Romania is currently a very attractive European destination for technology investment and outsourcing. Some of its main advantages are highly skilled and diversified workforce, a stimulating business environment and competitive prices. Despite the setbacks given by the economic crisis and political turbulence on the overall market, Romania’s IT sector has registered continuous growth over the past years. Romania’s software providers are well recognized for their flexibility, tech expertise, good language skills, so they are a very good choice for business collaboration or outsourcing. Romania is the 6th country in the world regarding the number of IT certified specialists per capita, exceeding UK, Germany and Canada.
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What are the main advantages of opening a software company in Romania?
Romanian IT&C companies enjoy the support of the Government and this has played and important role in the market development. Some of the support consists of elimination of the tax applied on software developers salaries, price liberalization, the unique 16% taxation on profit, open foreign trade regimen and fair competition in the informational sectors. The overall vision of the Romanian Government is to encourage the development of the IT sector, so that the growth rate and investor attractiveness is maintained.
An important difference is that having such company in the IT&C field means having certain facilities. According to the Law 571/2003, article 55, from the Fiscal Code the facilities apply to the economic operators in Romania that develop programmes for computers (registered under the CAEN code 5821, 5829, 6201, 6202, 6209), and also its employees and involve tax elimination for the income. In order to do so, the economic operators must comply all the conditions stated bellow by our attorneys in Romania:
- a) the position for which they are employed must coincide with the ones mentioned in a special list.
- b) the position is an integrated part of a specialized department of informatics as specified in the organizational status.
- c) has a diploma released by an university in the field required and the tasks for the position occupied are related to its specialities.
- d) the employer registered in the previous fiscal year (and has distinctly registered this in its accounting) due to activities devoted to computer programming creation for commercial purposes an annual income of at least 10.000 US dollars (equivalent in RON) for each employee that benefits from this tax deduction.
One of our lawyers in Romania can provide investors with more details about the regime available for income tax deductions for IT companies. We can also assist company owners when submitting the required documents for the income tax deduction. The main documents required for this are the following: the company’s Articles of Association, the organizational chart of the company, the job description, copy of the employees’ University degree and high school degree, copy of the individual labor agreement, the payslip and other accounting documents for the company that highlight the fact that it derives income from software creation. Please note that this list of documents is not exhaustive and applicants may be required to present additional documents. It is always recommended to check with one of our attorneys or tax authority representative.
Overall, the software companies in Romania are being very well seen by foreign investors and also enjoying support from the Romanian authorities. This will further push the growth of the IT&C industry and consolidate the position of Romanian market as a top provider for best services. Our Romanian lawyers can help you open a software company no matter the type of legal entity you choose for incorporation. We can also help you choose the suitable type of company for your business and give you details about each legal entity, from micro companies to joint stock companies.
How can investors open a software company in Romania? A guide by our lawyers in Romania
Company formation in Romania is a relatively simple process once the founders have prepared all of the required documents. Compared to the incorporation requirements in other European countries, the minimum share capital for the most widely used business form, the private limited company, is only 200 Ron or the equivalent of almost 42 Euros. This is an important advantage for many foreign investors who are looking to benefit from these low incorporation costs, in addition to the low labor-related costs.
The main advantages of opening a SRL in Romania are the following:
- Limited liability: as the equivalent of the private limited liability company, the SRL allows its founders to be liable only to the extent of the capital they invest.
- Flexibility: the SRL can be incorporated by only one founder and must have a maximum of 50 members; however, this is enough for most investors.
- Low capital: as mentioned above, the minimum share capital, that needs to be subscribed upon incorporation (in cash) is only 200 Ron.
- Credibility: the SRL is a business form that grants a high level of credibility to clients and other business partners, compared to the partnership or the sole trader.
Opening an IT&C company in Romania involves the same steps as a regular company. These include choosing a unique company name, drafting the Articles of Association and registering the business with the National Trade Register Office. Please find out more about the procedure here.
The IT&C sector is also an attractive one for employees. Romania offers a pool of talented programmers and engineers for companies in this business field in all major cities like Bucharest or Cluj Napoca. This is an advantage for software companies that have access to talented and highly skilled workers, at the same time being able to cut the labor costs, compared to those that would be required to run the same type of company in another Western European country, for example. One of our lawyers in Romania can provide more information about the requirements when hiring employees and the conditions imposed by the Ministry of Labor and Social Justice.
What are the requirements for a software company in Romania?
Companies in Romania are required to observe the requirements for taxation and annual reporting and accounting. The standard corporate tax rate is 16%, with lower rates available for small companies (1% or 3% depending on certain factors such as having at least one employee). The tax year in Romania is generally the same as the calendar year, although in some cases the taxpayer may opt for a fiscal year that is the same as the financial accounting year. Subsidiaries for which the parent company has a different accounting year may be allowed to change the period. We recommend discussing more about this topic with our team of lawyers in Romania.
Companies with an annual turnover of no more than 88,500 EUR (300,000 RON) may be eligible for a VAT exemption regime. VAT registration is required and the returns are to be submitted on a monthly basis. The standard VAT rate in Romania is 19%.
For further details about the topic, the facilities and the opportunities given by Romanian IT&C industry, the experts at our law firm in Romania are at your disposal with legal expertise in the field.
According to a study published by ARIES Transilvania, a Romanian regional IT association, the following data were available for 2016-2017:
- in 2016 there were 14,339 companies;
- these companies employed more than 100,000 individuals;
- the number of IT companies grew in Cluj Napoca by more than 75% compared to 2011;
- the number of IT companies in Cluj Napoca was 1,235, with 14,036 at the time of the study.
Contact our Romanian law firm for complete details about the business environment and the investment conditions in the country. Our team is able to answer any needed questions and can help advise during the entire incorporation phase, irrespective of the business field. Our team also provides ongoing legal assistance and needed post-incorporation advice.