised:
Is it worth it? What are the real salaries in the field I am interested in?
What are the same salaries in other similar countries?
How can I gather information before making a decision?
Do I have the big picture?
Of course we won’t be able to offer you complete answers in this article. We will be more realistic than that: we will just give you some information that hopefully you would find helpful for taking the right business decision.
The lowest salary in Romania is 440 Lei/month. That would be less than 150 Euros. Perhaps a more useful piece of information would be that a Romania student (of Economics for instance) would be paid around 250 Euros at his first job (in Bucharest). However amounts will quickly rise for an employee with a degree and 1-3 years of experience. (Some Romanian recruiting companies refer to entry-level employees as below 3 years of experience and mid-level, over 3 years of experience. In reality however it would be quite hard to find an employee with 2 years of experience whose financial requirements are specific to “entry-level” positions. This is largely because in Bucharest it is quite hard to find trained and experienced employees in some areas.)
*Note: Please keep in mind that differences in salaries are quite important between Bucharest and the province. An article dated from October 2006 published in the financial magazine “Banii Nostri” claimed that an average employee of a Bucharest-based company earns a salary of 2,600 Lei (about 750 Euros) with about 1,000 Lei over the country’s average. The Bucharest top salaries for highly trained (top) specialists are as follows: 1. marketing specialists – around 1,600 Euros; 2. legal specialists – 1,300 Euros; 3. Human Resources – 1,100 Euros (these are gross amounts).
Salaries have quickly risen because of the lack of specialists in some areas. Examples would be the banking sector, IT (Software), Legal sector, constructions. Because of the same reason an employer will also have a hard time keeping a trained employee and not losing him over to the competition (quite a common practice in Romania).
What are the same salaries in other similar countries?
If we were to trust the Internet and the rest of the press as a reliable source of information the differences between salaries in Eastern-European countries in the same stages of development are insignificant (Romania and Bulgaria for instance). Whatever relative difference between the two it can quickly decrease importance when compared to differences between other legislation and taxation issues.
How can I gather information before making a decision?
The best way to gather information would definitely be to interact with employers and employees in specific areas. The quickest way to do that is check out www.ejobs.ro and www.bestjobs.ro, the biggest online databases of employees in Romania. Here you can surf some of the offers (get some raw information on the quantum of salaries – if you are really patient as most of the offers do not contain a salary estimation) and even place your own offers. One very important thing to keep in mind (that is also perhaps very specific to the Romanian Human Resources market) is that most times less then 50% are truly interested in your job ad and show up at the actual interview.
Of course there is a number of Romanian specialists in certain areas, top-management etc. that will be very difficult to find on the Internet or at least on common job-search websites. The best way to go about solving this problem would be to either contact a Recruiting company (some are specialized in certain areas) or place an ad in Romanian business newspapers or magazines (like Capital www.capital.ro).
Do I have the big picture?
Romanian salaries are substantially lower than those in Western Europe. This is a fact however the big picture must not be overlooked. What is the big picture? It is a conclusion after analyzing the taxes, the laws, the infrastructure, the level of employee training. Some good advice would be to contact a local law firm to give you an idea on the legislation and taxes, contact a recruiting company, an accountant then make a pertinent decision.

VAT when buying properties in Romania

2007-07-12T02:47:00.000-07:00

A very common question asked by investors when purchasing Romanian property is whether they will have to pay Value Added Tax when purchasing a Romanian property. This has been a very thoroughly discussed issue as the Fiscal Law has recently changed in Romania and old regulations have now been replaced with new and... unclear ones. Payment of VAT depends on a multitude of factors, however the bottom line is that foreign buyers purchasing real estate via a Romanian company will not have to pay VAT, or rather they pay VAT by Law, but because of a regulation called "double taxation avoidance", this payment does not have to be actually fulfilled. What investors should take into account is that this rule might change in the future (Romanian legislation does change very easily) and this might have effects for all those investors who haven't yet fulfiled all payments due for their property (off-plan apartments for instance). You can get more information on this subject on www.RomanianLawOffice.com

The Romanian Real Estate Bubble – To burst or not to burst

2007-03-18T09:10:00.000-07:00

Prices for real estate properties have rapidly grown until Romania’s join of the EU and absolutely rocketed since this date. Just checking the prices listed on agency websites would give you an idea about this reality: practically every two weeks the prices suffer quite important modifications. Reading the Romanian business newspapers there is really absolutely no information that could really give pertinent information on the future evolution of the market; practically everyday there is a different article predicting the exact opposite than the article published yesterday. The mistake would be to just see what the diverse range of specialists has to say (agents, businessmen or developers) as they sustain extremely different ideas. Some seem quite convinced that this is an artificial development and prices for Romanian real estate properties will abruptly decrease bringing the entire market to a disastrous crash while some would bet their lives on the fact that because of obvious-to-see reasons the real estate properties in Romanian will finally become and stay as expensive as central London.

Although not as drastic or far-fetched as that, there are facts that are able to sustain diverse theories. Here is a list of possible causes for a possible stagnation or even decrease in property prices:

- an extremely fast increase in prices based on the psychological factor of Romania joining the EU;
- an artificial increase in prices caused by the international investors rushing in to take part of the booming market;
- rising prices that will eventually become outrageously expensive even for Western Europe and obviously much too expensive for average Romanians.

Note: we should note that all local real estate specialists seem to be in accordance with one another on one point: all scenarios for the eventual stagnation of prices for Romanian real estate are not describing a near-future development; in other words they all agree that this will take place in at least 4-5 years.

In regards to the other side of the fence, you can find below a list of causes for a possible on-going increase in property prices:

- the lack of both residential and office buildings in the entire country (but especially in Bucharest). Although we are in the middle of a real estate boom in Romania, the rhythm of constructing new buildings seems to be below other Eastern countries with similar economic potential (like Poland for instance).
- International interest in the market (interesting to see how international investors might be an argument for both scenarios);
- Gaining of more income for the average Romanians who might be able to buy more.
- Romania’s National Bank change of policy towards crediting for the purchase of property: commercial banks are not obliged to certain limitations in giving out credits anymore (this is a recent change).

The lists above are what can be quickly extracted from articles and interviews from the Romanian press and certain personal experience. If you can come up with other facts please don’t hesitate to post them here.

Legal practice in Romania

2007-03-04T09:11:00.000-08:00

To better understand the way legal assistance is practiced in Romania we have to first explain basic terms and regulations. A Romanian student of Law School has to pass the local Bar Exam in order to be qualified as a lawyer. This lawyer can immediately offer basic assistance and representation to clients but will have to pass a second bar exam to be approved as “definitive lawyer”. It’s quite important to point out that Romanian lawyers are not further separated into such solicitors, barristers etc. All lawyers in Romania have the right to appear in a Court of Law representing clients.

Lawyers in Romania are differently organized and are associated or practice law in a number of different modalities. The most common is the Individual Law Office “Cabinet individual”, with the vast majority of Romanian lawyers practicing law through this type of legal entity. While most of Individual Law Offices in Romania usually do not have more than one or two employees there are some which have a large number of attorneys and auxiliary help. The latter are however quite few.

Besides this type of organizing legal practice in Romania there are a number of medium-sized Law Firms with different orientations: Business and Commercial, Real Estate, IP Law etc. These firms have a number of partners of usually 2-6 and usually a larger number of employees, paralegal help, junior attorneys etc. As an example I would mention Ionita, Enescu & Cuc .

The third main category would be large Law Firms. These are very few and can be separated into Law Firms with Romanian partners (Examples: www.musat.ro or www.tuca.ro) or Branches of Large Foreign Law Firms (www.salans.com) These legal practices assist large corporate clients and government institutions or are present in Romania expanding together with their overseas clients.

The large Romanian law firms are basically legal practices which have started providing assistance to clients soon after the fall of communism and since then managed to work with large foreign clients and mostly with the Romanian State (privatizations etc.). If you are reading this article as a prospective client you will have to take into account that large Romanian Law Firms as well as the branches of foreign legal firms are quite expensive. In other words their fees are similar to large practices in Western states.

What I would recommend

If you are reading this article with the intention of hiring a Romanian lawyer then I would recommend thinking about doing business with a medium sized Romanian law Firm. (This is of course unless your represent a company which will generate lots and lots of business which will need a large number of lawyers). Here are the reasons why I think you should choose this way:

Medium sized legal practices have the greatest flexibility in handling business from both smaller or larger businesses;
I really believe that at this point in Romania it is best to hire a Romanian lawyer as they know best the characteristics of the business world here (and there are lots of characteristics);
They have moderate fees (they do not have the lowest fees as most Individual Law Offices have).

Set up a company in Romania - a few details

2007-02-25T13:56:00.000-08:00

Most of the information contained in this article was obtained from RomanianLawOffice.com (IEC Law Firm)

Somewhat surprising when you think of the Romania’s economic growth in the past years is that there are very few places to find out more information on how to go about setting up a company in Romania, no matter if it’s branch of an existing foreign company, a simple SRL (Limited Liability Company) with a sole shareholder or Joint-Stock Company (called S.A.). A few stuff you must know:

- there is no way to reserve your Romanian company’s name on the Internet
- You can incorporate the company even without visiting Romania with the help of a lawyer.

- the minimum share capital is 70 Euros for a SRL and the equivalent in Lei of 25,000 Euros for an SA

- Besides the classic SA and SRL there is also the possibility of establishing 3 different types of branches/subsidiaries of your existing foreign company, each with its own limitations.

- Any foreign person or company can be shareholder or director in a Romanian company

- There is no need to appoint a Romanian Director or any type of Romanian agent.

The actual procedure of setting up a company in Romania is to draft the company documents (Articles of Association/Incorporation) and take the file to the Trade Register. A judge will approve the incorporation or request further information/documents on a case-by-case basis. The Romanian judges tend to be extremely strict with the form of the requested documents.

After the file is taken to the Trade Register (and if the information is correct and complete) it will take 5 business days to approve the company. Please be warned however that each judge might have his/her own opinion on the documents and information requested to complete the incorporation so the process can take a little longer when you least expect it.

Costs

1. Approx. 120 Euros to reserve the company name + Trade Register tax

2. Sworn Translator fee (if you will not be signing the documents drafted in the Romanian language) – around 150 Euros. Note: if you are visiting Romania then you have the choice of signing the documents in front of a Public Notary and in the presence of a sworn translator.

3. Attorney costs.

4. Costs of an office address (at least a registered office). An attorney will be able to offer you this service.

This is about all the basic information on how an actual company incorporation process actually takes place in Romania. For other information visit www.RomanianLawOffice.com. Also don’t hesitate to write a comment if there is anything I left out.