Establishing a Company or Branch in Romania: A Comprehensive Legal Guide

Romania represents an attractive opportunity for international businesses seeking expansion within the European Union. This article provides a detailed explanation of how to proceed when establishing a company or branch in Romania, the legal steps involved under Romanian law, the associated costs, and what to expect in practice. You will discover what lies behind seemingly simple procedures and why it is safer to entrust these matters to our Prague-based legal team and their regional experts.

Why Romania for Czech entrepreneurs?

Romania is one of the fastest-growing economies in the Central and Eastern European region, offering a competitive tax environment, a skilled workforce, and access to the EU single market. A clearly attractive part of the package is the standard corporate income tax rate of 16% under Czech-comparable standards. However, for smaller businesses, there is an option to utilize much lower turnover-based taxation, provided specific conditions are met under Romanian law.

Czech companies are recognizing these advantages and, in recent years, have increasingly expanded into Romania, particularly in the technology sector, healthcare, e-commerce, and manufacturing. Establishing a limited liability company (SRL) is flexible, and the minimum share capital can be a symbolic amount, although in practice, it usually starts at around 200 RON.

However, the decision to build your business in Romania is not a mere formality. The Romanian legal system has its specifics; administrative procedures can sometimes be bureaucratic, and procedural details often differ from what Czech entrepreneurs are accustomed to from domestic procedures in the Czech Republic.

Our attorneys in Prague at ARROWS law firm handle these matters daily and know exactly what to watch out for. ARROWS law firm's professional indemnity insurance covers up to 400 million CZK, so you can be certain of the security of your investments.

Basic Structure: When to choose a branch vs. a company?

Even before starting administrative steps, Czech firms must decide which legal form to choose in Romania. This decision has fundamental impacts on tax obligations, legal liability, and the content of future procedures. There are three basic options: directly establishing a Romanian subsidiary (SRL), setting up a branch of a foreign company, or creating a representative office.

Most often, Czech companies choose the direct establishment of a Romanian company in the form of an SRL, as it provides maximum flexibility and limits the liability of the parent company. Conversely, a branch remains legally part of the parent company and lacks its own legal personality, meaning the parent company bears full legal responsibility for all the branch's obligations under Romanian law.

Distinguishing between these forms is more complex in practice than it seems at first glance. It depends on the specific activities you wish to perform in Romania, how long you plan to operate, the profile of your business, and your long-term strategies. These choices will affect taxes, liability, and administration.

FAQ – Legal tips for choosing a legal form

1. What is the difference between an SRL and a branch?

An SRL (Societate cu Răspundere Limitată) is a separate legal entity with its own assets and liability, while a branch is an organizational unit of the parent company, and the parent company is liable for all its obligations. An SRL brings risk separation; a branch may be administratively simpler for capital transfers but carries higher risk.

2. Which legal form should I choose?
If you will be conducting regular commercial activities in Romania, plan to grow, and want separation of liability, choose an SRL. If it concerns specific projects without the need for a separate entity, consider a branch. 

3. Is an SRL in Romania the same as an s.r.o. in the Czech Republic?
In principle, yes – it is a limited liability form with its own legal personality. In Romania, however, it is associated with different tax obligations (e.g., the micro-enterprise regime) and different procedural regulations within the Romanian legal system.

Process of registering a Romanian company (SRL): Step by step

The procedure for establishing an SRL in Romania has been simplified in recent years; nevertheless, its practical implementation hides many procedural details. The total process takes approximately 3 to 7 days from the submission of complete documentation to the registry, but document preparation and completion can take longer.

The Romanian National Trade Register Office (ONRC) requires every company to have a unique name. The first necessary step is therefore the reservation of the company name, which takes place via the ONRC portal; it is recommended to prepare multiple variants.

After the name is approved, the preparation of basic documents follows. You must prepare the Articles of Association (Act Constitutiv), which contains information about the company, its business activities, ownership structure, and identification of founders and directors.

Every company must also have its registered office, for which it must prove the right of use. The Articles of Association must be signed by all founders, and for foreign persons, verification of signatures or apostilles is often required depending on the country of origin.

An important change in legislation is the abolition of the obligation to provide proof of payment of the minimum share capital before incorporation for an SRL. It is sufficient to subscribe the capital and subsequently pay it after incorporation into a newly opened bank account.

Submission can be carried out in person, by mail, or electronically with a qualified electronic signature. In the case of electronic submission, all documents must be digitally signed, which speeds up the entire process of communication with Romanian authorities.

A judge delegated to the trade register or the director of the registry then reviews your documentation and usually issues a decision within one to three business days. If everything passes without issues, you will receive a certificate of registration (Certificat de înregistrare) and an identification number (CUI).

FAQ – Legal tips for the registration process

1. What do I need to establish an SRL?
You need at least one shareholder, the Articles of Association, name reservation, a registered office address, and identity documents/registry extracts for the founders. Furthermore, affidavits from shareholders and directors stating they meet legal conditions. Our Czech legal team at ARROWS law firm handles the management of all documents – write to us at office@arws.cz.

2. Do I need to be physically present in Romania during registration?
It is not necessary if you grant power of attorney to a lawyer to act on your behalf. 

JUDr. Jakub Dohnal, Ph.D., LL.M.

associate, managing partner

• dohnal@arws.cz

Mgr. Vojtěch Sucharda

associate, partner

• sucharda@arws.cz

3. How long does registration take from submission?
Standardly 3 to 5 business days, provided all documents are in order.

Tax registration and VAT in Romania

Immediately after successful registration with the ONRC, your company must address tax obligations. The company obtains a tax identification number (CUI) upon registration, but for specific purposes such as VAT, further steps are required with the National Agency for Fiscal Administration (ANAF).

Companies whose annual turnover exceeds 300,000 RON (approx. 60,000 EUR depending on the exchange rate) are required to register for VAT in Romania. The Romanian standard VAT rate is 19%, while reduced rates apply to selected goods and services.

Tax registration is not merely a matter of paperwork; it includes the obligation to maintain accounting records in accordance with Romanian legislation. In recent years, the Romanian tax authorities (ANAF) have become increasingly rigorous in their audits, and the digitalization of the system is at a high level.

Our attorneys in Prague have extensive experience in this field. If your company generates income in both the Czech Republic and Romania, attention must be paid to the Double Taxation Treaty. Contact us at office@arws.cz to optimize your tax situation.

Tax Risks and Sanctions

Opening a Bank Account in Romania

A Romanian company requires a bank account for its operations. Opening a bank account is subject to strict Anti-Money Laundering (AML) and Know Your Customer (KYC) rules under Law No. 129/2019.

The procedure for opening a bank account requires the submission of a registration certificate, articles of association, the resolution appointing directors, and the identification of Ultimate Beneficial Owners (UBO). If a shareholder is a foreign company, the bank will require a detailed disclosure of the ownership structure down to the final natural persons.

The timeframe for opening an account can range from a few days to several weeks, depending on the bank and the complexity of the ownership structure. Romanian banks have different internal processes, and some are more cautious toward newly established companies with foreign owners. Our attorneys in Prague can provide recommendations and assistance during communication with the bank.

Registration of a Foreign Company Branch: An Alternative to Establishing an SRL

If you wish to operate in Romania as a branch of your Czech company, the procedure is different. A branch (sucursala) does not have its own legal personality and is part of the parent company, but it is a tax resident in Romania and must be registered in the Romanian Trade Register in accordance with Law No. 31/1990.

Registration of a branch requires a resolution from the parent company's governing body to establish the branch, certified copies of the parent company's founding documents, and an extract from the Czech Commercial Register. The branch must have a registered office in Romania and a designated branch manager to represent it.

Although a branch does not need to deposit share capital, it has several disadvantages. Most importantly, the parent company is fully liable for the branch's obligations.

FAQ – Legal Tips for Branch Registration

1. What are the advantages and disadvantages of a branch?
Advantage: Capital link with the parent company. Disadvantage: Full liability of the parent company, more complex proof of legal personality during routine negotiations, the parent company guarantees everything.

2. Must the branch be registered for VAT?
Yes, if it meets the statutory conditions or registers voluntarily.

3. Who will represent the branch?
You must appoint a branch manager (an authorized person to act), whose signature specimen is filed in the register.

Administrative Obligations After Registration: Routine Maintenance

Registering a company or branch in Romania is not the end of your obligations. Every Romanian entity must fulfill a series of administrative tasks, without which it risks sanctions.

A major topic is digitalization – the mandatory use of the e-Factura system for B2B transactions and e-Transport for tracking high-risk goods. Maintaining accounting records and filing tax returns (monthly or quarterly) is also essential.

Another obligation is the registration of Ultimate Beneficial Owners (UBO). Although the general requirement to submit an annual UBO declaration has been abolished, the obligation to report the owner upon establishment and upon any change in data remains in effect.

If you have employees, you must register them in the REVISAL system (employee register) no later than the day before they start work. It is also necessary to pay social and health insurance contributions according to Government Decision HG No. 905/2017.

Specific sectors (finance, construction, healthcare, etc.) require professional licenses and permits. Without these, activities cannot be legally performed, and the company faces the risk of penalties from regulatory authorities.

Common Administrative Risks and Sanctions

Specific Aspects for Czech Companies: Tax Implications and Reporting

A Czech parent company must correctly structure its relationship with its Romanian subsidiary, particularly regarding transfer pricing. Transactions between related parties must be conducted at arm's length, and large companies are required to prepare transfer pricing documentation under both Czech and Romanian regulations.

When paying out a share of profits (dividends) from Romania to the Czech Republic, Romanian withholding tax must be taken into account. The standard dividend tax rate is 8%, unless the EU Parent-Subsidiary Directive is applied, which may reduce the tax.

Coordination between Czech and Romanian tax advisors is crucial for the correct setup of financial flows and the avoidance of double taxation. ARROWS law firm in Prague, through its ARROWS International network, provides comprehensive cross-border advisory services. Contact us at office@arws.cz.

Timeline and Incorporation Costs

Timeline Overview:

• Name reservation: 1 day.
• Document preparation and signatures: 2 to 5 days (depending on client speed).
• Registration with the ONRC (Trade Register): approx. 3 to 5 business days from filing.
• VAT registration: can take up to 2 weeks depending on the type of registration.
• Opening a bank account: 1 week to 1 month (depending on the bank and KYC procedures).

Costs of establishing an SRL in Romania consist of:

• ONRC administrative fees: These have been significantly reduced; currently, mainly publication fees are paid (approx. 100–200 RON).
• Notary fees and translations: 200 to 500 EUR (if documents are from abroad).
• Registered office (virtual): 200 to 500 EUR per year.
• Legal services: 1,000 to 3,000 EUR, depending on the scope of services and complexity of the structure.

Total costs can therefore range from 1,500 to 4,000 EUR when utilizing professional assistance—an investment that prevents future penalties.

Executive Summary for Management

• Expansion into Romania requires readiness for local specifics: Administration is more formalistic than in the Czech Republic. Invest in professional legal representation.
• SRL is the preferred form: It provides separation of liability and flexibility. A branch is suitable only in specific cases.
• Taxes are attractive but require attention: 16% corporate tax, micro-enterprise regime options (1% / 3% of turnover), 8% dividend tax. Watch out for transfer pricing.
• Compliance is a necessity: UBO, e-Factura, timely financial statements. Fines for non-compliance are significant.

Conclusion

Establishing a company in Romania is a logical step for expansion into Eastern markets. However, seemingly simple procedures hide procedural details and specifics that differ from the Czech environment. Without professional guidance, you may encounter delays and errors.

Our attorneys in Prague handle these expansions regularly. We have experience with the entire process, from choosing the legal form to day-to-day administration. ARROWS law firm maintains professional liability insurance of 400 million CZK, guaranteeing your security. Do not hesitate to contact us at office@arws.cz.

FAQ – Frequently Asked Legal Questions on Company Formation in Romania

1. Can I rent a virtual office for my Romanian company?
Yes, Romanian law allows the use of a virtual office. This is a common solution for starting a business.

2. What are the minimum share capital requirements for an SRL?
The legal requirement for a minimum share capital of 200 RON has been abolished. Now, the capital must be positive and divided into shares; in practice, a company can be established with capital in the single digits of lei, although contributing a reasonable amount is still recommended.

3. Do I need to be physically present in Romania to establish a company?
It is not necessary. Using a power of attorney, the process can be managed remotely.

4. What are my tax obligations if I have a branch in Romania?
A branch pays income tax in Romania on the profit attributable to that branch (permanent establishment).

4. How often must I file tax returns in Romania?
Usually quarterly (micro-enterprises, some VAT payers) or monthly (larger VAT payers). The annual financial statement is generally filed by the end of May of the following year.

5. What are the penalties for non-compliance?
Sanctions range from hundreds to tens of thousands of lei. Serious violations (e.g., in the area of VAT or money laundering) can lead to criminal liability for statutory bodies. Contact us at office@arws.cz to ensure compliance.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue. Although we strive for maximum accuracy, legislation and its interpretation evolve over time. To verify the current wording of regulations and their application to your specific situation, it is essential to contact our Prague-based law firm directly (office@arws.cz). We bear no responsibility for any damages or complications arising from the independent use of information from this article without our prior individual legal consultation and professional assessment. Every case requires a tailor-made solution; therefore, do not hesitate to reach out to us.

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