PWC Bguide2001 Business Gui

Business Guide to Romania
2001 / 2002 Edition
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PricewaterhouseCoopers refers to the member firms of the worldwide PricewaterhouseCoopers organisation.
This guide has been prepared for the assistance of PricewaterhouseCoopers clients and also parties interested in doing
business in Romania. It does not exhaustively cover the subject, but is intended to be a synopsis of some of the important
initial questions that may arise. When specific problems occur in practice, it is likely to be necessary to refer to the laws,
regulations and decisions of the country and to obtain appropriate accounting and legal advice.
The material contained within this Guide has been assembled in September 2001 and, unless stated otherwise, is based
on the legislation as it stands at 30th September 2001.
For the most up to date information, please contact PricewaterhouseCoopers Bucharest:
Country Senior Partner
Jean-Pierre Vigroux
Audit and Business Advisory Services [ABAS]
Vasile Iuga
Dinu Bumbacea
David Trow
Taxation Advisory Services [TAX]
Ron Barden
Joe Kerrane
Corporate Finance & Recovery Services [CFR]
Emilian Radu
Copyright 2001 PricewaterhouseCoopers. All rights reserved.

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1-5 Costache Negri Street
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Contents
Section
Page
Romania: a Profile
1.1
Geography and Climate
1.2
Government and Elections

Population and Urbanisation
1.4
Language
1.5
Education
1.6
The Economy
Overview of the Economy
1.7
Transport and Communications
1.8
Suggestions for Business Visitors

6
7
1.3
Government
The Political Situation Since the November 2000 Elections
Currency
Modes of Address
Business and Social Etiquette
Statutory Holidays
9
10
10
10
Business Environment
11
2.1
Business Climate
11
2.2
The Aims of Government Policy
11
2.3
Free Trade Zones
11
2.4
Financial Services
12
2.5
European Union Associate Status
12
2.6
International Agreements
12
2.7
Land Ownership and Real Estate
13
2.8
The Property Market
13
2.9
Business Lobby Groups
13
Foreign Investment, Privatisation and Foreign Trade
14
3.1
14
Foreign Investment

Regulatory Climate
Regulatory Legislation
Restrictions on Foreign Investment
Investment Incentives
Repatriation of Earnings and Capital
Guarantees and Rights
Policy Trends
14
14
14
15
15
15
15
PricewaterhouseCoopers - Business Guide To Romania 2001 / 2002
3.2
Privatisation

3.3
Trade

16
16
16
17
4.1
The Banking System
17
4.2
The National Bank of Romania
17
4.3
The Foreign Currency Market
The Banking Market

Foreign Investment
Repatriation
17
18
18
18
4.4
Specialised Financial Institutions
18
4.5
Leasing
18
4.6
Financial Markets
19

Stock Exchange
RASDAQ
Unlisted Securities / Companies
19
19
19
Corporate and Business Law
20
5.1
20
Legal Framework

5.2
Company Law
Commercial Register Law
Direct Investment Legislation
Portfolio Investment
Commercial Code
Forms of Business Organisation

Regulatory Climate
Regulatory Authority
15
15
Banking and Finance
Regulatory Climate
Privatisation Background
15
Registration Procedure
Capital and Shares
Directors (Administrators)
Censors
General Meeting of Shareholders
20
20
20
20
20
20
21
21
21
22
22
5.3
Branches
22
5.4
Representative Offices
22
Labour Relations and Social Security
23
6.1
23
Labour Relations

Availability of Labour
Employer / employee relations
Unions
23
23
23
6.2
Working Conditions

6.3
25
25
25
Foreign Personnel
25

Work and Residence Permits

Fiscal Registration Numbers
Social Security Agreements
Living Conditions
25
25
26
26
Accounting and Audit Requirements and Registrations
27
7.1
27
Accounting

Introduction of International Accounting Standards

Existing Romanian Accounting Regulations
Significant Accounting Differences Between RAR and IAS
27
27
28
7.2
The Chart of Accounts
28
7.3
Audit Requirements
28

24
24
24
24
24
24
Coverage
Contributions
Wages
Working Hours
Paid Holidays and Vacations
Equal Opportunities
Health and Safety
Termination of Employment
The Social Security System

6.4
24
Legally Required Audits

Auditing Standards for Legally Required Audits
Securities Commission Requirements
Accounting and Law Firms
28
28
28
28
Taxation of Corporations
29
8.1
29
Corporate Tax System

8.2
Companies
Dividends
Romania Fund
Tax on Capital Increase
Depreciation and Amortisation
Territoriality
Incentives

Direct Investment
50% Reduction in Profit Tax Liability
Other Incentives
SMEs
Disfavoured Zones
Oil and Gas Incentives
29
29
29
29
29
29
30
30
30
30
30
30
30
31
8.3
Gross Income

8.4
Deductions

8.5
31
32
32
32
32
32
32
Consolidation
32
Other Taxes
32
Withholding
Property Tax
Health Tax
Advertising Tax
32
33
33
33
Taxation of Individuals
34
9.1
Income Tax
34
9.2
Gross Income

Interest Expense
Transfer Pricing
Bad Debts
Travel Expenses
Losses
31
31
31
31
31
31
Tax Computations
8.6
Accounting Period
Business Profits
Capital Gains
Interest, Royalties and Service Fees
Dividends
Exchange Gains and Losses
31

Territoriality and Residence
Employees' Gross Income

Income From Independent Activities
Non-residents
Income Earned By Non Tax-payers
34
35
35
35
35
35
9.3
Tax-exempt income
35
9.4
Deductions
36

9.5
Tax Administration
9.6
Returns, Calculation and Payment of Tax
Tax Registration
9.7
Business Expenses
Personal Allowance
Tax Registration Forms / Fiscal Representative
Other Taxes

Capital Gains
Dividends and Interest
Other Income
Local Taxes on Income
Wealth Tax
Gift and Inheritance Tax
Social Security Contributions
36
36
36
36
37
37
37
37
37
37
38
38
38
38
10 Indirect Taxation
39
10.1 Value Added Tax (VAT)

39
The Scope of VAT

Rates of VAT
VAT Exemption
Import VAT
Fiscal Representation
Non-deductible Input VAT
VAT Administration
VAT Postponement
39
39
39
40
40
40
40
40
10.2 Customs and International Trade

40
Customs Duties
Temporary Import Relief
Customs Duties Incentives
Leasing Regulations
Checking the Declared Customs Value
Import Restrictions
Customs Regime for Individuals
40
41
41
41
42
42
42
10.3 Other Indirect Taxes
42
Excise Tax
Clearance Fees
Road Tax
42
42
43

11 Introduction to PricewaterhouseCoopers
44
11.1 PricewaterhouseCoopers
44
11.2 PricewaterhouseCoopers in Romania
44

Audit and Business Advisory Services (ABAS)

Taxation Advisory Services (TAX)
Corporate Finance and Recovery Services (CFR)
45
45
46
Appendices
Appendix I
Appendix II
Appendix III
Appendix IV
Appendix V (a)
Appendix V (b)
Appendix VI
Appendix VII
Appendix VIII (a)
Appendix VIII (b)
Appendix IX
Appendix X
Appendix XI
Appendix XII
47
Government Ministries
Bilateral Investment Treaties
Major Banks Operating in Romania
Hotels and Restaurants
Chart of Accounts - for companies not applying OMF 94
Chart of Accounts - for companies applying OMF 94
Major Differences Between RAR and IAS
Accountants and Law Firms
Double Taxation Agreements
Withholding Tax Rates Provided by Some Major DTAs
Local Employment Agreements
Customs Duties Effective from January 2001
Import Duty Exemptions
Excise Tax for Domestic and Imported Products
47
48
49
50
52
54
56
57
58
59
60
61
62
63
Chapter 1
Romania: a Profile
1.1 Geography and Climate
1.2 Government and Elections
Romania is in southeastern Europe, just north of the Balkan
Government
Peninsula. With an area of 238,391 square kilometres

(91,780 square miles), it is the second largest country in
The Constitution, passed by Parliament on 21 November
Central and Eastern Europe after Poland.
1991, proclaims Romania a republic and a parliamentary

democracy. The President and the bicameral Parliament
Romania borders on the Ukraine and the Republic of
(Chamber of Deputies and Senate) are elected by universal
Moldova in the north and northeast. It borders on Bulgaria
suffrage for four-year terms.
in the south, on Serbia in the southwest, and on Hungary

in the northwest. The Black Sea coast is its eastern border.
The current President is Mr Ion Iliescu, the former leader of
The Danube runs along Romania's southern border for
the Romanian Party of Social Democracy (PDSR) and
1,075 km, and eventually flows into the Black Sea, forming
President from 1990 to 1996. The President nominates the
the Danube Delta.
Prime Minister. Cabinet ministers, selected by the Prime

Minister, have to be approved by Parliament before taking
The country's terrain consists of arable land, forests,
up office.
pastures, hayfields, vineyards, orchards and lakes. Large

areas of the country are mountainous. Romania is also rich
in natural resources, amongst which the following are to be
found: oil, natural gas, coal, iron ore, non-ferrous ore
(copper, lead, zinc), gold and silver ore, sulphur, and salt.
The climate is continental with hot summers, long cold
winters, and short springs and autumns. The average
temperature in summer is 23 Celsius (72 Fahrenheit);
some days it may exceed 40 C (102 F). In winter, the
weather is usually frosty, with considerable snowfall, and
an average temperature of -3 C (27 F). Rainfall varies
In the current cabinet, Mr Adrian Nastase is Prime Minister.

Contact details for all government ministries are contained
in Appendix I.
The territory of Romania is subdivided into forty counties
(judete); these are the administrative units of local
government. Bucharest and its surrounding area form a
unitary district with county status. Local councils and
mayors are directly elected. The Government appoints
prefects to each county.
according to topography, the average being 636 mm (25

inches) per annum.
Chapter 1 - Romania: a Profile
The Political Situation Since the November

2000 Elections
1.4 Language
In the general elections that took place in November 2000,
language uses the Latin alphabet and is part of the
the centre-left PDSR received the largest share of
Romance language family. In some parts of Transylvania,
parliamentary seats, just below 50%. The nationalist
Hungarian is spoken alongside Romanian.
Greater Romania Party (PRM) won more than 25% of the

seats. The remaining 25% was almost equally divided
between Liberals (PNL), Democrats (PD), and ethnic
Hungarians (UDMR).
The official language of the country is Romanian. The
In addition, many Romanians speak English and/or French.

Business is often conducted in one of the two. German is
spoken in a number of areas.
Seats in Parliament
Party
Party of Social Democracy (PDSR)
Greater Romania Party (PRM)
Democrats Party (PD)
National Liberal Party (PNL)
Ethnic Hungarian Party (UDMR)
Others
Total
Senate
65
37
13
13
12
140
Chamber
of Deputies
155
84
30
30
27
15
341
1.5 Education
Education is mandatory from the ages of six to fourteen.
The Romanian state education system includes primary,
secondary, and higher education institutions. The higher
education sector consists of academic universities and
polytechnic institutes. Like many post-Communist
countries, Romania has a reputation for strength in
scientific fields. Recent years have seen an increase in the
number of post-secondary establishments and private
education has become more popular. Increasingly,
1.3 Population and Urbanisation

The current population of Romania is estimated at 22.5
million. Romanians make up about 89% of the population.
resources are being devoted to professional and vocational

training. Business administration and management studies
have been introduced in co-operation with the US and
Canada.
The main minority groups are Hungarians (7%), followed

by a large community of Roma (5.5%), and smaller
numbers of Germans, Russians, and Serbs. More than half
of the population (55%) lives in urban areas.
1.6 The Economy
The population of Romania is predominantly Christian of
Overview of the Economy
different denominations: Orthodox (89%), Roman Catholic

(5%), Reformed (3.5%), Greek Catholic (1%), Pentecostal
After a three-year recession, Romania's economy began to
(1%). Romania also has small Jewish and Muslim
recover in 2000 and the trend continued in 2001. This is
communities.
based on progress in restructuring, which should lead to a

more competitive economy in the medium term.
Major Romanian cities

City
Bucharest
Iasi
Constanta
Cluj-Napoca
Timisoara
Galati
Craiova
Brasov
Population
1,996,000
349,000
337,000
332,000
329,000
325,000
312,000
308,000
Industries
Capital; commercial and manufacturing centre
Manufacturing and transport
Shipping and tourism
Commercial and manufacturing
Commercial, manufacturing and agriculture
Transport and agriculture
Manufacturing and transport
Agriculture, manufacturing and tourism
Source: National Bureau of Statistics, January 2001
Consequently, Standard & Poors has upgraded all its ratings
and in January 2001. This is USD 1.8 billion more than in
for Romania and has changed its outlook to positive.
June 2000.
In 2000 Gross National Product was reported by the
National Bank foreign exchange reserves increased
National Institute for Statistics and Economic Studies
constantly from USD 2.1 billion in August 2000 to USD 3.6
(INSSE) as ROL 796.5 trillion (USD 36.7 billion), of which
billion in August 2001.
the private sector accounted for 62%. In real terms, Gross

Domestic Product increased by 1.6% in 2000 compared to
1999, and industrial output grew by 8.2%.
In the first half of 2001, GDP increased by 4.9% compared
to the same period in 2000, and an overall 4.1% increase
is expected for 2001. Industrial output increased in the first
1.7 Transport and Communications

Transport
seven months of 2001 by 9.6% year on year, due to strong
Rail: Romania has a railway network of approximately
exports figures (15.4% y/y).
11,500 kilometres, of which 33% is electrified track,
In the first seven months of 2001, exports increased at a

reasonably high rate reaching USD 6.7 billion. Imports also
increased significantly, reaching USD 8.3 billion, which
resulted in a record trade deficit of USD 1.6 billion.
By September 2001, inflation had been reduced year-onyear to 31.2%, compared to 44.9% at the same time in
2000. Government estimates for the year show a significant
deceleration in annual inflation to 29% compared to
40.7% in 2000.
At the end of June 2001 external debt reached USD 10.7
billion following the Eurobond issues at the end of 2000
operated by the state-owned SNCFR. Approximately 36%

of all intercity passenger transport and 13% of freight
transport is handled by the rail sector.
Road: The country has more than 73,000 kilometres of
roads, but only approximately 18,000 kilometres are
modernised; there are fewer than 500 kilometres of limited
access highways. In winter, snow and ice make certain
areas difficult or temporarily impassable.
Water: Romania has access to both the Black Sea and the
Danube River. The Danube is now connected to the North
Sea by the Danube-Rhine waterway.
Key economic indicators

Indicator
December 1999
GDP (USD billion)
34
GDP (% change against previous year)
-3.2
GDP per capita (USD)
1,515
Inflation (against previous year) %
54.8
Unemployment %
11.4
ROL/USD exchange rate (end of period)
18,255
Foreign direct investment (USD million)
961
External debt (USD billion)
8.589
Exports FOB (USD billion)
8.50
Imports FOB (USD billion)
9.60
Credit Rating
Standard & Poors
BMoody's
B3
Fitch
BForeign Exchange Reserves
National Bank of Romania (USD billion)
1.5
December 2000
36.7
+1.6
1,633
40.6
11.1
25,926
861
9.9
10.37
12.05
End August 2001

16.4
+4.9
N/a
+18.9
8.1
30,035
334*
10.7
5.7
7.1
Estimates 2001
38.1
+4.11
1,700
291
9.9
31,647
1,580
9.2
11.4
13.5
BB3
B
B
B3
B
2.5
3.5
N/a
* provisional data
Source: National Institute for Statistics and Economic Studies; National Bank of Romania.
For estimates 2001: 1: Government; all others from The Economist Intelligence Unit.
Air: The main gateways for international air transport are
newspapers and periodicals are available in Bucharest and
located in Bucharest (Otopeni), Timisoara, Constanta,
other main cities.
Suceava and Cluj-Napoca. There are sixteen domestic

airports with scheduled air services run by Tarom (Boeing,
Airbus and ATR) Carpat Air and Angel Air. Airfreight is
handled almost exclusively in Bucharest; the terminal
capacity is currently being upgraded. Seventeen
international airlines now serve Romania and there are
direct flights to most European capitals.
Communications
Research, Advertising, and Media Buying: The growth of a

consumer society has stimulated the emergence of research
organisations (CSOP Gallup, IRSOP and IMAS), and
marketing research consultants (Mercury Marketing &
Research and AMER Nielsen). There are a number of
agencies in the advertising sector, including some with
international affiliations (McCann Erickson, Saatchi &
Saatchi, D'Arcy, Grey, Ogilvy & Mather, Lowe Lintas, Scala
Thompson and Young & Rubicam).
Telephone networks: At the end of June 2001 there were

almost 4 million fixed subscribers. Service has been
Internet: Romania has embraced the Internet with
upgraded considerably by Romtelecom, which has
enthusiasm. Estimates show that by mid-2001 there were
introduced new digital exchanges, optic fibre overlay
over 1.2 million users.
networks, and expanded international dialling and ISDN

services. Direct international dialling is possible from all
cities across Romania. Companies, institutions, hotels, and
post offices all have access to international lines, although
1.8 Suggestions for Business Visitors
in smaller towns this service may not be as widely available

as in major cities.
As is the case with any business trip, when visiting

Romania some advance preparation is essential. Useful
There is an impressive range of cellular services. Two GSM
information for visitors is outlined below.
900 cellular services were introduced in 1997 by the

Canadian-led Mobifon and the French-led Mobil Rom, and
All visitors to Romania require passports, preferably with a
an analogue cellular network is provided by Telemobil. A
validity of more than six months. With the exception of EU
GSM 1800 service was launched in 2000 by Cosmorom,
and US citizens, visitors also require a visa. A two-month
the mobile arm of Romtelecom. There were more than 3
visa may be purchased at most main points of entry,
million mobile phone subscribers by August 2001.
including Otopeni airport, at a cost of USD 33.
Television: Television is the most widely used advertising
Currency
medium in Romania today and the one with the greatest

impact. Public television consists of two national networks,
TVR 1 and TVR 2, and there are six major private television
Points to bear in mind:

The Romanian currency is the leu (plural lei),

abbreviated as ROL; on 30 September 2001 the
exchange rate was USD 1 = ROL 30,420;
Transactions between residents must be in ROL;
Most prices are given in ROL but prices for some

goods and services are given in a convertible currency
(USD or DEM) yet payable in ROL;
Cash, travellers' cheques, and credit cards may be

used in Romania but cash (usually USD) is the
preferred method of payment. Dollars can be
exchanged at official exchange offices at favourable
rates;
Changing money in the street is not advisable; it is

risky and illegal.
stations including Pro TV, Antena 1, and Prima TV. Over

45% of households are subscribers to cable television
services allowing access to a wide range of international
and local broadcasts. Programmes are shown in the
original language with Romanian subtitles.
Radio: State-owned Radio Romania operates three national
AM radio networks. There are also several private FM
networks, including two with extensive national range
(Radio Contact and Radio Pro FM) and one with
international coverage (Europa FM).
Newspapers and Periodicals: Romania has more than
ninety daily newspapers written for diverse audiences.
There are also more than 200 weekly papers as well as a
growing number of magazines. The technical quality of the
newspapers has improved, but limited supply of newsprint
has restricted the size of editions. Some international
Modes of Address
Statutory Holidays
Visitors should address people by their surname preceded
Romania has the following statutory holidays:
by Mr/Mrs (Domnul/Doamna) until invited to address them

by their first name.
New Year (1 and 2 January);
Orthodox Easter Sunday and Monday;
Business and Social Etiquette
May Day (1 May);
Romanian business customs tend to be formal.
National Day (1 December);
Introductions are respectful, business cards are exchanged
Christmas (25 and 26 December).
and suits are worn. The handshake is used both on meeting

and taking leave. Dealing with public and state officials is
often time-consuming and requires perseverance.
Romanians are often very proud of their national heritage,
Additionally, little business takes place between Christmas

and New Year. During the summer, some companies,
government agencies, and the courts are closed for August
or operate with reduced hours and staff.
and tend to be sensitive about cultural and political matters

that concern their country.
10
Chapter 2
Business Environment
Foreign Direct Investment of nearly USD 7 billion
GDP growth of 1.6% in 2000, after three years of

contraction
Inflation trending downwards
The taxation system, still an area of concern, is

undergoing reform
2.1 Business Climate
programme for the period 2001-2004 has, in line with EU

and NATO requirements, the following aims:
To achieve consolidated macroeconomic stability

through structural reforms and financial discipline;
To develop the internal market by allowing increased

competition i.e. reducing the role of state monopolies;
To fight tax evasion, curb the illegal flight of capital

from the country and increase state budget revenues,
while reducing taxes;
To encourage investment by Romanian and foreign

investors by providing special incentives for reinvesting
profit and creating jobs;
To conclude the privatisation of the 64 big commercial

companies listed in the PSAL programme;
To promote the use of information and communication

technologies in public administration and industry.
In the last few years, significant progress has been made in

establishing a market economy. Changes have taken place
in the following areas:
Consolidation of macroeconomic stability;
Privatisation of important state-owned banks (Romanian

Development Bank, Banc Post, Agricultural Bank);
Encouragement of Romanian and foreign investment

through fiscal and other types of incentives;
Restructuring utilities;
Developing a more understandable and consistent

system of direct and indirect taxation;
Continuing privatisation of large and medium-sized

companies under PSAL I and II, a World Bank-funded
project;
Liberalising the trade regime in line with commitments

made in agreements with the EU and CEFTA countries.
2.3 Free Trade Zones

Romania has six designated Free Trade Zones, all located
around ports: Constanta Sud-Agigea (on the Black Sea),
Sulina (at the mouth of the Danube), Braila, Galati and
Giurgiu (on the Danube), and Curtici-Arad (on the
Hungarian border).
The Free Trade Zone legislation falls under Law 84/1992. It
allows, under certain conditions, exemption from customs
duties and value added tax, unrestricted import and reexport of goods, and permission to conduct financial
2.2 The Aims of Government Policy
transactions in convertible currency. In practice,
The 2000 general elections brought to power a centre-left
rapid flow of investments into these zones. However, new
government focused on two major issues: European and
regulations have been adopted and, as a result, investment
Euro-Atlantic integration. Consequently, the government
into these zones should increase over the next eighteen
bureaucracy and low investor interest have prevented the
months.
11
Chapter 2 - Business Environment
2.4 Financial Services
of rights conferred upon the lessee, inability of the lessor to
The financial services sector includes banks, the state-
and the distinction between operational and financial lease
owned savings office (CEC), investment banks, stock
agreements (see also Chapter 4).
execute his right to the property in case the lessee defaults,
brokerage firms, insurance firms and leasing companies.

In the banking sector, Romanian state-owned banks have
moved towards international standards with improved
credit approval channels, upgraded treasury functions, and
improved accounting and reporting (refer to Chapter 4 for
more details). Apart from the commercial banks mentioned
in Appendix III, some investment banks and the Big 5
accountancy firms have established a significant presence
in the country, whilst the re-foundation of the Bucharest
Stock Exchange (BSE) and RASDAQ, the over-the-counter
market, have also resulted in the emergence of a growing
stock brokerage sector. Currently the BSE lists over 70
companies while RASDAQ lists approximately 5,150
companies. Furthermore, a number of investment funds
2.5 European Union Associate

Status
In 1993 Romania signed an agreement on associate
membership of the European Union. The agreement was
ratified in 1995. The EU decided to open accession
negotiations with Romania in late 1999 and negotiations
were formally launched in February 2000. At the request of
the EU Commissioner for enlargement, Romania prepared
and submitted the Medium-Term Economic Strategy (20002004) in March 2000 as a basis for negotiations.
focusing on Eastern Europe and/or Romania have invested
In the short term, membership means that reduced customs
in Romanian securities.
rates and non-tariff barriers will facilitate exports to and
There are over 70 registered insurance companies in
imports from EU nations.
Romania offering a range of insurance services. A number
Additionally, the Government is making a concerted effort
of these companies are members of UNSAR (National
to upgrade its legislative, regulatory, and fiscal standards to
Union of Insurance and Reinsurance Companies) and this
the levels set by the European Union. As of June 2001,
group comprises around 90% of capital and premiums in
Romania had provisionally closed seven of the thirty-one
the industry. Large international insurers such as AIG, ING
negotiation chapters and had opened seven other chapters
Nederlanden, Commercial Union, Generali and Sara
for negotiation.
Merkur have established domestic operations and sales

forces. There are also a significant number of insurance
There is still hope that Romania could become a full
brokers.
member of the European Union some time before 2010.
The insurance industry regulator is the Insurance

Surveillance Commission, which recently replaced the
Office for Insurance and Reinsurance Activities (OSIRA)
within the Ministry of Finance.
Romanians are increasingly interested in the insurance
market but insurance penetration is still much lower than
the EU average. Although most of the large insurance
companies operating in the Romanian market offer various
life insurance services, sometimes associated with private
pension plans, life insurance accounted for only 15% of
total insurance premiums in 2000. The Romanian market is
dominated by other types of insurance (of which nearly
35% is car insurance).
A Government Ordinance on leasing was passed in 1997
2.6 International Agreements

Romania has diplomatic relations with over 170 nations.
This has enabled the country to join important
organisations and be party to key agreements including the
following:
Membership:
United Nations (UN)
World Bank
International Monetary Fund (IMF)
World Trade Organisation (WTO)
European Bank for Reconstruction and

Development (EBRD)
Bank for International Settlements
Council of Europe
and amended in early 2000. The Ordinance goes a long

way towards guaranteeing the rights of both the lessee and
lessor in lease transactions and substantially increases the
scope of leasing activities recognised by law. However,
some areas need further clarification, including delineation
12
Chapter 2 - Business Environment
Agreements:
In addition, there are specific regulations governing the
Associate member, European Union (EU)
restitution of property confiscated during the communist
Central European Free Trade Agreement (CEFTA)
regime to its former owners. The main regulations are Law
Free trade agreement with European Free Trade

Association (EFTA)
Most Favoured Nation (MFN) status with United

States
Partnership for Peace programme with North

Atlantic Treaty Organisation (NATO)
Free Trade Agreements with Hungary, Czech

Republic, Turkey and Moldova
1/2000 on the Restitution of Agricultural and Forestry Land

and Law 10/2001 on the Legal Regime of Immovable
Properties Abusively Taken from their Legal Owners
between 6 March 1945 and 22 December 1989.
2.8 The Property Market
In addition, Romania has concluded a number of bilateral
Recent years have seen an upgrading and expansion of the
agreements concerning trade, avoidance of double
stock of office, industrial, retail and residential properties in
taxation, and mutual guarantees of investments.
Romania.
The average cost of office space ranges from USD 12 to 30
per square metre. Apartment rental ranges from USD 500
2.7 Land Ownership and Real Estate

Before 1990, most land in Romania was owned by the
state, either as community property or as the property of
to 1,500 per month, depending on location, size and

furnishings. Rental costs for villas in some residential areas,
especially in Bucharest, may range from USD 2,500 to
7,000.
state-owned entities. Individuals owned a limited amount

of farm land and residential land.
Since 1991, land ownership and use has been regulated by
2.9 Business Lobby Groups
the Constitution and the Land Law (Law 18/1991).

Effectively, surface rights to land that is not community
There are a number of business groups that lobby
property have been transferred to individuals, state-owned
Government ministries on policy issues. These include the
companies (which are now being privatised), and farmers
Foreign Investors Council (FIC) (tel + 40 1 222 1931,
(although resale rights for agricultural land are restricted).
www.fic.ro) and the American Chamber of Commerce
The Constitution and other legislation limits land ownership
(AMCHAM) (tel + 40 1 221 7515, www.amcham.ro).
by non-Romanian individuals and companies However,

Romanian companies are entitled to land ownership, and
companies with foreign participation fall under this
category.
13
Chapter 3
Foreign Investment,
Privatisation and
Foreign Trade
Investor considerations
All businesses must be registered according to the

legislation that governs the particular type of enterprise.
Foreign and domestic investments are treated equally
According to the Law on Direct Investments adopted in
Foreign investment in defence and national securityrelated sectors requires additional government
approval
June 2001, foreign and local investment should be treated
One hundred per cent foreign ownership is permitted
APAPS (formerly the State Ownership Fund) sold

1,300 companies in 2000 and 61 in the first eight
months of 2001
equally.
No restrictions are imposed on the amount of capital that
can be invested in Romanian enterprises.
Regulatory Legislation
The following major pieces of legislation (in addition to
taxation law) regulate foreign investment in Romania:
3.1 Foreign Investment
1. Commercial Code
2. Company Law (see Chapter 5)
Regulatory Climate
One of the Government's main targets is to substantially
3. Law on Direct Investment (see Chapter 8)

4. Law on Banking Activities (see Chapter 4)
increase the volume of foreign investment in Romania by
5. Commercial Companies Privatisation Law
ensuring an investment climate that encourages and attracts
6. Commercial Register Law
foreign investors.
In January 2001 the Department for Liaison with Foreign
Investors (DRIS) was formed. It is directly answerable to the
Prime Minister, and acts as a link between the Government
and important foreign investors (those investing over USD
10 million).
The General Directorate for Investment Promotion, a
department of the Ministry of Development and Planning,
monitors direct investments between USD 1 million and
Restrictions on Foreign Investment

No restrictions are imposed on foreign ownership or
participation in joint ventures and in Romanian companies.
It is possible for a foreign entity to own 100% of a
Romanian-registered company.
The main industrial sectors in which additional government
approval is necessary for investors are government defence
and state monopolies.
USD 10 million and offers technical assistance to foreign
Resident and non-resident companies are allowed to
and domestic investors. This department now issues a single
acquire and hold rights over movable assets in Romania.
investment certificate, thus streamlining previously time-
Only resident companies may hold property rights over
consuming and laborious procedures, which often
immovable assets.
necessitated the approval of numerous authorities.
14
Chapter 3 - Foreign Investment, Privatisation and Foreign Trade
Investment Incentives
companies are promoted on international capital markets,

foreign investment banks act as intermediaries, and Global
According to the June 2001 law on direct investments,
Depository Receipts are used.
eligible investors may be given incentives including

customs duty exemption and VAT postponement, as well as
certain fiscal facilities including the use of 'accelerated'
depreciation and a 20% investment allowance applicable
to technical equipment and machinery (further details are
provided in Chapter 8 - Taxation of Corporations).
Repatriation of Earnings and Capital
Privatisation Background
The privatisation process commenced in 1990 with the
creation of joint stock companies out of approximately
6,200 state-owned entities. Of the shares in these
companies, 70% was allocated to the State Ownership
Fund (SOF) and 30% to one of five Private Ownership
Funds (POFs).
The earnings and profits of an investment can be

repatriated after payment of state liabilities (interim
Passed in 1995, the Law on the Acceleration of the
dividends are not allowed). Upon cessation of the
Privatisation Process provided for the transfer of up to 60%
investment/business, capital can be repatriated.
of the capital of 3,905 companies to Romanian citizens

(approximately 17 million) in exchange for vouchers. This
Guarantees and Rights

Foreign investments are not to be subject to nationalisation,
comprised the 30% held by the five POFs and up to 30%

of the SOF's share.
expropriation, requisition, or any other measure of similar
Following Emergency Ordinance No 296/December 2000,
effect, except when this is in the public interest and even
the State Ownership Fund became the Authority for
then only after 'appropriate compensation'. Romania is
Privatising and Management of State Ownership (APAPS).
party to a number of bilateral investment guarantees and is
APAPS is a public institution, answerable to the Romanian
a member of the Multilateral Investment Guarantee Agency
Government.
(MIGA) (refer to Appendix II for existing protection

agreements). There are, however, no government
guarantees available to compensate for inconvertibility.
Since it took over from the SOF, APAPS has managed to

privatise 61 companies with assets of USD 330 million.
Major deals concluded in 2001 include Sidex Galati, the
Policy Trends
The current trend is towards liberalisation of the investment
largest Romanian steel producer and Banca Agricola, the

agriculture bank.
process. Legislation aims to enable businesses to be
The Romanian Government concluded a loan agreement
transferred from state to private ownership. It also seeks to
with the World Bank (WB) in June 1999. The loan
encourage wide domestic share ownership as well as to
amounted to USD 300 million for the Private Sector
facilitate foreign investment in Romania.
Adjusting Loan Programme (PSAL) that includes

privatisation of 64 large state-owned companies, banks, the
state bonds exchange market, reorganisation of utilities,
business environment improvement, and the relief of social
3.2 Privatisation
Regulatory Climate
problems resulting from reforms.

Moreover, in order to ensure that the prerequisites for the
implementation of PSAL objectives are in place, the
Foreign investors can either acquire the state's shares in a
Romanian Government concluded a loan agreement of
fully or partially state-owned joint stock company from the
USD 25 million with the World Bank for the Programme
Authority for Privatising and Management of State
for Institutional Development of the Private Sector.
Ownership (APAPS - formerly the State Ownership Fund) or

acquire equity from private investors. Privatisation of over
5,500 companies has been approved and completed in
Romania since 1992.
Privatisation methods include open and closed tenders,
local stock auctions, direct sale, and management and
employee buyouts (MEBO). In addition, Romanian
Receipt of the next two instalments of the loan granted by

PSAL is conditional on APAPS' accomplishing the
objectives related to restructuring and privatisation of banks
and state-owned companies.
In late 2000 privatisation of the 64 companies under PSAL I
began, with the help of investment banks. By August 2001
24 companies have been offered for sale and another
15
Chapter 3 - Foreign Investment, Privatisation and Foreign Trade
eleven will follow shortly. Prospective major deals include
Romania. Radioactive materials, weapons, nuclear
those of Alro and Alprom, Romania's largest aluminium
equipment and related materials are also subject to special
producer and processor, Electroputere, the country's largest
regulations.
railway rolling stock producer, Romvag, a freight wagon

producer, and Antibiotice, a pharmaceutical company.
Licences are also required for imports within quota limits,

barter transactions (i.e. payment in kind), transactions using
According to government sources, a second Private Sector
clearing accounts or based on government co-operation
Adjustment Loan may eventuate in the medium-term. The
agreements, as well as commercial operations performed
main objective of PSAL II is to support structural reforms in
for recovering the state's external claims or carried out
the areas of privatisation of state-owned companies, reform
using a government credit line.
and privatisation in the banking sector, development of a

smoother business environment for investors, and an
improved social assistance programme for workers
dismissed as a result of restructuring. The Government has
released a list of a further 20 companies to be privatised
under PSAL II.
Further details on customs duties and other indirect taxes

are included in Chapter 10.
Regulatory Authority
The Licence Department of the Ministry of External Affairs
is in charge of issuing trade licences.
3.3 Trade
Foreign trade regulations have been liberalised since 1990
and now broadly follow the guidelines set by the EU.
Regulatory Climate
Import and export of commodities into and out of Romania
does not generally require a special licence. Exceptions are
those commodities subject to quantity restrictions as
stipulated by international trade agreements signed by
16
Chapter 4
Banking and Finance
Three major banks privatised by September 2001
Privatisation of Romanian Commercial Bank planned

to begin in 2002
Many corporate banks operating
4.1 The Banking System

Romania has a two-tier banking system. The National Bank
of Romania (BNR) is Romania's central bank and is
The prime functions of the BNR are:

To issue and control the supply of banknotes and coins;
To licence all banking institutions in Romania and

monitor their activities;
To establish and manage the state's foreign exchange

policy;
To establish and manage monetary and credit policy.
Since 1 August 1995 the BNR has offered various forms of

credit to commercial banks as a means of refinancing.
independent of the Government. Commercial banks
The BNR has its own auditors authorised to conduct on-site
operate under the authorisation of the BNR.
evaluations of all commercial banks operating in Romania.
The Bank Privatisation Law, passed early in 1998 and
These evaluations generally take place on an annual basis.
applicable to state-owned banking institutions, stipulates
There is ongoing co-operation between the BNR and
that bank privatisation can be effected solely through cash
international banking institutions, including the IMF and
subscriptions made by Romanian or foreign persons. In
the World Bank. This is aimed at developing and improving
1998 two major banks were privatised, Banc Post and the
procedures and structures and furthering the BNR's
Romanian Bank for Development, and a third, the
transformation into a dynamic, modern central bank.
Agricultural Bank, was privatised in 2001. The privatisation

of the largest Romanian bank, the Romanian Commercial
Bank, is expected to take place in 2002.
The Foreign Currency Market

The interbank foreign exchange market was established in
1994. Foreign currency can be bought or sold at spot or
forward rates. The exchange rate is freely set by
4.2 The National Bank of Romania
intermediaries authorised by the BNR. The BNR also

publishes a daily reference rate.
A nine member Board of Directors nominated by the Prime
Exchange offices provide exchange facilities to private
Minister and approved by Parliament heads the National
individuals.
Bank of Romania. The term of office is usually eight years.

The Board of Directors includes the Governor of the BNR,
The current hard currency regulations allow residents free
three Vice-Governors, and five ordinary members. It is the
access to the foreign exchange market.
responsibility of the directors to issue BNR policy

guidelines.
17
Chapter IV - Banking and Finance
4.3 The Banking Market

Banking has witnessed significant changes in recent years
following the development of domestic banks and the
influx of foreign banks into Romania. Most domestic banks
are now private.
Appendix III lists major foreign banks operating in Romania

as of 30 September 2001.
Repatriation
The current legislation contains strict rules on the
repatriation of hard currency. Banks are directly responsible
Commercial banks must be registered with and operate
to the BNR for monitoring the way in which regulations on
under a licence issued by the BNR. Banks may engage in
hard currency repatriation are observed. Failure to observe
the following activities:
the deadlines set for collecting hard currency receivables

earned from exports by Romanian residents entails severe
Taking deposits;
sanctions. In addition, hard currency prepayments made for
Making loans;
imports of goods and services that have not been finalised
Issuing guarantees and letters of credit;
within a set time are also governed by repatriation rules.
Issuing and trading securities;
Non-compliance with repatriation deadlines is punished
Leasing.
with fines ranging from 10% to 100% of non-repatriated
Commercial banks may also participate in currency
monies, depending on the delay period.
auctions provided they have broker or dealer licences.

Only banks are authorised to conduct banking services and
operations in Romania.
4.4 Specialised Financial Institutions
In recent years, several banks have experienced problems

such as deposit runs and even bankruptcy. These include
Specialised financial institutions in Romania are still
the transfer of assets from Bancorex, the largest state-owned
developing and, at present, the range of services offered is
commercial bank prior to its closure, and the bankruptcy
quite limited, especially in relation to factoring operations.
and liquidation of Bankcoop, Banca Albina and the
Brokerage houses have been established and many of these
International Bank of Religions.
are linked to banks.
The BNR issues regulations that commercial banks must

observe. Most important are:
4.5 Leasing
Minimum share capital and funds of ROL 150 billion

(ROL 250 billion from 31 May 2002);
Mandatory credit risk reserve of 2%;
beginning of 2000, provides a more stable framework for
Minimum reserve requirements of 27% (deposited with

the NBR) for ROL and 20% for hard currency;
leasing operations in Romania. As in many countries, new
Capital Adequacy Ratios of 12% (own funds/net

exposure) and 8% (own capital/net exposure);
leases.
Lending limit of 20% of own funds to any one client;
Maximum 20% ownership of 'non-bank' investments;
Prohibition on holding property other than for own use;
Detailed monthly reports in standardised format to the

BNR.
The risks and rewards of ownership are transferred to

the lessee at the outset;
The lease states that ownership of the asset

automatically transfers to the lessee on expiry of the
lease;
The lessee has a purchase option under which the

purchase price is no more than 50% of the market
value of the asset; or
The lease period exceeds 75% of the normal useful life

of the asset (as defined by Romanian depreciation
legislation).
Government Ordinance no. 51/1997, revised at the
leasing contracts are split into finance leases and operating
Finance leases are defined as leases that meet any of the

following conditions:
Foreign Investment
In the last few years there has been an increase in the
number of foreign banks operating in Romania, either
through branches or subsidiaries (requiring a minimum of
five shareholders). Legislation provides no incentives
specifically tailored to foreign banks.
18
Chapter IV - Banking and Finance
Leases that do not meet any of the above conditions are
The BET (Bucharest Exchange Trading), the official index,
operating leases.
measures BSE performance. It is a synthetic indicator based
Details of customs and VAT implications of leasing are

included in Chapter 10 - Indirect Taxation.
on the ten most liquid shares traded on the BSE.
RASDAQ
The RASDAQ trading system opened in October 1996 as
part of a USD 20 million capital market development
4.6 Financial Markets
project run by the US Agency for International
Stock Exchange
NASDAQ system.
The first Bucharest Stock Exchange (BSE) opened in 1882,

although in subsequent years most securities trading took
place outside the market. The current exchange opened in
July 1995 with Canadian and British technical assistance.
Currently more than 150 brokers are members of the
exchange, which is open daily. The exchange's trading
system encompasses both order-driven and block trade
Development (USAID). RASDAQ is modelled on America's
RASDAQ is an exchange market that trades all the

companies initially privatised through the Government
Mass Privatisation Programme. It has less rigorous
requirements than the BSE. A RASDAQ index (compozit)
based on all transactions began as a benchmark of activity
in 1998.
Unlisted Securities / Companies
markets and is fully automated, with all transactions

matched and reported immediately. The BSE lists 70
In 1999 a third securities market was established for
companies divided into two categories.
unlisted securities. Companies that are not listed on either

the BSE or RASDAQ can be traded on this market under
The supervisory body is the National Securities Commission
certain conditions.
(which also regulates and controls the OTC market and

institutional investors). The National Securities Commission
was established after the Securities Exchange Law was
passed in 1994.
19
Chapter 5
Corporate and
Business Law
Legislation allows for the establishment of a wide

range of business entities, including wholly foreignowned company subsidiaries and branches
entities to register their entry into operation and any

subsequent changes in status, operation, or nature of
business, and details the registration procedure.
The most common type of company is the limited

liability company (SRL), largely because it is easiest to
operate and can have a sole shareholder
Many foreign businesses initially establish

representative offices
incentives for investors in Romania is the Law on the
Expert legal and tax advice should be sought in the

early stages of operation, as legislation varies
according to interpretation and changes regularly
Impact (Law no. 332/2001). This law was passed in July
Direct Investment Legislation

The only legislation in force that stipulates certain
Promotion of Direct Investments with Major Economic
2001 and grants fiscal incentives for large-scale investment
in Romania (investments over USD 1 million) if conditions
stipulated in its provisions are met (see Chapter 8 - Taxation
of Corporations, for details).
5.1 Legal Framework
Portfolio Investment
Romanian legislation governing domestic and foreign
There is no specific legislation in this area.
investment has undergone radical change since the 1989

Revolution, particularly with the introduction of the
Commercial Code
Company Law in 1990 (re-issued in 1998 and modified
The Commercial Code includes the basic rules applicable
again in May 2001). The current legislative bases for
to business transactions.
investment and business operations in Romania are

described below.
Company Law
5.2 Forms of Business Organisation
Governs officially recognised forms of business

organisation and their corresponding regulations. Covers
Company Law lists the following types of business
registration procedures and documentation, capital and
organisation:
shares, administration and shareholders, mergers and

liquidation.
Commercial Register Law

Regulates the organisation and functioning of the
Commercial Register, stipulates the obligation of business
Limited liability company (SRL);
Joint stock company (SA);
General partnership (SNC);
Limited partnership;
Limited partnership on shares;
Silent partnership;
20
Chapter 5 - Corporate and Business Law
Sole proprietorship;
Family association;
Branch of a foreign company.
Family association and sole proprietorship are types of

businesses generally not available to foreign investors. It is
also difficult for a foreigner to operate in a partnership in
Romania.
The forms of business most commonly used by foreign
investors are the limited liability company (SRL) with 1 to
Registration Certificate also includes in an appendix all

the necessary authorisations and approvals for carrying
out commercial activities. The company legally exists
and has the right to begin trading from the date of its
registration with the Commercial Register.
The branch registration procedure is technically quite
similar to the above, but in practice it is often more
cumbersome.
Capital and Shares
50 shareholders, the joint stock company (SA) with a
The minimum capital required for an SRL is ROL 2 million,
minimum of 5 shareholders, and the branch (of a foreign
about USD 65. Capital contributions can either be in cash
parent company). Banks and insurance companies cannot
or in kind, but cannot be entirely in kind.
be SRLs.
Capital is divided into shares (parti sociale) that cannot
Representative offices are often used as a market entry
have a value of less than ROL 100,000. Shares can be
technique allowing for an assessment of existing
freely transferred between existing shareholders. Transfer of
opportunities before committing financially to setting up a
the shares to third parties can only be done with the
company or establishing a joint venture - such as with a
approval of shareholders representing at least 75% of the
former state enterprise that is undergoing privatisation.
capital. The transfer of shares must be registered with the
All types of companies share the following characteristics:

They are considered as resident in Romania for tax and

currency regulation purposes (this does not apply to
representative offices);
They must comply with statutory requirements in
Romanian legislation for book and record keeping (see
Chapter 7 for further details);
Dividends/net profits are to be distributed according to
the approved annual accounts (in March/April of the
following year).
Registration Procedure
Company registration procedure was simplified and
amended in August 2001. The registration procedures for
limited liability companies and joint stock companies are
quite similar and consist of the following main steps:
Commercial Register and entered in the company's

Shareholders Register.
An SA company must have a minimum capital of ROL 25
million in cash or in kind. Some cash contributions,
however, are compulsory. At least 30% of the subscribed
capital must be paid up when founding the company. The
remainder must be paid within twelve months of the
foundation of the company.
Capital is divided into shares and the nominal value of a
share must be at least ROL 1,000. Shares can either be
nominative or bearer shares, as established in the company
constitutive documents. However, shares that are not fully
paid up can only be nominative shares.
In general, shares must have equal value and grant equal
rights to the shareholders. The Company Law, however, lists
the conditions under which preferential shares can be
The constitutive documents (company memorandum

and/or articles of association) must be prepared,
approved, and signed by the shareholders;
issued. Such shares give their holders the right to a
The subscribed capital must be paid upon registration

of the company. In the case of a joint stock company
(SA), each shareholder must pay at least 30% of its
subscribed capital. For an SRL, there is no deadline for
payment of capital contributions, although share capital
must be fully paid before the commencement of
commercial activities.
Directors (Administrators)
The company is registered with the Commercial

Register by issuance of a Registration Certificate. This
provides a Registration Code valid for both the
Commercial Register and the tax authorities. The
A joint stock company must have one or more directors.
preferential dividend, but they do not confer any voting

rights.
A limited liability company must have one or more

directors (administrators), each appointed by the
shareholders. Directors are responsible for the management
of the company.
The directors can be appointed and dismissed by the

General Meeting of Shareholders, which also establishes
21
Chapter 5 - Corporate and Business Law
their responsibilities. Administrators are responsible for the
Branches must have a General Manager appointed by the
management of the company.
Board of Directors of the parent company, who will
Unless stated otherwise in the company Statute, the

Chairman of the Board of Administrators and at least half of
the administrators must be Romanian citizens.
represent the branch in dealings with third parties in

Romania. The General Manager can be a foreign citizen.
Branches can only operate in the same field of activity as
their parent companies.
Administrators may appoint one or more executive

managers to carry out the day-to-day business of the
company.
Censors
5.4 Representative Offices

Representative Offices are often established as a first step. A
If a limited liability company has more than 15

shareholders, it has the obligation to appoint company
censors (see Chapter 7 for further details).
Joint stock companies must have three censors and three
substitutes. They are appointed by the General Meeting of
Shareholders for three-year terms. The majority of company
Representative Office cannot commit to any contractual

engagement in its own name but can perform the following
activities without being considered a permanent
establishment for profit tax purposes:
Using facilities for the purpose of storage, display, or

delivery of goods or merchandise belonging to the
enterprise;
Maintenance of a stock of goods or merchandise

belonging to the enterprise for the purpose of storage,
display or delivery;
Maintenance of a stock of goods or merchandise

belonging to the enterprise for the purpose of
processing by another enterprise;
Maintenance of a stock of goods or merchandise the

enterprise will display at a trade fair and sell afterwards;
Maintenance of a fixed place of business solely for the

purpose of purchasing goods or merchandise, or for
collecting information, for the enterprise;
Maintenance of a fixed place of business solely for the

purpose of advertising, providing information, carrying
out scientific research or similar activities of a
preparatory or secondary nature.
censors and substitutes must be Romanian citizens. At least

one must be a qualified accountant.
General Meeting of Shareholders

The General Meeting of Shareholders decides on all major
issues concerning the company, in accordance with
provisions in the company's constitutive documents and in
the Romanian Company Law. The General Meeting of
Shareholders decides on:
Change of the head office;
Changes in the object of activity;
Increases and decreases in capital;
Appointment of directors (administrators) and censors;
Approval of annual accounts;
Bond issues;
Mergers;
A special tax of between USD 1,600 and USD 19,800
Liquidation.
(based on an exchange rate of USD 1 to ROL 30,000) is

applied to Representative Offices (see Chapter 8 for more
details).
5.3 Branches
Branches must be registered using the same procedures for
SRLs and SAs. The foundation of a branch requires the
following documentation:
Notarised record of the existence of the parent

company (i.e. company memorandum and articles of
association, certificate of foundation, letter of reference
from bank).
Notarised decision of the Board of Directors to

establish a branch in Romania, listing the activities of
the branch and nominating a General Manager.
22
Chapter 6
Labour Relations
and Social Security
Salary costs are relatively low, although salary taxes

and social contributions are relatively high
protective measures for certain categories of workers, such
Employer social security, health and employment

contributions amount to maximum 40% of gross
payroll costs
All employees conclude a Labour Contract that is registered
It is not compulsory for expatriates to be employed

by a local company, though foreigners are required to
register and obtain a fiscal registration number
Some legal requirements applicable to the employer /
Representative offices and branches pay an additional

5% levy
There are reasonable living conditions for expatriates

and educational facilities for children of expatriates
as expectant mothers and young people.
with the relevant authorities. Companies can also hire

personnel based on a Civil (collaboration) Agreement.
employee relation (registration of contracts, withholding
taxation, and employer social security contribution) also
apply to cases of employment based on a Civil Agreement.
In 2000 new forms of Labour Contracts and Civil
Agreements were introduced that significantly restricted the
utilisation of Civil Agreements. In accordance with this new
law both collaborators and the companies hiring them have
to pay social security contributions if employees have not
6.1 Labour Relations

Availability of Labour
Unemployment was unknown prior to 1989, largely due to
overstaffing. After 1989 unemployment increased rapidly,
but since mid-1999 it has steadily declined from 11.3% to
8.1% in August 2001.
Skilled labour is mainly available in the industrial sector.
Certain skills, such as knowledge of Western accounting
and bookkeeping are less widespread, but the situation is
gradually improving.
Employer / Employee Relations
simultaneously concluded an employment agreement with

another employer.
Based on the same law, it is compulsory for freelance
employees to insure themselves with the public social
security system unless they are also party to an
employment agreement.
For staff employed under an employment agreement a
'labour book' (a record of activity, remuneration and
lengths of service for pension purposes) must be kept.
Either the states Department of Labour or the company is
responsible - depending on the number of employees that a
company has. For freelancers who have no employment
agreement for the period of work, labour books are
completed by the Department of Labour.
Employer / employee relations are regulated by the Labour

Code, which still needs adjustment in order to make it
more appropriate for use in a market economy. The Labour
Code regulates matters such as dismissal, working hours,
annual vacation and other holidays, and includes special
Unions
Trade unions are generally organised by branches of
industry. They have considerable negotiating power, and
23
Chapter 6 - Labour Relations and Social Security
have been particularly effective in obtaining minimum
Paid Holidays and Vacations
wage legislation as well as other basic rights for employees.

Annually they negotiate collective labour agreements at
In addition to statutory holidays, employees are entitled to
sector and company levels. Union membership is not
a minimum of 18 days annual paid vacation. The duration
compulsory, but historically membership has been fairly
of the annual paid vacation, as well as additional paid
high in state-owned and formerly state-owned companies.
leave (granted for special occasions such as marriage, the

birth of a child, or study, for example), must be specified in
Unions do not participate in the management of a
the individual or collective labour agreement. Most
company. However, there have been cases of business
companies grant 20 to 22 days of annual vacation in
decisions taken by the management of state-owned
addition to the seven days of statutory holiday (refer to
companies being disputed by unions. Objections tend to be
Chapter 1).
based on the negative social consequences of the

respective decisions.
Equal Opportunities
The Constitution guarantees equal rights for men and
women, as well as for members of ethnic and religious
6.2 Working Conditions

Wages
groups. It is of additional interest to employers that if

companies have more than 100 employees, at least 4% of
the company's positions must be filled by disabled persons.
Companies that refuse to hire disabled persons must pay an
Average wages in Romania are low compared to Western
additional monthly amount (about USD 45) for every
European countries and to other countries in Eastern
position that ought to be occupied by a disabled person.
Europe. The average gross wage was the equivalent of USD
Health and Safety
150 per month at the end of September 2001. Romanian

law guarantees a minimum gross wage. From time to time,
Health and safety regulations vary according to the
due to increases in the price of consumer goods, the
particular hazards of the industrial sector in question. In
Government raises the level of the minimum gross salary in
general, they are less stringent than those applied by other
ROL terms.
European countries.
Private sector salaries are increasing rapidly due to the
Termination of Employment
limited supply of skilled staff in certain professions.

Consequently the average gross salary shown in official
The Labour Code stipulates three circumstances in which
statistics is likely to be misleading to foreign investors
an employment contract can be terminated:
seeking skilled employees for a new business venture. An

average gross salary cost (including salary tax) is likely to
exceed USD 400 per month. Employer social contributions
of maximum 40% also apply to the gross salary (refer
below).
Upon expiry of the period stipulated in the employment

contract (if provided);
Upon agreement of both parties;
At the initiative of one of the parties.
Working Hours
If terminated at the initiative of one of the parties, the
The standard working week is 40 hours, generally Monday
written notice (30 days for employees in managerial
to Friday from 8:30am to 5:00pm with a 30-minute lunch
positions). Employees are not required by law to state their
break. Most industrial workers also have an eight-hour
reasons for leaving, but the employer can terminate an
working day but factories usually start the day earlier than
employee's contract only by complying with the conditions
commercial institutions.
specified in the Labour Code. If employment is terminated
Overtime can be remunerated by free time or extra pay.

Overtime is generally paid at the rate of 100% or 150% of
the hourly rate for up to a certain number of hours. Hours
Labour Code requires a minimum of fifteen working days
because of a legal reorganisation of the company, up to sixmonth redundancy pay should be given to the employee if
certain conditions are met.
in excess of this amount are paid at a higher rate (150% or

200%).
24
6.3 The Social Security System
Employers calculate, withhold, and pay employee
Social security legislation was overhauled in April 2001.
State budget contributions are payable on the same date as
The law introduced new definitions of public system,
are monthly salaries.
contributions to the state budget when paying the salary.
persons and risks covered in the public system,

contribution and accumulated periods, the personal social
security code, pensions, and monthly and annual average
rates of contribution.
6.4 Foreign Personnel
The law also stipulates the change of computation method
When foreign personnel are employed with a labour
for state social security contributions (the quotas being
contract by a Romanian entity, all the provisions in the
annually determined by the laws on the state's social
Romanian labour legislation as well as provisions on salary
security budget).
tax and employment-related contributions are applicable
In Romania all employers and employees must contribute
(with the exception of the unemployment fund
to the state social, health and employment security system.
contribution).
Coverage
When foreign staff of multinational companies in Romania
Social and health security covers pensions, child benefits,
employed on a labour contract by the Romanian branch of
illness and other social care services. Employment security
the multinational group, each foreign member of staff must
covers minimal unemployment benefits, and grants aimed
obtain a work permit from the local labour authorities. In
at generating employment.
order to obtain a work permit, a working visa should be
Contributions
Both employers and employees are required to contribute
to the social security system. The percentages paid by the
employer and the employee are based on gross salary and
are as follows:
Employee's contributions as a percentage of gross salary:
on long-term assignments (more than one year) are also
obtained from the Romanian diplomatic mission or from

the Romanian consular offices in the country where the
expatriate is domiciled. However, it is not compulsory to
be employed by a local entity. This does not significantly
change tax liability but could affect social security liability.
Foreign staff of multinational companies visiting Romania
for a short secondment (without being employed by the
local entity) should obtain a residence permit (legitimatie)
Social security contribution - 11.67% (this percentage

increases when the wage reaches three times the
average salary for the respective year. In 2001, the
average statistical salary is ROL 4,148,653);
Unemployment fund - 1%;
Health fund - 7%.
Employer's contributions:
and, possibly, a multiple entry visa (not required for EU or

US citizens).
Work and Residence Permits

A work permit is generally granted for a period of up to six
months (until 31 July or 31 December) and is renewable. A
residence permit is issued for a period of up to six months
and is renewable. Six-month multiple entry visas are
Social security fund - 23.33%, 28.33% or 33.33%

depending on working conditions;
generally issued with both these permits.
Health fund - 7%;
Fiscal Registration Numbers
Unemployment fund - 5%;
Social Solidarity Special fund - 3%;
services performed in Romania) need to register with the
Education fund - 2%;
tax authorities in the town or city (or sector in the case of
Department of Labour commission (for SAs and SRLs) 0.75% if the labour book is kept by the Department of
Labour, or 0.25% if the labour book is kept by the
company. Freelancers pay 0.75% commission.
Bucharest) where they have their temporary residence in
Foreign individuals who earn a wage in Romania (for
order to obtain a fiscal number. The application form needs

to be submitted within 15 days of crossing the Romanian
border.
Labour office commission (for Representative Offices

and Branches) - 5% on top of gross salary and social
security.
25
and car crime should be taken, Bucharest does not have a
Social Security Agreements
high crime rate and is safer than many other international

A number of social security agreements concluded
capitals.
between Romania and other countries provide for

exemptions from payments of social security contributions
The standard of housing varies widely, and many foreigners
for foreign individuals working in Romania. The following
pay high rents in convertible currency for accommodation
countries have concluded a social security, medical
that may be inferior, in terms of facilities, to their housing
assistance, or benefits agreement with Romania:
at home. Bucharest has a number of international schools

that cater for children between the ages of 3 and 18.
Country
Czech Republic
Slovakia
Bulgaria
France
Algeria
Peru
Morocco
Libya
Russia
Hungary
Albania
Yugoslavia
Year
signed
Type of agreement
1957
1957
1960
1976
1982
1983
1984
1986
1960
1961
1961
1976
social security
social security
social security
social security
social security
social security
social security
social security
medical assistance and benefits
medical assistance
Bucharest has numerous restaurants and cafes, including a

steadily increasing number of privately owned restaurants
serving international cuisine. Appendix IV includes a list of
contact numbers for hotels and restaurants in Bucharest.
There is a number of theatres, concert halls, libraries,
cinemas, bars, nightclubs and casinos.
In short, companies considering assigning expatriate staff to
Romania can do so without excessive anxiety, particularly
if they are to be based in Bucharest or other large towns
such as Timisoara, Brasov or Constanta. Nevertheless, if
staff and especially their families are to feel at home, some
preliminary research is useful to ensure that their needs are
met without difficulty.
Living Conditions
Bucharest offers reasonable living conditions for
expatriates. While normal precautions against petty theft
26
Chapter 7
Accounting and Audit

Requirements and
Registration
Gradual introduction of International Accounting

Standards (IAS) and EU accounting directives has
begun
Existing Romanian Accounting Regulations (RAR)
geared towards tax compliance, not information
provision
Significant differences exist between RAR and IAS
Audit requirements depend on accounting framework

adopted (IAS or RAR)
Moreover, in practice the system was rarely applied fully,

mainly for tax purposes.
In February 2001, the Ministry of Finance issued Ordinance
94 (OMF 94) for the approval of the 'Accounting
Regulations Harmonised with the Fourth Directive of the
European Union and International Accounting Standards'.
This ordinance requires application of IAS or, where
exceptions to IAS are permitted, requires an appropriate
qualification in the auditor's report (see Audit Requirements
below). OMF 94 will be applied to most companies by
2005. The exact date of implementation is determined by a
company reaching set thresholds in two out of three areas -
7.1 Accounting
namely, turnover, asset value, and number of employees.
Introduction of International Accounting

Standards
In the first year OMF 94 is applied, companies have to
Historically, accounting in Romania was directed towards
accounting regulations. From the second year of
providing information to two specific groups: the tax
application onwards, a company should in theory only
authorities (accounting profit is broadly similar to taxable
prepare financial statements in accordance with OMF 94.
profit) and the Government (the National Commission of

Statistics). This led to the preparation of financial statements
that failed to take into account the needs of other interested
parties such as shareholders, bankers, suppliers, customers,
prepare two sets of financial statements: one in accordance

with OMF 94 and one in accordance with the existing
Until required to produce financial statements under OMF

94, companies must adhere to the existing Romanian
Accounting Regulations (RAR).
employees, and potential investors.
Existing Romanian Accounting Regulations
In 1994 a new system of accounting, based on the French
Romanian Accounting Regulations are currently governed
system and incorporating a revised 'Chart of Accounts', was
by the Ministry of Finance. They take the form of:
introduced. Although it allowed the measurement of a

company's assets and liabilities in a manner broadly
Laws or Government Ordinances, detailing significant

new pieces of legislation;
Norms (or regulations), providing a detailed

explanation of how the Laws or Government
Ordinances should be implemented;
consistent with International Accounting Standards (IAS),

the system still failed to include certain essential
information, such as cash flow statements and other
disclosures, including notes, in financial statements.
27
Chapter 7 - Accounting and Audit Requirements and Registration
Orders of the Ministry of Finance providing additional

guidance on accounting and tax issues.
Annual instructions for closing the year's accounts are

sometimes issued. They contain details of additional
accounting entries to be recorded, which might
fifteen shareholders that are not subject to OMF 94 must be

audited by their appointed company 'censors'. Censors are
either individuals or companies appointed by the SA or SRL
at the time of their registration. Their main responsibilities
include:
significantly affect results. This may happen after year-end.
Significant Accounting Differences Between

RAR and IAS
Supervising the administration of the company and

ensuring that accounts and legal books are properly
kept;
Ensuring that decisions taken by the General Meeting of

Shareholders are properly implemented;
Ensuring that the company and its directors comply

strictly with the law;
Ensuring that the end-of-year financial statements are

prepared in accordance with the law.
Appendix VI contains a table indicating some of the major

differences between the practical application of RAR and
IAS. This should be kept in mind when reading Romanian
financial statements prepared under RAR.
The auditing rules for companies not subject to OMF 94,

and not either an SA or an SRL, are open to interpretation.
7.2 Chart of Accounts

Both OMF 94 and RAR require the use of a Chart of
Accounts. The chart is different for each, with the OMF
chart including additional accounts for items such as
inflation impact, correction of fundamental errors, and
additional reserve accounts.
The principle underlying the Chart of Accounts is that all
companies should record the same item in the same
account, irrespective of the nature of their business.
Accordingly the Chart of Accounts is a set of predefined
account numbers and names that must be used by all
companies. A brief summary of the Chart of Accounts for a
commercial company under both OMF 94 and RAR is
given in Appendix V. (Note that the Chart of Accounts for
banks and non-profit organisations is different.)
The local fiscal authority to which the annual financial

statements are submitted may require an audit to be
performed if the turnover of the company is in excess of
ROL 10 billion. Such audits are normally performed by
individuals or companies who are members of the
professional Romanian Accountants Body (CECCAR).
Auditing Standards for Legally Required

Audits
Audits performed by members of the Chamber of Auditors
have to be performed in accordance with the Auditing
Standards set by the Chamber of Auditors, which are
effectively the same as International Standards on Auditing.
A number of the international accounting firms (including
PricewaterhouseCoopers) have become members of the
Chamber.
Audits performed by censors do not have to be performed
under any particular framework.
7.3 Audit Requirements

Audits in Romania take place by legal requirement.
Legally Required Audits
Securities Commission Requirements

Companies subject to regulations on securities (all of which
must be SAs) are required to appoint independent external
auditors (individuals or audit firms) licenced by the
Companies Subject to OMF 94: Companies applying the
National Securities Commission (NSC) rather than ordinary
provisions of OMF 94 are required to submit to an audit by
censors. At least once a year, these companies must submit
a member of the Romanian Chamber of Auditors. This body
an auditor's report to the NSC. Independent external
was created under Emergency Government Ordinance
auditors should be registered with the Chamber of Auditors.
75/1999, and is designed to be in accordance with the

EU's 8th Directive. The Chamber of Auditors was created as
part of a UK Government-funded project to improve
accounting and auditing practice.
Accounting and Law Firms

Details of major accounting and legal firms are provided in
Appendix VII.
Companies Subject to RAR: Joint Stock Companies (SAs)

and Limited Liability Companies (SRLs) with more than
28
Chapter 8
Taxation of Corporations
Corporate tax rate of 25%, reduced rate of 5% for

export earners
Dividend tax of 10%, 5% for individuals
Taxable profits on exports taxed extra 1%
Reinvested profits subject to 50% reduction in profit

tax
Quarterly reporting and payment (monthly for banks)
Fiscal year is calendar year for all entities
Romania Fund
For companies with exports, a tax of 1% is applicable to
that share of taxable profit derived from exports.
Tax on Capital Increase

A 5% tax applies to any increase of share capital from
reserves or profits, except for legal reserves and favourable
differences from revaluation of patrimony.
Depreciation and Amortisation

There is no distinction between depreciation for tax
8.1 Corporate Tax System
purposes and depreciation for accounting purposes in the

case of tangible and intangible assets. The method of
Companies
All legal entities doing business in Romania are liable for
corporate income tax (profit tax). The standard profit tax
rate is 25%, applicable to both Romanian companies and
to foreign companies operating through a permanent
establishment in Romania. Profits derived from export
activities are subject to a 5% profit tax rate provided that
the cash is received in a Romanian bank account (the
calculation used is generally that of useful lifespan, as

determined by the authorities, although reducing balance
or accelerated methods may also apply (see Investment
Incentives). There is an exhaustive list of items and rules,
which is occasionally updated. The actual allowable rates
are generally lower than in Western Europe or the United
States.
Territoriality
difference cannot be distributed as dividends).

A company is considered resident if it has its domicile or
An additional profit tax rate of 25% applies to nightclubs
administration in Romania. The national territory of
and gambling operations.
Romania includes the portion of the continental shelf
From 1 September 2001, micro-companies (turnover up to

EUR 100,000 and maximum 9 employees) are taxed at
1.5% of revenue earned.
beyond the territorial waters of Romania over which

Romania, under domestic law and in compliance with
international law, exercises rights related to the exploration
and exploitation of the seabed and of natural resources
Dividends
therein.
A withholding tax of 10% applies to dividends paid by all
Income earned by non-resident Romanians and resident
Romanian companies. Individuals pay 5% withholding tax.
foreign citizens from sources outside Romania is non-
29
Chapter 8 - Taxation of Corporations
taxable. However, salary income paid outside Romania for
Other Incentives
work performed in Romania is considered to have a

Romanian source and is taxable.
Besides incentives for direct investments, other incentives

are available, such as those for investments in small and
Romanian law also allows for the establishment of a
representative office.
A representative office can only undertake secondary or
preparatory activities. A representative office cannot trade
in its own name and cannot engage in any contractual
medium-sized enterprises and in disadvantaged zones, as

well as incentives related to trade in oil and gas. The
incentives available for investing in free-trade zones were
presented in Chapter 2.
If an investment qualifies for incentives under several laws,
only one will be applied - to be selected by the investor.
activity.
Small and Medium-Sized Enterprises (SMEs)
There are minimum levels of annual taxable revenue for
From the end of 2000, the Romanian Government has
representative offices based on the number of staff
sought to stimulate and encourage Small and Medium-
employed. Most representative offices pay tax on this basis.
Sized Enterprises. A number of tax incentives are available,
Some categories of employees are not included in this
as follows:
calculation of the number of staff.

Customs duties and VAT exemption for industrial

equipment (except for cars), installations and knowhow, granted on the basis of prior approval from the
Ministry of Industry and a company declaration that
these imports will be used for the company's own
production, activities and services. The authorities have
issued a list of the items that qualify for this exemption;
Customs duties and VAT exemption for certain raw

materials;
Profit reinvested in tangible and intangible assets

(including leased assets) is tax exempt. The assets to
which this facility applies at should be kept by the
company for a period of at least half their legally
defined useful lifespan;
A 20% profit tax reduction if staff numbers are 10%

higher than the previous fiscal year.
8.2 Incentives
Direct Investment
A law regarding direct investments passed in July 2001
allows for specific incentives for cash investments of a
minimum of USD 1 million or equivalent. These include:
Customs duties exemption for specific

tangible/intangible goods imported as part of the
investment. (See Appendix X);
VAT suspension for the acquisition of specific

tangible/intangible goods;
A deduction for profit tax purposes of 20% of the value

of the investment, applied in the month when the
investment is completed;
Utilisation of accelerated depreciation for the new

investment (50% depreciation in the first year).
social deprivation (primarily high unemployment and poor
In order to benefit from these incentives, the investment
develop activities in these areas benefit from the following
should be registered with the Ministry of Development and
incentives:
Planning - a recently established Government unit.

Investments undertaken within 30 months of registration
Disfavoured Zones
Disfavoured zones are those that meet certain conditions of
infrastructure). Companies that have their headquarters and
Customs duty and VAT exemption for equipment and

raw materials imported into the disfavoured zone for
investment/production purposes;
VAT exemption for equipment and raw materials

purchased from the domestic market for
investment/production purposes in the disfavoured
zone;
Profit tax exemption for the validity period of the

disfavoured zone status, which is usually 10 years.
may benefit from incentives.
50% Reduction in Profit Tax Liability

From January 2001, those companies reinvesting profit into
fixed assets used in that company's normal activity are
liable to a reduction of 50% in profit tax. The tax difference
cannot be distributed as dividends but should be utilised
for financing business activities.
30
Oil and Gas Incentives
Exchange Gains and Losses
According to the Petroleum Law, there are specific
Exchange gains and losses (except those on 'capital
incentives granted to companies operating in the field of
account') are taxable income or allowable expenses for the
crude oil and gas exploration and extraction, as follows:
period in which they arise. An assessable/deductible

provision can be included in the accounts to provide for
Customs duty exemption for import of equipment by

the concession titleholders or their subcontractors;
the difference between unrealised exchange gains and
Customs duty exemption for imported household and

personal goods required by the expatriate personnel of
the titleholders/foreign subcontractors;
and can represent a significant tax deduction.
The right to offset exploration expenditure against

income obtained from extraction for 5 years thereafter.
hard currency funds are non-taxable/non-deductible
losses on a quarterly basis. This difference is usually a loss
Gains/losses from exchange differences corresponding to

expenses.
Additionally, titleholders of oil companies that drill offshore

at sea depths exceeding 100 metres benefit from oil and
gas tax exemption, as well as from various VAT incentives.
8.4 Deductions
Companies may deduct all expenses incurred in
connection with revenues, except the following:
8.3 Gross Income
Profit tax as well as tax on revenues obtained in foreign

countries;
Fines and penalties due to Romanian or foreign

authorities;
Fines and penalties due to foreign legal entities;
Amounts used for setting up or increasing reserves,

except for:
Accounting Period
All entities doing business in Romania are required to keep
their accounts by calendar year. The fiscal year is
considered to be the calendar year.
Business Profits
setting up or increasing the reserve fund to a limit

of 5% of the yearly accounting profit (until it
reaches 20% of the share capital);
reserves created by banks, within the limit of 2%

of the balance of the credits granted;
the reserve fund and other credit reserves set up

according to the Banking Law and pertinent
legislation;
technical reserves, set up by insurance and

reinsurance companies, in accordance with the
Insurance Law 32/2000;
The tax liability of an enterprise is calculated according to

its gross income from all sources less deductible expenses.
The basis for the calculation of the taxable profit is the
annual accounts.
Capital Gains
Capital gains are taxed in the year in which they arise.
There is no separate legislation on capital gains tax and
therefore such gains are included in, and taxed as, ordinary
income. Capital losses are not, generally, tax deductible.
Expenses incurred for services (including management

and consultancy), if not supported by a written
contract. Also, payments made abroad for services are
non-deductible if the Romanian taxpayer makes a loss
at the end of the fiscal year;
Sponsorship expenses which exceed the limit of 5% of

taxable income;
Protocol expenses above 2% of net profit;
'Excessive' per-diem expenses;
Management expenses and administrative expenses

incurred by a permanent establishment of a foreign
individual or company, exceeding 10% of the
permanent establishment's taxable salaries;
Interest, Royalties, and Service Fees

Interest, royalties, and service fees are included in a
company's business profits for accounting purposes and are
subject to corporate profit tax at the normal rate.
Dividends
Dividends received by one Romanian company from
another company, either foreign or Romanian, are not
subject to profit tax.
31
Withholding tax paid on behalf of non-residents;
8.5 Tax Computations
Interest expenses related to loans granted by legal

entities other than banks or authorised entities over the
average bank interest rate;
Tax statements have to be prepared on a quarterly basis (by
Insurance expenses, except for insurance against work

related accidents or insurance related to assets owned
by the taxpayer;
31 March, 30 June, 30 September, and 31 December) and

submitted, along with the appropriate tax payment, by the
25th of the following month. However, banks are obliged
to pay tax and submit tax statements on a monthly basis.
Expenses incurred on the loss or wastage of perishable

goods, and loss on disposal of fixed assets;
Any other expenses for the benefit or to the advantage

of shareholders or associates;
There is no system of group taxation in Romania. Members
Most provisions, including provisions for obsolete stock

and dubious debts (although exchange loss provisions
are deductible - see above.)
provisions to offset the losses of group members against the
Interest Expense
Consolidation
of a group must file separate returns. There are no
profits of other group members. The absence of any
provisions for group taxation and the 10% dividend tax
means that the establishment of a holding company in
Romania is unlikely to be advantageous.
Interest payments at the level of the average banking

interest rate are fully deductible. In the past, limits were
placed on interest deductions. There are currently no
specific thin capitalisation rules.
8.6 Other taxes
Transfer Pricing
Withholding Tax
The definition of transfer pricing was expanded in January
According to Government Ordinance no. 83/1998, non-
2000. Specific methods were provided for establishing the
resident companies and individuals are subject to the
market value of transactions between related parties, such
following withholding taxes if there are no overriding
as 'prices comparison' method, 'cost-plus' method, and
provisions in international treaties:
'resale minus' method. Expenses that are considered in

excess of market value are considered non-deductible.
Bad Debts
The tax deductibility of bad debts is severely limited. In
10% withholding tax on interest (interest on bank

deposits paid by Romanian banks is exempted);
15% withholding tax on commissions;
15% on revenues obtained from technical assistance

and most other services if they are performed in
Romania;
15% on revenues achieved from international transport

activities;
15% withholding tax on royalties;
20% on entertainment and sport activities, on amounts

paid to writers, artists and scientists;
10% on international contest awards and on revenues

obtained as a result of gambling by non-resident
individuals;
effect the debtor has to be declared bankrupt by the courts.
Travel Expenses
Travel expenses (including transport and accommodation)
for business trips within and outside Romania are
deductible if supported by justified documents. The per
diem allowance for internal travel is deductible by a
multiple of 2.5 times the limit set for government officials.
Losses
A fiscal loss cannot be carried forward in the case of a
The Double Taxation Agreements signed by Romania may
merger or split.
reduce the withholding tax rate on the payments listed

above. The reduced rates vary according to the country to
Companies making a tax loss for three consecutive years

are now automatically subject to a tax control inspection.
Losses can be carried forward for a five year period.
which the payments are made, and according to the

Double Taxation Agreement applicable (refer to Appendix
VIII b).
Tax authorities are generally very aggressive when applying
withholding regulations.
32
Property Tax
Advertising Tax
A local tax from 0.5% to 1% is levied annually on the
According to current legislation, advertising tax is due by
recorded cost of buildings. There is also a local tax on land.
the beneficiary of advertising services and the provider of
Health Tax
the advertising service should make the payment.

Advertising tax ranges from 1% to 3% of the value of the
Health tax is paid by providers of advertising services for
advertising contract and its quantum is established by the
products like tobacco and alcohol. The tax is 12% of the
local councils in whose area the advertising services are
value of cashed advertising revenues (i.e. 12% is applicable
performed.
on the gross amount of the cash received, health tax

included).
33
Chapter 9
Taxation of Individuals
lodge monthly declarations with the Romanian tax
Global Income Tax in effect since January 2000
A 40% tax rate with a low tax base (approximatively

USD 265 per month)
Individuals classed as resident for tax purposes if

domiciled in Romania or present in Romania for more
than 183 days a year
By means of a statement, the local company that is the
No capital gains tax except for gains from transfer of

shares and social parts
assignment. The monthly tax declaration needs to be
No wealth tax or inheritance taxes
in which the salary was paid.
Dividends subject to a 5% withholding tax
Interest on term deposits subject to a 1% withholding

tax
Tax exemption for software engineers
Important amendments to individual taxation are due

to be made in 2002
authorities. Alternatively, they may appoint a fiscal

representative to lodge declarations on their behalf.
beneficiary of their services is obliged to inform the

authorities of the starting and ending date of the
lodged before the fifteenth of the month following the one
Husbands and wives are treated as separate taxpayers and

the concept of 'income splitting' does not exist in the
Romanian legal system.
Territoriality and Residence

The Ordinance defines taxpayers as:
9.1 Income Tax
Romanian individuals with Romanian domicile, for

income earned in Romania and abroad;
Romanian individuals without Romanian domicile, for

income earned from a fixed base in Romania or during
a period of presence in Romania of more than 183 days
in any twelve month interval;
Foreign individuals, for income earned from a

Romanian source, from a fixed base in Romania or
during a period of presence in Romania exceeding 183
days in any twelve-month interval.
The following sources of income are subject to individual

taxation: income from independent activities, salaries, the
transfer of usage rights over goods and other rights,
dividends and interest. Capital gains are still not taxable
except capital gains on the sale of shares or social parts.
The maximum marginal tax rate for salary income, income
from independent activities, and the transfer of usage rights
over goods and other rights is 40% for income higher than
ROL 95.4 million per annum (approximately USD 3,180).
Foreigners with foreign employment agreements are
required to calculate and pay monthly salary tax and to
34
Chapter 9 - Taxation of Individuals
9.2 Gross Income
payments during the fiscal year, with a final payment on 15

December of the fiscal year.
Employee's Gross Income
Net income derived from the exercise of intellectual
An employee's gross income is considered the salary and
property rights is computed by applying a 25% to 40% rate
related remuneration in cash and in kind, received from a
on gross revenue from such sources. The payers of
Romanian source irrespective of the period to which it
intellectual property rights must compute, withhold, and
relates. Benefits in kind include discounts, personal usage
pay a quota of 15% as advance tax payable by the 10th of
of cars and accommodation, and the difference between
the month following the month in which the income was
preferential interest rates and market interest rates.
earned. A 10% withholding tax also applies to commission

agreements, agency agreements or commercial mandates
Income is considered to derive from a Romanian source if
from January 2002.
the place of origin of the income of the individual or the

place where the income is earned is situated on Romanian
territory, irrespective of whether this income is paid inside
or outside Romania.
The allowances and the equivalent in ROL of the benefits
in kind are taxable only if they are deductible expenses for
profit tax purposes and relate to the activity of the entity
that granted them.
Non-residents
Non-resident individuals are also subject to the following
withholding taxes on payments made abroad, unless a
relevant bilateral tax treaty states otherwise:
10% on interest;
15% on commercial transaction commissions;
15% on revenues resulting from technical assistance,

expertise, training, and other services effectively
rendered in Romania;
15% on royalties obtained through concession of

patents, licences, trademarks and other intellectual
rights.
Income from Independent Activities

Income from independent activities includes commercial
income, income from freelance activities, and income
derived from intellectual property rights exercised
individually and/or in association.
Income in cash and in kind is assessed on the basis of
Income Earned by Non-taxpayers
entries in the single entry books that providers of
Income earned by non-resident Romanians and resident
independent activities are obliged to keep. Net income is
foreign citizens from sources outside Romania is non-
computed as gross income minus the relevant deductible
taxable. However, salary income paid outside Romania for
expenses.
work performed in Romania is considered to have a
Net income for specific independent activities will be
Romanian source and is taxable.
computed on the basis of regulations that are published by

the Ministry of Finance every fiscal year, before 31 January
of the fiscal year.
9.3 Tax-exempt Income
For independent taxpayers, the following expenses are not

tax deductible: fines, late payment penalties (other than
contractual penalties), donations, sponsorship, and protocol
The most important categories of tax-exempt income are:

Income from the sale of movable and immovable assets

(with the exception of shares described as 'capital
gains');
Salary income related to the design and creation of

software (certain criteria needs to be observed);
Taxpayers earning income from independent activities as
Interest on state treasury bonds;
well as from the transfer of usage rights over goods, have
Reimbursement of an employee's costs for relocation if

the transfer is in the company's interest;
expenses in excess of upper limits set by law, per diem in

excess of upper limits set by government decision for
secondments in Romania or abroad, and other expenses
exceeding limits provided by current law.
the obligation to make four equal quarterly provisional tax
35
Chapter - Taxation of Individuals
Limited daily allowances for business trips;
returns, but are required to submit monthly declarations
Payments made in lieu of termination period (specific

rules apply);
(see below).
Pensions that do not exceed ROL 2,749,000 per month;
Insurance premiums received in compensation for

damage;
source is not obliged to submit a tax return.
Scholarships;
Individuals whose income derives from an employment
Income received by foreign individuals providing

consultancy services on specific projects funded by
international financial bodies.
contract or a commission contract, will have tax withheld
Tax returns for the year 2001 have to be filed before 31

March 2002. A taxpayer obtaining income from only one
from amounts due to them. For employees under an

employment contract the standard procedure is to withhold
the full amount of tax due (at marginal rates) from the
employee's monthly income.
9.4 Deductions
Business Expenses
A Romanian employee is entitled to a monthly deduction
of professional expenses amounting to 15% of the basic
personal deduction of ROL 1,273,000 per month.
Salary tax needs to be paid before the 25th of the month

following the one for which the salary has been paid.
Romanian employees can deduct their payments to the
Social Security, Unemployment, and Health funds.
Employees will also be able to deduct between ROL
1,273,000 and 2,749,000 per month as a personal
deduction (refer above). A further 15% of the basic
personal deduction (ROL 1,273,000) may also be deducted
Personal Allowance
for job related expenses.
Taxpayers are entitled to a standard monthly deduction
For an employee paid in hard currency (such as staff
from ROL 1,273,000 to ROL 3,182,500 (approximately
working for a Representative Office), the calculation of due
USD 40 to USD 100) per month representing 'personal
tax is made by translating the monthly gross income into
basic and supplementary deduction' depending on
ROL at the official exchange rate at the date of payment.
personal circumstances.
The taxes are calculated and paid on this basis. Net

payment is then received as the calculated difference in
The average Romanian family (husband, wife and two
hard currency, at the above stated exchange rate.
children) is granted a deduction of ROL 2.9 million lei

(almost $100) per month.
Taxpayers who earn income from abroad are obliged to

compute and pay the individual income tax either
The Ordinance decrees that only individuals domiciled in

Romania who earn incomes from Romania and from
abroad are entitled to personal deductions and to
supplementary deductions. Therefore foreign individuals
who perform services in Romania are not entitled to
personal deductions, and neither are Romanian individuals
who are not domiciled in Romania.
personally or through an appointed fiscal representative.

Non-residents providing services in Romania, Romanians
not domiciled in Romania, and Romanian staff of
embassies in Romania should appoint a fiscal
representative for the period in which they are not
physically present in Romania. The fiscal representative has
to be a Romanian resident, empowered to fulfil the fiscal
duties of the aforementioned individuals while they are out
of the country. The tax has to be paid before the fifteenth of
9.5 Tax Administration

Returns, Calculation, and Payment of Tax
the month following the one for which the salary has been
paid.
The tax authorities are obliged to calculate the year-end
Romanian global income tax due. After issuance of the tax
Foreign individuals performing services in Romania and
assessment, amounts representing differences in the tax due
Romanians not domiciled in Romania do not submit tax
of up to ROL 1,000,000 need to be paid within 30 days

and amounts over ROL 1,000,000 can be paid in two
36
equal monthly instalments within 60 days. Starting from the
The tax computed, withheld, and paid by the intermediary
year 2002, these amounts are due within 60 days; no
is the final tax.
penalties arise during this interval.
Dividends and Interest
If certain conditions are met, a fiscal credit is available if

the income is also taxed abroad. The fiscal credit cannot
Dividends distributed by a legal entity in cash or in kind
exceed the individual income tax that would be due if the
and monies received from investments in closed investment
income were taxed in Romania.
funds are taxed at 5%. It is the obligation of the legal entity

to compute, withhold, and pay the tax on dividends before
31 December of the year the payment was made.
If the dividends are distributed by a foreign company and
9.6 Tax Registration
withholding dividend tax is paid at source, any difference

up to 5% should be payable in Romania. Currently, this is
Tax Registration Forms / Fiscal

Representative
applicable to Romanian citizens domiciled in Romania. No

taxes or dividends are due in Romania by expatriates
receiving dividends from abroad.
Fiscal registration forms need to be submitted by the

following individuals:
Interest and amounts received from open investment funds

are taxed at 1%. It is the obligation of the payer of the
Romanian individuals without domicile in Romania

and foreign individuals who obtain income from
activities carried out in Romania (including salary
income from local employment contracts) within fifteen
days of crossing the Romanian border;
income to compute, withhold, and pay the tax. The tax
Individuals who carry out commissions, mandates,

representations, royalties, or other similar contracts.
The tax withheld on both interest and dividends is
Designated fiscal representatives can also register the
should be paid before the 25th of the month following the

one in which the interest was computed. Amounts received
from life insurance will be tax-free from January 2002.
considered as the final tax.
Other Income
forms. In such cases, the fiscal representatives must register

themselves within fifteen days of appointment. For the
The net income derived from the right of usage of goods
appointment of a fiscal representative, a notarised contract
and rights is taxed at a rate of 40%. A fixed amount of 30%
or power of attorney needs to be in place.
can be deducted as deductible expenses. The tax on this

type of income is considered as the final tax as well. The
average tax rate on, for example, rental income will
therefore amount to 28%.
9.7 Other Taxes

Capital Gains
At the present moment, there is no general capital gains tax
in Romania.
Other income not included in any above category is

subject to a 10% tax. Such income includes gambling wins
and prizes in cash and in kind. The 10% tax is applied to
the difference between the earned revenue and the amount
representing the exempted revenue as provided by the
Ordinance. The exemption amounts to ROL 4,770,000 for
However, there is a 1% capital gains tax on the sale of
each source of revenue earned by the payer of income in a
shares. For transactions carried out through intermediaries,
single day.
the 1% is applied on the difference between the value of

the transaction minus the commission of the intermediary.
37
Local Taxes on Income
Social Security Contributions
There are no local taxes on income.
Social security aspects are mentioned in Chapter 6. An
Wealth Tax
example tax calculation for an employee forms Appendix

IX.
There is no wealth tax in Romania.
Gift and Inheritance Tax

There is no gift or inheritance tax in Romania.
38
Chapter 10
Indirect Taxation
Value Added Tax

There are two rates of VAT: 19% and 0%. The 0% rate
is applied to the supply of goods and services
directly linked to export of goods, and international
passenger transport (but restrictions apply)
The supplier's head office, with certain exceptions, is

considered to be the place of origin of services
supplied but only for those services that are supplied
abroad or from abroad
Only Romanian VAT registered entities are entitled to

reclaim VAT. To recover VAT, the offshore entities
should appoint a fiscal representative for VAT-able
activities performed in Romania
Customs and International Trade

Romania is an associate member of the EU and EFTA

and has signed Free Trade Agreements with Turkey,
Moldova, and CEFTA member countries. Preferential
rates apply to a wide range of products originating in
these countries when imported into Romania
A wide range of products can be imported without an

import/export licence. Nonetheless, import licences
are required for commodities such as oil, certain
chemical products, and weapons
10.1 Value Added Tax (VAT)
the international transport of passengers. The 0% rate is
The Scope of VAT
Romanian bank accounts and upon the existence of certain
conditioned upon the effective cashing of hard currency in

documentation.
VAT-able operations are: delivery of movable goods and the

transfer of ownership of fixed assets situated on Romanian
territory, the import of goods, the provision of services, and
assimilated operations. The rules for establishing the place
of origin for services (and therefore the place of VAT
taxation) are similar to those stipulated in the EU's 6th VAT
Directive. If the provider of the service is not a Romanian
entity, then it will be taxed in Romania only if it falls within
a defined list of services.
Rates of VAT
The rates applied are 19% and 0%. The 0% rate is applied
VAT Exemption
VAT exemption applies to a range of activities carried out
by licenced companies and institutions, including banking,
finance and insurance companies, medical, veterinary, and
social assistance organisations, educational organisations,
production and broadcasting companies, and specific
operations carried out in the Free Trade Zones.
Entities that are exempt from VAT can also choose to apply
VAT to all their VAT-able activities subject to strict
conditions and approval from the Ministry of Finance.
to the supply of certain goods and services for export and
39
Chapter 10 - Indirect Taxation
Where both taxable and exempt operations are carried out,
within the limit of the output VAT. The difference is not
'input VAT' is recoverable based on pro rate.
deductible.
Import VAT
VAT Administration
VAT on imported goods is due at the date of submitting the
VAT-able suppliers must keep complete and detailed
import customs declaration after entrance into Romania. In
records for the computation of VAT liability. VAT returns
certain circumstances, VAT payment for imported goods
should be drawn up monthly, at the time the payment of
can be suspended for a period of 60 days (for raw
the VAT is due, and submitted by the 25th of the following
materials) or 120 days (for equipment), subject to prior
month.
authorisation by the Ministry of Finance. This procedure

applies to installations, equipment imported for investment
or for developing existing capacities, and to some raw
materials that are not produced in the country or for which
a shortage exists.
If a company is in a VAT reimbursable position, it is entitled

to request a refund according to specific provisions,
depending on its activities. Alternatively, the balance can
be carried forward against VAT liabilities arising in future
returns. In practice, if a refund request is submitted it can
The taxable amount for imported goods is the customs
often take some months for the money to be repaid. The
value, to which are added customs duty, commission, and
VAT refund is paid only after an audit is carried out by the
excise tax (if applicable) due.
tax authorities on all state liabilities.
Services provided by offshore entities to Romanian
VAT Postponement
companies that are VAT-able where the beneficiary has its

head office (for example consulting, technical assistance, or
Under the Direct Investment Law (Chapter 8), the purchase
engineering services), are subject to Romanian VAT under a
of equipment, installation, devices and or software whose
reverse charge mechanism. The VAT reverse charge should
value is a minimum of USD 1 million benefits from the
be applied by the Romanian beneficiary within seven days
suspension of VAT payment throughout the investment. In
of the date of receiving the external invoice or at the time
order to benefit from this incentive specific conditions
the foreign supplier is paid (for payments made without
should be met, and the investment must be registered at the
invoice). This includes interest paid to non-financial
Prognosis and Development Ministry.
institutions.
Fiscal Representation
For services provided by offshore entities to Romanian
beneficiaries that are VAT-able in Romania according to the
Romanian territoriality rules (excepting the services which
10.2Customs and International Trade

Customs Duties
are VAT-able where the beneficiary has its head office), the
The Romanian Customs Import Tariff is based on a
non-resident is obliged to register for VAT purposes or to
harmonised system for the denomination and classification
appoint a fiscal representative in Romania. Under such
of goods, and is in line with the Combined Nomenclature
circumstances, output VAT charged on the goods and
adopted by EU countries, which use an eight-digit code.
services supplied in Romania is accounted for through a

return submitted by the fiscal representative. The foreign
Customs duty is expressed as a percentage of customs
business can recover the input VAT charged by the local
value - ad valorem.
suppliers through the monthly VAT returns.
Except for agricultural and food products, which have a
Non-Deductible Input VAT
specific tariff regime, the rates of customs duty vary from
VAT related to goods and services that are not purchased
characteristics of the goods. Examples of rates are given in
for the purpose of business is not deductible. Furthermore,
Appendix X.
0% to 30% depending on the technical type and
for goods sold at a price below the purchase/import price,

the VAT originally deducted will be recalculated to fall
Preferential customs duty rates apply for goods originating

in EU, EFTA, and CEFTA countries, as well as in countries
40
with which Romania has signed bilateral free trade
Customs Duties Incentives
agreements (Turkey, Moldova and Israel). The trend is

towards elimination of customs duties for goods originating
Foreign Investment Incentives: The customs incentives
in these trade blocs.
granted under Law no. 35/1991 and Ordinance no.

31/1997 are still applicable, providing that certain
Also, preferential customs duty rates apply for certain
conditions are met.
goods originating in developing countries that are members

of P16 and GSTP.
Import of goods purchased out of cash capital contributed

to share capital under the Foreign Investor Law 35/1991
Temporary Import Relief

Inward Processing Regime (IPR): If the goods are imported
into Romania for processing and subsequent re-export,
customs duty relief is available through IPR. Processing
before 19 June 1997 may be exempted from customs

duties. Also, raw materials imported for use in the
company's own production benefit from customs duty
exemption upon import for a two-year period.
covers the full assembling and manufacturing process.
Equipment and installations brought by Romanian
Under this regime importers can opt either for a duty
companies as contribution in kind or acquired through a
suspension or for a duty draw-back system.
credit line opened and guaranteed by a foreign investor
Outward Processing Regime (OPR): The OPR customs

regime allows for the export of raw materials to be
processed for subsequent re-import with partial or full
customs duty relief. The extent of duty relief depends on
may be exempt from customs duties if the Ordinance no.

31/1997 provisions are met. Raw materials imported for
production purposes may also be imported with a 50%
reduction of customs duty for a two-year period.
the value and percentage of exported goods that are
Direct Investment Incentives: As mentioned in Chapter 8,
included in the output.
the law regarding direct investments of at least USD 1
Bonded Warehouse Regime (BW): The BW is a customs

regime allowing for temporary suspension of payment of
import duties on goods stored in warehouses (the
ownership of the goods should remain with the foreign
million are subject to an array of incentives. These include

customs duty exemption for specific tangible and intangible
goods imported as part of the investment. Approved goods
are listed in Appendix XI.
entity), until the date the products are sold. If sold to
SMEs Incentives: According to the SME Law, a company
Romanian customers, the Romanian customers will
that qualifies as an SME (certain conditions are listed) could
become importers responsible for customs import
benefit from various incentives as stated in Chapter 8.
formalities and liable for the related import duties. If sold to

customers elsewhere, no import duties are due in Romania.
Leasing Regulations
Generally, a guarantee is requested by the customs
Current assets imported by Romanian lessees based on
authority in order to assure the effective payment of import
financial and operational leasing contracts with foreign
customs duties. But this is not compulsory.
leasing companies are part of a Temporary Admission

customs regime with total customs duties (excise taxes
Temporary Admission Regime (TA): Goods that are
included) relief, and, consequently, they benefit from
introduced into Romania in order to be temporarily used
customs duty exemption (i.e. full exoneration from payment
and later returned to the foreign owner are granted total or
and guarantee of customs duty and VAT).
partial relief from customs import duties. Total relief means

no payment or guarantees are requested by customs. Partial
Romanian leasing companies benefit from import duty
relief means a monthly portion of 3% of the customs duty
exemption on import of current assets based on lease
will be levied by customs and the importer should provide
contracts concluded with Romanian beneficiaries.
a guarantee to cover the difference (i.e. the difference

between customs duty and VAT).
Import customs duty becomes payable at the end of the

leasing agreement, computed according to residual value.
The leasing law provides, for customs purposes, for a
minimal residual value of 20% of the acquisition value of
41
the goods. The duration of the leasing contract should be at
Exports: Romanian and foreign individuals are also allowed
least one year and cannot exceed seven years.
to take items specifically mentioned above out of the
Parts and components imported by leasing companies and

destined to be used for manufacturing products that are
subsequently the subject of domestic lease agreements,
benefit from import customs duty exemption upon
importation.
Checking the Declared Customs Value
country without payment of customs duties. Additionally,

they are allowed to export under the same conditions (i.e.
without payment of customs duties), goods of any kind not
exceeding EUR 1200 in value and a single product the
value of which exceeds EUR 1200. For quantities
exceeding those above, customs duties become payable
and a general 20% customs duty rate is applicable.
Customs authorities check the declared customs value of

certain imported commodities using comparative values.
Import Restrictions
In an attempt to liberalise import-export transactions,
Romania does not generally impose values or quantitative
quotas on imports and exports from or to other countries
(except for certain agricultural and food products).
Therefore, a wide range of products can be
imported/exported without a licence.
However, import/export licences from the Ministry of
Commerce are required for commodities such as chemical
products, explosive materials, and the waste products of
certain transactions (including outward processing,
compensation activities with the Republic of Moldova, and
related transactions).
10.3 Other Indirect Taxes

Excise Tax
Excise tax is applied on imports and production of
excisable goods (alcohol, cigarettes, coffee, motor vehicles,
fuel, cosmetics, and perfumes) and on some electrical
domestic appliances such as microwave ovens, video
cameras, and air conditioning units. The current rates of
excise tax for a range of goods are listed in Appendix XII.
Companies or individuals bringing alcoholic drinks and
tobacco products destined for their own consumption into
the country, in quantities that do not exceed the limits
exempted from customs duty, are not subject to excise tax
payment. Excise tax is payable for cars brought into
Customs Regime for Individuals
Romania by individuals on a permanent basis.
Foreign individuals travelling on business to Romania are
A special system of fiscal surveillance is in force for alcohol
allowed to bring personal belongings and other necessary
production, importation of alcohol and alcoholic drinks in
goods temporarily into the country, as accompanied or
bulk, and beer and natural alcoholic drink production.
non-accompanied luggage. This has to take place within

three months of acquiring their temporary residence status.
There are specific licencing requirements for companies

obtaining income from sales of alcohol, tobacco products,
Imports: Romanian or foreign individuals are allowed to
and coffee. Also, producers, importers, and wholesalers of
bring into the country the following items without payment
the above mentioned products have to use standardised
of customs duties: pharmaceuticals, personal jewellery,
fiscal invoices and transport documents.
books, publications, records for personal use, two litres of

alcoholic drinks, 200 cigarettes, 50 cigars, and any other
Clearance Fees
goods with a value of less than EUR 100, besides personal
A customs commission of 0.5% is applied to the declared
effects.
customs value of imported goods. However, the 0.5%

customs commission has been eliminated for imported
42
goods originating in EU, EFTA, and CEFTA countries, as
Road Tax
well as for goods from Turkey.

A tax of EUR 110 per ton for diesel oil and EUR 125 per
A commission of EUR 8 per customs declaration is also
ton for gas is payable for fuels bought from domestic
applied for each customs declaration submitted and
producers or imported. The road tax is not included in the
processed through the ASYCUDA system, the national
taxation base for VAT.
computerised system for processing customs declarations.
43
Chapter 11
Introduction to
11.1 PricewaterhouseCoopers
Domestic taxation and general business advice on all

aspects of inward investment into Romania, corporate
structuring of investments and trading activities,
international tax planning, individual taxation advice,
human resources advice;
Corporate finance and recovery services including:

mergers and acquisitions, project finance and
privatisation, valuation and shareholder value, business
recovery services, dispute analysis and investigation.
PricewaterhouseCoopers (www.pwcglobal.com) is the

world's largest professional services organisation. Drawing
on the knowledge and skills of more than 150,000 people
in 150 countries, we help our clients solve complex
business problems and measurably enhance their ability to
build value, manage risk, and improve performance in an
Internet-enabled world.
PricewaterhouseCoopers Romania currently employs

approximately 400 individuals, both Romanians and
expatriates. The key element of our success is the quality of
11.2 PricewaterhouseCoopers in
Romania
our staff, to whom we are committed to provide extensive

training in technical and management skills in order to
develop their personal and business expertise. For example,
Coopers & Lybrand entered the Romanian market in 1991
members of our audit team are required to obtain an
and Price Waterhouse in 1993. We have continuously
internationally recognised professional accounting
expanded the scope of our services and currently the
qualification (UK ACCA).
merged firm of PricewaterhouseCoopers offers a full range

of professional services to both international and Romanian
Projects in Romania are generally staffed by a combination
enterprises. PricewaterhouseCoopers operates in Romania
of local specialists, with knowledge of local conditions and
and the Republic of Moldova out of four offices based in
regulations, and international consultants, with expertise in
Bucharest, Timisoara, Cluj-Napoca, and Chisinau. This
tackling issues faced by international enterprises and
network is managed by a team of seven partners, including
practices working in the Romanian environment.
three Romanian partners.

Our services in Romania include:
We provide a full range of business advisory services to a

wide array of clients, including local state-owned and
private enterprises, central government bodies, and leading
Assurance and business advisory services: financial,

operational, and organisational audit, financial and
accounting reviews and investigations; restating
accounting records prepared in accordance with
Romanian standards in compliance with IAS, UK
GAAP, US GAAP; accounting services and consultancy
concerning financial audit, accounting, management
accounting, including organisation and restructuring;
business valuations, feasibility studies and preparation
of business plans; IAS accounting training courses for
clients;
international corporations.
Our combination of local experience and a 'one-firm'
culture enable us to provide the most current consulting
advice and be responsive to local conditions and
requirements.
44
Chapter 11 - Introduction to PricewaterhouseCoopers
Audit and Business Advisory Services

(ABAS)
The Romanian ABAS practice is comprised of
internationally trained Romanians and a group of foreign
experts familiar with local accounting practices. As part of
our long-term development strategy,
PricewaterhouseCoopers Romania requires its local
employees to obtain an internationally recognised
professional qualification in accounting (UK ACCA), and to
specialise in International Accounting Standards (IAS).
Establishment of accounting procedures and

implementation of checks;
Transaction support and financial due diligence.
Taxation Advisory Services (TAX)

Our tax and business advisory department includes
national and international tax experts and Romanian
lawyers, expert accountants, and customs specialists. Our
managers have extensive experience advising and providing
consulting services to clients on international and
Romanian law. Many have international experience and are
Our knowledge and experience, gained over the period of
able to provide specific insight into the Romanian legal,
reform in all of the former Communist countries, enables us
accounting and taxation framework.
not only to advise on immediate ABAS issues, but also to

put them in context and advise on the likely impact that the
pace and direction of economic and financial change will
have on commercial activity within Romania.
During Romania's transition to a market economy, the
country's accounting and auditing legislation changes
rapidly, and such changes are often substantial. This
environment requires close attention to each piece of
legislation and any accompanying amendments. We are
well placed to understand the practical implications of the
legislation for a company's activities, and we can assist in
We are able to provide taxation and general business

advice on all aspects of inward investment into Romania,
corporate structuring of investments and trading activities.
The tax laws and their interpretation in Romania are
undergoing continual revision and amendment of the law is
often vague. Moreover, the tax authorities do not always
interpret the law in strict accordance with written
legislation. Our advice is based on both our interpretation
of the law and of our understanding of current practice and
interpretation by the tax office.
the development of appropriate strategies to obtain the
As a worldwide firm, we advise clients based upon our
maximum benefit from each situation.
knowledge of Romanian laws and how these laws
Furthermore, PricewaterhouseCoopers Romania has

developed strong relationships with key entities within
Romania, including various national organisations and
ministries. These relationships enable us to resolve any
interrelate with international laws and treaties. As such, we

are able to provide clients with local advice within an
international context.
Our services cover the following areas:
queries on professional issues and identify reliable sources

Corporate and individual direct taxation;
Value added tax;
Tax compliance work;
Compilation of financial statements in accordance with

International Accounting Standards (IAS) or other
recognised accounting standards (US or UK GAAP);
Negotiation of disputes with the tax authorities;
Withholding taxes;
International tax planning and structuring;
Audits in accordance with International Standards on

Auditing (ISA) or the Generally Accepted Auditing
Standards;
Expatriate tax planning and structuring;
Foreign exchange regulations;
Customs duty issues;
Import and export regulations;
Local labour regulations;
Obtaining work and residence permits;
Tax related intellectual property matters;
Information and commentary on tax and legislative

amendments, and advice on its likely effects on
investment and trading activities in Romania.
of information.
Our services cover the following areas:
Audit-related services in accordance with ISA;
Compliance audits (Statutory, Security Commission, and

National Bank of Romania);
Evaluations of alternatives for foreign investment;
Evaluations of a company's or an investment's financial

viability;
Business investigations and internal audits;
Evaluations of accounting systems and internal controls;
Forensic and investigative accounting;
45
Chapter 11 - Introduction to PricewaterhouseCoopers
Corporate Finance & Recovery Services

(CFR)
The Romanian CFR practice offers three types of services:
basis, where lenders and investors look principally to the

cash flow generated by a specific project for their returns.
Valuations & Shareholder Value: The starting point for
many business decisions is value and impact on value.
Corporate finance, providing advice on: Mergers and

Acquisitions; Privatisation; Business Valuations,
Feasibility Studies and Business Plans; Project Finance;
Finance Raising
Pressure is great to create shareholder value. We help
Business Recovery/Insolvency, specialised in:

Insolvency and Liquidation; Corporate Recovery and
Turnaround; Real Estate and Asset Valuations
the identification and exploitation of intangible assets to
Business Research and Development, providing a

variety of services including: Company/Sector analysis;
Research; Internationally Funded Projects; Securities
Support; Marketing and Business Development
acquisition, divestiture, restructuring, shareholder buyout,
clients understand the value of their business and its

components. We apply leading-edge tools including the
application of real options, the use of economic value and
show how strategies and decisions will create value.
Companies seeking new capital or involved in an
or those looking for innovative approaches to increase
shareholder value turn to us to understand the value impact
of their financial and strategic alternatives.
We are part of a worldwide network of 6,000 professionals
Business Recovery Services (BRS): We have the largest
providing comprehensive financial, economic, and strategic
Business Recovery practice in the world and we are the first
advice and services.
Big Five consulting firm in Romania to develop a dedicated
Mergers and Acquisitions (M&A): We provide a full range

of services to guide clients through complex business
transactions. We support companies through every aspect
of a transaction, from identifying the appropriate
acquisition and divestiture candidates, to assisting with deal
structuring and capital sourcing.
team of professionals specialised in this field. We advise

upon and implement a complete range of solutions for
business failure and business recovery situations, from
personal bankruptcy to implementation of large-scale
turnarounds for under-performing corporations, from
services to lenders to privatisation via realisation of assets.
We help companies stabilise operations, diagnose under-
Project Finance and Privatisation (PFP): We have the
performing areas of the business, and develop and
world's largest Project Finance & Privatisation practice with
implement strategies for survival, regeneration and growth.
the highest number of privatisation mandates worldwide.
This department also provides specialised real estate
We help the Government restructure industries and
services adapted to the hospitality sector.
businesses, often introducing capital through privatisation

or public-private partnerships. We provide a wide range of
privatisation services including lead advisory, target
identification, company profiles, assessment of privatisation
options, and transaction support. We advise corporations
and consortia that want to be part of these programmes,
particularly through raising of finance on a limited recourse
Dispute Analysis & Investigations (DA&I): Our Dispute

Analysis practice is the global market leader. This newly
introduced practice in the expertise range of
PricewaterhouseCoopers Romania involves expert
testimony as well as business, economic, and financial
advice and analysis throughout the dispute resolution
process.
46
Ministers
Government Ministries
Authority
Phone
Prime Minister
212 1660
Ministry of Foreign Affairs
230 7570
Hildegard Carola Puwak
Ministry of European Integration
301 1502
Mihai Nicolae Tanasescu
Ministry of Public Finance
410 1189
Ministry of Justice
311 2266
Ministry of National Defence
410 6876
Ministry of the Interior
222 9630
Leonard Gheorghe Cazan
Ministry of Development and Prognosis
314 3400
Marian Sarbu
Ministry of Labour and Social Solidarity
222 3850
Ministry of Industry and Resources
231 0262
Ministry of Agriculture
315 4412
Ministry of Waters and Environment Protection
410 0215
Ministry of Public Works, Transport and Housing
223 0660
Ministry of Tourism
312 3731
Ministry of Small and Medium-Sized Enterprises
335 2620
Ministry of Education and Research
313 3315
Razvan Theodorescu
Ministry of Culture
224 0375
Daniela Bartos
Ministry of Health
315 0300
Ministry of Youth and Sports
211 5550
Ministry of Communication and Information Technology
400 1737
Ministry of Public Administration
222 1364
Ministry of Public Information
312 69 31
Ministry for Relations with Parliament
222 36 77
Privatisation Authority and State Participation Administration
303 6509
Adrian Nastase
Mircea Dan Geoana
Mihaela Rodica Stanoiu

Ioan Mircea Pascu
Ioan Rus
Ioan Dan Popescu

Ilie Sarbu
Ilie Aurel Constantin
Miron Tudor Mitrea
Dan Matei Agaton
Silvia Ciornei
Ecaterina Andronescu
Georgiu Gingaras
Dan Nica
Octav Cozmanca
Vasile Dincu
Acsinte Gaspar
Ovidiu Tiberiu Musetescu
Appendix I
Appendix I
Calls from outside Romania should be prefixed by the international dialling code, then 40 for Romania and 1 for
Bucharest.
47
Bilateral Investment Treaties
Romania has negotiated and concluded a series of treaties on protection of investment with a number of countries, as
follows:
Albania
Germany
Philippines
Algeria
Greece
Poland
Argentina
Hungary
Portugal
Armenia
India
Qatar
Australia
Indonesia
Russia
Austria
Israel
Senegal
Bangladesh
Italy
Slovakia
Belarus
Jordan
Slovenia
Belgium
Kazakhstan
South Korea
Bolivia
Kuwait
Spain
Bulgaria
Lebanon
Sudan
Cameroon
Lithuania
Switzerland
Canada
Luxembourg
Thailand
Chile
Macedonia
Tunisia
China
Malaysia
Turkey
Croatia
Mauritania
Turkmenistan
Cuba
Moldova
Ukraine
Cyprus
Mongolia
United Arabian Emirates
Czech Republic
Morocco
United Kingdom
Denmark
Netherlands
Uruguay
Ecuador
Nigeria
United States
Egypt
North Korea
Uzbekistan
Finland
Norway
Vietnam
France
Pakistan
Yugoslavia
Gabon
Paraguay
Georgia
Peru
Appendix II
Appendix II
48
Major Banks Operating in Romania
Bank
ABN AMRO Bank

Alpha Bank Romania
Phone
202 0400
210 9042-5
Banca Agricola - Raiffeisen
323 0031
Banc Post
336 1125
Citibank Romania
210 1850-3
Commercial Bank of Greece Romania
310 3955-6
Commercial Bank of Romania (BCR)
312 1678
Demirbank
330 2900
Egnatia Bank
303 2100
Eximbank Romania
Appendix III
Appendix III
336 6162-4
Finansbank Romania
312 3629
Frankfurt Bucharest Bank AG - Bucharest Branch
250 1003
French-Romanian Bank
223 3040
HVB Romania
203 2222
ING Bank Romania
222 1600
Tiriac Bank
302 5600
Romanian Development Bank Group Societe Generale
313 3200
Romanian Savings Bank (CEC)
312 3465
Bucharest.
49
Hotels and Restaurants
There are numerous hotels and restaurants in Bucharest. Here is a selection:
Hotels
Phone
Athenee Palace Bucharest Hilton (*****)
303 3777
Best Western Parc (***)
224 2000
Bucuresti (****)
313 3525
Casa Victor (****)
222 5723
Continental (****)
638 5022
Crown Plaza Flora (*****)
224 0034
Helvetia (***)
223 0566
Ibis (**)
222 2722
Inter-Continental (*****)
310 2020
Lido (****)
314 4930
Majestic (****)
310 2720
Marriott Grand (*****)
403 0000
Minerva (***)
311 1550
Sofitel (****)
224 3000
Restaurants
Phone
Al Casolare (Italian)
792 2274
Barka Saffron (Indian / International)
224 1004
Basilicum (Italian)
222 6779
La Bastille (French)
212 4914
Bistro Ateneu (International)
313 4900
Bistro de l'Institut Francais (French)
230 1213
Byblos (International)
313 2091
Cafe Royal Brasserie (International)
303 3777
Carioca (Brazilian)
313 3525
Casa Caragiale (French / International)
211 1518
Casa Doina (Romanian / International)
222 3179
Appendix IV
Appendix IV
50
Phone
Casa Vernescu (Romanian / International)
231 0220
Cucina (Italian)
403 1902
Da Vinci (Italian)
312 2471
Die Deutsche Kneippe (German)
679 2363
Dom (International)
231 0400
Gallery (Greek)
211 5899
Il Gattopardo (Italian)
659 7428
Marrakech (Moroccan)
335 4247
McMonies (International)
224 2672
Menuet (International)
312 0143
Mesogios (Mediterranean)
313 4951
Nan Jing (Chinese)
311 1550
Sahib (Indian)
222 1855
La Taifas (Spanish / International)
311 3204
Tokyo House (Japanese)
315 5979
Uptown (International)
231 4077
Appendix IV
Restaurants (cont.)
Bucharest.
51
Chart of Accounts - for companies not applying

OMF 94
Class 1
Capital Accounts
101 - 106
Capital and Reserves
107
Retained Earnings
108
Sole Trader's Account
111 - 119
121;
129
Funds
Profit for the Year; Profit Distribution
131
Subsidies
141
Statutory Provisions
151
Other Provisions
161 - 169
Class 2
Long-Term Loans and Associated Accrued Interest
Fixed Assets Accounts
201 - 208
Intangible Assets
211 - 212
Tangible Assets
230 - 231
Assets in Construction
260
Financial Investments
280 - 281
Accumulated Depreciation for Fixed (intangible and tangible) Assets
290 - 296
Provisions for Fixed Assets Depreciation
Class 3
Inventories Accounts
300 - 308
Raw Materials and Materials Inventory
321 - 328
Petty Inventories
331 - 332
Work in Process
340 - 348
Products
350 - 358
Inventory Held by Third Parties
360 - 368
Animals
370 - 378
Goods for Resale
380 - 388
Packaging
390 - 398
Provisions for Depreciation of Inventories and Work in Progress
Class 4
Appendix V (a)
Appendix V (a)
Third Party Accounts
400 - 408
Accounts Payable and Similar Accounts
409 - 419
Accounts Receivable and Similar Accounts
421 - 428
Personnel and Similar Accounts
431 - 438
Social Security Funds and Other Similar Accounts
52
State Budget, Special Funds and Other Similar Accounts

441
Tax on Profit
442
Value Added Tax
444
Tax on Wages
445
Subsidies
446 - 448
Other Debts and Claims on State Budget
450
Intercompany and Associates
460
Sundry Debtors and Creditors
470
Adjustment Accounts
480
Internal Settlements
490
Provisions for Bad and Doubtful Debts
Class 5
Treasury Accounts
500
Marketable Securities - Shares and Bonds
510
Bank Accounts
530
Cash and Equivalents
540
Letters of Credit and Advances
581
Cash in Transit
590
Provisions for Depreciation of Treasury Accounts
Class 6
Expense Accounts
600
Cost of Raw Materials, Materials and Goods
610
Cost of Services Performed by Third Parties
620
Cost of Other Services Performed by Third Parties
630
Taxes, Duties and Similar Disbursements
640
Personnel Expenses
650
Other Operating Expenses
660
Financial Expenses
670
Exceptional Expenses
680
Depreciation and Provision Expenses
690
Income Tax Expenses
Class 7
Appendix V (a)
440
Revenue Accounts
700
Revenues from Sales of Products, Goods and Services Performed and Others
710
Revenues from Production of Inventories (see Appendix III above)
720
Revenues from Fixed Assets Production
740
Revenues from Subsidies
750
Other Operating Revenues
760
Financial Revenues
770
Exceptional Revenues
780
Revenues from Provisions
53
Chart of Accounts - for companies applying the

OMF 94
Class 1
Capital Accounts
101 - 107
Capital and Reserves
117
121 ; 129
Retained Earnings
Profit for the Year; Profit Distribution
131
Subsidies
151
Provisions for Risks and Expenditures
161 - 169
Class 2
Long - Term Loans and Associated Accrued Interest
Fixed Assets Accounts
201 - 208
Intangible Assets
211 - 214
Tangible Assets
230 - 234
Assets in Construction
260
Financial Investments
280 - 281
Accumulated Depreciation for Fixed (Intangible and Tangible) Assets
290 - 296
Provisions for Fixed Assets Depreciation
Class 3
Inventories Accounts
300 - 308
Raw Materials and Materials Inventory
331 - 332
Work in Process
340 - 348
Products
350 - 358
Inventory Held by Third Parties
360 - 368
Animals
370 - 378
Goods for Resale
380 - 388
Packaging
390 - 398
Provisions for Depreciation of Inventories and Work in Progress
Class 4
Third Party Accounts
400 - 408
Accounts Payable and Similar Accounts
409 - 419
Accounts Receivable and Similar Accounts
420 - 428
Personnel and Similar Accounts
430 - 438
Social Security Funds and Other Similar Accounts
440
446 - 448
Appendix V (b)
Appendix V (b)
State Budget, Special Funds and Other Similar Accounts

Other Debts and Claims on State Budget
450
Intercompany and Associates
460
Sundry Debtors and Creditors
470
Adjustment Accounts
54
Internal Settlements
490
Provisions for Bad and Doubtful Debts
Class 5
501
502 - 509
Treasury Accounts
Short - term Financial Investments
Marketable Securities - Shares and Bonds
510
Bank Accounts
530
Cash and Equivalents
540
Letters of Credit and Advances
581
Cash in Transit
590
Provisions for Depreciation of Treasury Accounts
Class 6
Expense Accounts
600
Cost of Raw Materials, Materials and Goods
610
Cost of Services Performed by Third Parties
620
Cost of Other Services Performed by Third Parties
630
Taxes, Duties and Similar Disbursements
640
Personnel Expenses
650
Other Operating Expenses
660
Financial Expenses
670
Exceptional Expenses
680
Depreciation and Provision Expenses Including Inflation Adjustment Expenses
690
Income Tax Expenses
Class 7
Appendix V (b)
480
Revenues Accounts
700
Turnover: Revenues from Sales of Products, Goods and Services Performed and Others
711
Inventory Variation
720
Revenues from Fixed Assets Production
740
Revenues from Operating Subsidies
750
Other Operating Revenues
760
Financial Revenues
770
Exceptional Revenues
780
Revenues from Provisions and Inflation Adjustment Gains
791
Revenues from Deferred Income Tax
55
Major Differences Between Romanian Accounting

Regulations and International Accounting
Standards
Accounting Component
Romanian Accounting Standards Differences to IAS
1. Consolidation
1.1 Basis of Consolidation
Appendix VI
Appendix VI
Annual financial statements incorporate results of an individual

company only.
All financial years are based on calendar year.
2. Fixed Assets
2.1 Property, plant and equipment
Historical cost less accumulated depreciation subject to revaluation

according to government decisions (do not necessarily result in
fair value).
2.2 Disposals
Gains or losses from disposals are calculated at revalued book value,

and included in P&L. Losses are not immediately tax deductible.
2.3 Depreciation
Useful lives are typically longer than IAS.

Useful lives are usually longer than those used in other countries.
2.4 Investments
Usually classified as current assets and recorded at acquisition cost

but may be classified as fixed assets if a long-term investment.
3. Foreign Currency Translation

3.1 Foreign Currency Balances
If cash includes hard currency share capital contributed then the

corresponding element of the revaluation is taken directly
to Reserves.
3.2 Foreign Trading Translations
Unrealised exchange gains and losses are taken to balance sheet.

If the net balance is a debit the company is required to create a
provision at year-end.
4. Inventory
4.1 Accounting for Inventory
Manufactured products and WIP are valued at raw material cost plus
labour cost and a proportion of total company overhead expenses
including selling and general administration costs.
Variances are recorded in both balance sheet and income statement.
5. Deferred Taxation
5.1 Accounting for deferred taxation
Not required.
6. IncomeF Statement
6.1 Format of Income Statement
Income Statement includes "revenues from production of inventory"

and total costs of production, rather than cost of goods sold as is
normal under IAS. (This may have a distorting effect on any
margin analysis.)
7. General
7.1 Hyperinflation
No indexation of non-monetary items and income to reflect inflation

(other than certain ad-hoc fixed asset revaluations detailed above).
56
Accountancy and Law Firms
Accountancy firms and tax consultants
Phone
202 8500
Andersen Consulting
205 3000
Audiconsult
336 9088
BDO Conti Audit
323 5980
Deloitte & Touche
330 5775
Ernst & Young
410 4449
KPMG
336 2266
Law firms
Phone
Altheimer & Gray
212 3791
Hall Dickler
222 8888
Herzfeld & Rubin
223 3358
Miculiti & Associates Linklaters
307 1500
Musat & Associates
223 3717
Nestor Nestor Diculescu Kingston Petersen
201 1200
Stoica & Associates
336 7010
Sinclair Roche & Temperley
312 2425
Voicu & Filipescu SCA
211 8797
Appendix VII
Appendix VII
Calls from outside Romania should be prefixed by the international dialling code,
then 40 for Romania and 1 for Bucharest.
57
Albania
Indonesia
Poland
Algeria
Iraq
Portugal
Armenia
Ireland
Qatar
Australia
Israel
Russian Federation
Austria
Italy
Slovak Republic
Bangladesh
Japan
South Africa
Belarus
Jordan
Spain
Belgium
Kazakhstan
Sri Lanka
Bulgaria
Korea (Republic)
Sudan
Canada
Kuwait
Sweden
China
Lebanon
Switzerland
Costa Rica
Luxembourg
Syria
Croatia
Malaysia
Thailand
Cyprus
Malta
Tunisia
Czech Republic
Mexico
Turkey
Denmark
Moldova
Ukraine
Ecuador
Mongolia
United Arab Emirates
Egypt
Morocco
United Kingdom
Finland
Namibia
USA
France
Netherlands
Uzbekistan
Georgia
Nigeria
Vietnam
Germany
North Korea
Yugoslavia
Greece
Norway
Zambia
Hungary
Pakistan
India
Philippines
Appendix VIII (a)
Appendix VIII (a) Double Taxation Agreeements
58
Country
Commissions (%)
Dividend (%)*
Interest (%)
Royalty (%)
15
10
10
15
Australia
5/15
10
10
Austria
15
0/10
10
Belgium
5/15
10
Bulgaria
10/15
15
15
Canada
15
15
10/15
Cyprus
10
10
Czech Rep
10
10
Denmark
10/15
10
10
Finland
2.5/5
France
10
10
10
Germany
10/15/25/45
10
10
Greece
45/20
10
5/7
Hungary
5/15
15
10
Ireland
Israel
15
5/10
10
Italy
10
10
10
Non Treaty
Japan
10
10
10/15
Korea
10
7/10
0/10
7/10
5/15
0/10
10
10
5/30
Moldova
10
10
10/15
Netherlands
0/5/15
Norway
10
10
10
Poland
10
5/15
10
10
Portugal
15
10
10
Russia
10/15
15
10
Slovakia
10
10
10/15
South Africa
15
15
15
Spain
10/15
10
10
10
10
10
10
Switzerland
10
10
Turkey
15
10
10
Ukraine
10/15
10
10/15
12
10/15
10
10/15
10
10
10/15
Luxembourg
Malta
Sweden
United Kingdom
USA
Appendix VIII (b)
Appendix VIII (b) Withholding Tax Rates Provided by Some

Major DTAs
Note:
X - not stipulated.
* - the lower rate provided either by DTA or domestic legislation would apply.
59
Local Employment Agreements
Individual Income Tax Computation

Monthly calculation of the individual income tax and social security contributions due on local employment contracts
Gross salary (assumed)

Benefits in kind (assumed)
Total gross salary
ROL
USD
28,105,000
1,000
5,621,000
200
33,726,000
1,200
Appendix IX
Appendix IX
Employee
Due Social Security Contribution (capped)
1,452,443
52 a
Health Fund Contribution (7%)
2,360,820
84
281,050
10
29,631,687
1,054
4,094,313
146
Individual Income Tax
10,781,815
384
Net salary (cash)
13,228,872
471
Unemployment Fund Contribution (1%)

Taxable Salary
Total Social Security Contribution due by Employee
Employer
Due Social Security Contribution (capped)
2,903,642
103 a
Unemployment (5%)
1,686,300
60
Other taxes 7%+3%+2%
4,047,120
144
Total Social Security due by the Employer
8,637,062
307
42,363,062
1,507
Total Costs Incurred by the Employer
a:
The Social Security Contribution is capped to 3 times the average national salary estimated for 2001 (amounting to
ROL 4,148,653, or USD 148)
The average exchange rate valid for the period January - August 2001, as used by the National Bank of Romania (USD 1 =
ROL 28,105), has been used in this calculation.
60
Customs Duties,
Effective from January 2001
Rates applicable to:

Product or
Standard Reduced
Group of Products
Rate
EU
EFTA
Rate
Turkey
Czech
Rep
Rep
ex
ex
Poland
Slovak Slovenia Hungary Bulgaria

Rep
[%] applicable
Appendix X
Appendix X
in 2001
IT equipment
ex
ex
ex
ex
ex
ex
cc 1,000-3,000 cm
30
cc over 3,000 cm -
30
ex
ex
ex
20
15
0-8
65
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
ex
5; 25
0-17.5
5; 25
5; 25
ex
ex
ex
ex
ex
ex
301
248
55
248
248
20
248
20
248
248
173.6
226.9
45
43.2
45
45
45
45
45
45
45
45
ex
ex
ex
ex
ex
ex
Cars
Office equipment
Office items made
of plastic materials
Envelopes, boxes, etc.
Telecommunications
Coffee
Beer
(Only applicable within a quota)
Chocolate products
Pharmaceuticals -
10
containing vitamins
Exploration and
exploitation equipment
Plastic flexible piping
20
ex
ex
ex
ex
ex
ex
Pumps for liquids
10
ex
ex
ex
ex
ex
ex
10; 15
2; 3
2; 3
2; 3
ex
ex
ex
ex
ex
ex
Components of
drilling equipment
Note:
These columns contain the customs duties applicable to the goods that have their origin in the places shown,
which are proved by certificates of origin according to the respective agreement
ex: exemption
61
Import Duty Exemptions
Description of equipment
1
Water tube boilers
Furnaces and ovens
Machinery for filling, closing, sealing or labelling bottles, cans, boxes; machinery for capsulling; machinery
aerating beverages
Packing or wrapping machinery
Lifting, handling, loading or unloading machinery, specially designed for underground use (mining extraction)
Milking machines
Bakery machinery; bakery and biscuit ovens
Brewery machinery
Machinery for the preparation of tea or coffee
10
Machinery for the preparation or manufacturing of drinks
11
Machinery for finishing paper or paperboard
12
Printing machinery
13
Machines for extruding, carding, combing, spinning and twisting textile materials; dry-cleaning machines
14
Machine tools of a kind used in the manufacture of semiconductor wafers or devices
15
Machine-tools for drilling, boring, milling, threading or tapping
16
Machine-tools for working metal by forging, hammering, or die-stamping
17
Machine-tools for working stone, ceramics, concrete, asbestos-cement or like mineral materials; concrete or
mortar mixers
18
Machines for making optical fibres and pre-forms thereof
19
Machinery for working rubber or plastics or for the manufacture products of these materials
20
Machinery for preparing or making up tobacco
21
Rope or cable-making machines
22
Concrete mixer-lorries, concrete-pumping vehicles
23
Instruments and appliances used in medical, surgical, dental sciences; x-rays apparatus; medical or laboratory
sterilisers
24
Gas, liquid or electricity supply or production meters
25
Automatic regulating or controlling instruments and apparatus
26
Machine-tools for working wood, cork, hard rubber, hard plastic or similar hard materials
Appendix XI
Appendix XI
62
Crt
No
Excise Tax for Domestic and Imported Products
Products or Group of Products
Excise Rate
Alcoholic drinks with at least 0.5% alcoholic content (whisky, gin, rum, etc.)
EUR 180/hl pure alcohol + 1%
Natural alcoholic drinks
EUR 180/hl pure alcohol
Sparkling wines
EUR 2.75/hl x degree alcohol
Beer
EUR 1.50/hl x degree alcohol
Cigarettes
EUR 2.2/1,000 cigarettes + 30%
Tobacco
EUR 14/kg
Green coffee
EUR 775/tonne
Roasted coffee
EUR 1,035/tonne
Natural fur clothes (excepting rabbit, sheep, goat)
40%
10
Crystal products
50%
11
Jewellery made of gold and platinum, exclusive of wedding rings
20%
12
Premium, regular and normal fuel
EUR 270/tonne
13
Unleaded fuel
EUR 220/tonne
14
Diesel fuel
EUR 105/tonne
15
Cars and 4 x 4 wheel drive cars, gas fuel:

cc 1,601-1,800
with usual pollution degree
with reduced pollution degree
cc 1,801-2,000
cc 2,001-2,500
cc over 2,500
Cars and 4 x 4 wheel drive cars, diesel fuel:
cc less 1,601
cc 1,601-2,000
cc 2,001-2,500
Appendix XII
Appendix XII
3.5%
1.5%
6%
3%
12%
6%
18%
9%
1%
0%
3%
1.5%
6%
3%
63
Products or Group of Products
Excise Rate
cc 2,501-3,100
12%
6%
cc over 3,100
18%
9%
16
Cosmetics / Perfumery products
20%
17
Video players or recorders and audio racks
15%
18
Tape recorders or CD players
15%
19
Video cameras
15%
20
Micro-wave ovens
15%
21
Air conditioning equipment
15%
22
Weapons
50%
Appendix XII
Crt
No
64
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Business Guide to Romania

2001 / 2002 Edition

Copyright 2001 PricewaterhouseCoopers. All rights reserved.

Geography and Climate

Government and Elections

Population and Urbanisation

Overview of the Economy

Transport and Communications

Suggestions for Business Visitors

The Aims of Government Policy

Free Trade Zones

European Union Associate Status

Land Ownership and Real Estate

The Property Market

Business Lobby Groups

Foreign Investment, Privatisation and Foreign Trade

PricewaterhouseCoopers - Business Guide To Romania 2001 / 2002

The Banking System

The National Bank of Romania

The Foreign Currency Market

The Banking Market

Specialised Financial Institutions

Corporate and Business Law

Forms of Business Organisation

Banking and Finance

Labour Relations and Social Security

PricewaterhouseCoopers - Business Guide To Romania 2001 / 2002

Work and Residence Permits

Accounting and Audit Requirements and Registrations

Introduction of International Accounting Standards

The Chart of Accounts

The Social Security System

Legally Required Audits

Corporate Tax System

PricewaterhouseCoopers - Business Guide To Romania 2001 / 2002

Territoriality and Residence

Employees' Gross Income

Returns, Calculation and Payment of Tax

Tax Registration Forms / Fiscal Representative

10.1 Value Added Tax (VAT)

The Scope of VAT

10.2 Customs and International Trade

10.3 Other Indirect Taxes

11.2 PricewaterhouseCoopers in Romania

Audit and Business Advisory Services (ABAS)

PricewaterhouseCoopers - Business Guide To Romania 2001 / 2002

1.1 Geography and Climate

1.2 Government and Elections

Romania is in southeastern Europe, just north of the Balkan

Peninsula. With an area of 238,391 square kilometres

The Constitution, passed by Parliament on 21 November

Central and Eastern Europe after Poland.

1991, proclaims Romania a republic and a parliamentary

Romania borders on the Ukraine and the Republic of

(Chamber of Deputies and Senate) are elected by universal

Moldova in the north and northeast. It borders on Bulgaria

suffrage for four-year terms.

in the south, on Serbia in the southwest, and on Hungary

The current President is Mr Ion Iliescu, the former leader of

The Danube runs along Romania's southern border for

the Romanian Party of Social Democracy (PDSR) and

President from 1990 to 1996. The President nominates the

the Danube Delta.