Romania is a sovereign state located in Southeastern Europe. It borders the Black Sea, Bulgaria, Ukraine, Hungary, Serbia, and Moldova. It has an area of 238,397 square kilometers.
With almost 20 million inhabitants, the country is the seventh most populous member state of the European Union.
Its capital and largest city, Bucharest, is the sixth-largest city in the EU.
It has been a member of NATO since 2004, and part of the European Union since 2007. Most of the population is Eastern Orthodox Christians.
The largest of the Balkan countries, Romania has dramatic mountain scenery and a coastline on the Black Sea.
Romania, as part of the European Union single market, is a fast developing, with a very high Human Development Index and a skilled labor force. It’s ranked as 16th largest in the European Union by total nominal GDP and the 13th largest based on purchasing power parity.
Romania is the largest electronics producer in Central and Eastern Europe. Electronics manufacturing and research are among the main drivers of innovation and economic growth in the country.
In the past 20 years Romania has also grown into a major center for mobile technology, information security, and related hardware research Dacia automobiles.
Romania is rich in iron ore, oil, salt, uranium, nickel, copper and natural gas. The country is a regional leader in multiple fields, such as IT and motor vehicle production.
Bucharest, the capital city, is one of the largest financial and industrial centers in Eastern Europe. The top 10 exports of Romania are vehicles, machinery, chemical goods, electronic products, electrical equipment, pharmaceuticals, transport equipment, basic metals, food products, and rubber and plastics.
For many centuries Romania’s economy was based on agriculture. In the 1930s Romania was one of the main European producers of wheat, corn and meats and it used to be called “the bread basket of Europe.” In the 1950s the communist leader of Romania, Gheorghe Gheorghiu Dej, began developing heavy industry. The employees of the agriculture field are the one-third of the workforce.
Romania produces:
- Coal
- Natural gas
- Iron ore and petroleum
But actually most raw material for the country’s large industrial capacity potential are imported. Prominent industries include:
- Chemical (petrochemical, paints and varnishes)
- Metal processing
- Machine manufacturing
- Industrial and transport equipment
- Textiles
- Manufactured consumer goods
- Lumbering and furniture.
39.2% of Romania’s territory is arable land, 28% forests, 21% pastures, hayfields and orchards and 2.5% vineyards. Corn, wheat, vegetable oil seeds, vegetables, apples and grapes for wine are the main crops and sheep and pigs the main livestock. Forestry and fisheries are being developed under long-term programs.
THE ROMANIAN TAX SYSTEM
Romanian employers are required to withhold tax at source on salaries paid to employees on their payroll and to pay such tax to the Romanian government on a monthly basis.
Romanian residents who derive rental income in foreign currency, self-employment income, capital gains from sale of securities or income from intellectual property rights must file an annual tax return by 25 May of each year for the previous year.
Individuals who receive taxable remuneration from a non-Romanian payroll are taxed from the moment of their arrival in Romania irrespective of the assignment duration in Romania, unless they can claim protection under the relevant tax treaty.
Tax on profits
Tax on profits applies at a rate of 16%. In the case of bars, nightclubs, casinos and sports betting will be applied a 5% as a tax rate.
As regards the representative offices of foreign companies, they will pay the taxes equal to the fixed sum for the tax year in euros. In general, the current exchange rate is communicated by the National Bank of Romania and is valid on the tax payment date.
The following companies have to pay tax on profits:
- Romanian companies
- foreign companies having offices in Romania
- foreign companies receiving revenue from real estate transactions or from shares of a Romanian company
- physical residents associated to Romanian legal persons when income is received in Romania as well as from abroad in associations without legal personalities
- legal persons having an office in Romania in accordance with European laws.
The following are exempt from tax on profits:
- state institutions involved in a particular activity
- micro-enterprises
- religious organizations
- teaching institutions and professionals
- owners associations
- guarantee funds in bank deposits, for economic activities limited to € 15,000 per year or 10% of total exempt income.
Tax on dividends
Tax on dividends is levied at source at a rate of 16% on dividends paid by a Romanian company to another. For an accomplished two years period, till the dividends’ payment date, tax does not apply to dividends paid by a legal person to another if the beneficiary has at least 10% of the other legal person’s equity securities.
VAT
Value added tax (VAT) applies at a standard rate of 24% in Romania. It is reduced to 9% for some good and services and to 5% on the sale of buildings under certain conditions.
Foreign Investments in Romania
Romania welcomes foreign investment, both direct and portfolio. The government provides national treatment for foreign investors.
Romania’s strategic location, membership in the European Union, well-educated workforce, competitive wages, and abundant natural resources make it a desirable location for firms seeking to access European, Central Asian and near East markets. U.S. investors have found opportunities in the information technology, energy, services, manufacturing, and consumer products sectors.
The distribution of foreign direct investment by sector shows a lead of the industrial sector (more than one-third of the total), with the metallurgy industry standing out.
Other sectors have attracted investors:
- Banking and insurance,
- Wholesale and retail,
- Energy,
- Construction
The regions that attract the most foreign Investors:
- Bucharest (more than 60% of the total),
- The center of the country
- South of Romania.
Romania has numerous advantages. For example:
- The country has a strong industrial tradition,
- Very low cost of labor.
This has been the reason for the development of a significant industrial sector, particularly car making, but also services.
Reasons to Invest in Romania
Strong Points:
- A large domestic market
- A skilled and inexpensive workforce
- It’s a member of the European Union
Weak Points:
- Its infrastructure (highways, railroads, air)
- Allegations of corruption
- Limited purchasing power
Government Measures to Motivate or Restrict FDI:
Romania actively seeks:
- Foreign direct investment and
- Has taken steps to strengthen tax administration
- Enhance transparency
- Create legal means to resolve contract disputes expeditiously.
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* www.romaniatourism.com
* wikipedia