Foreign investors can easily open a holding company in Romania and use the legal entity to hold stock in other businesses.
Our experts in company formation in Romania can offer ongoing assistance to those who are interested in setting up a holding company in Romania.
What is a holding company?
A holding company is a legal entity incorporated not for the purpose of engaging in commercial activities, but to hold stock or shares in other legal entities. Essentially, investors who open a holding company in Romania will be setting up a business that will be used to own and manage other companies.
The holding is thus a parent company that holds and controls another business without being involved in its daily activities. A parent holding company should not be confused with a parent company that simply owns a subsidiary or a branch in Romania.
To set up a holding company in Bucharest, investors will have to follow the usual steps required to open a company in Romania, combined with several special provisions for the holding.
How can a Romanian holding company be used by investors?
Foreign investors who want to manage other businesses can set up a holding company in Romania which will acquire stock in the target companies, thus managing them.
The holding company can be used to fully own another business or only partially. When a holding in Romania (or another country) owns 100% of a business, the owned company is called a wholly owned subsidiary.
A parent holding company can also be used to purchase and sell real estate in Romania. Therefore, one could open a holding company in Romania that will be involved in real estate transactions.
A distinctive feature of the holding company is that in most cases it is not involved in commercial trading itself. It does not provide goods or services, it only owns property or stock.
What are the main steps required to open a holding company in Romania?
By law, the establishment of a holding company is carried out in compliance with several important principles, summarized below by our experts in company formation in Romania:
- The holding company can be established if a group of companies incorporates it;
- The group of shareholders are required to draw up the constitutive documents for the holding;
- The percentage of shares and participations held by the group of shareholders must confer over 50% of the permanent voting rights within the group of companies. This condition ensures the holding company’s control over all subsidiaries, as well as control over some of these, as the case may be.
To register a company in Romania, investors follow the same set of steps, irrespective of the new legal entity’s object of activity. Our team briefly lists these below:
- Choose a legal structure: this can be the SA or the SRL company;
- Select an available name for the new company: preliminary name checks can be performed with the National Trade Register;
- Prepare the documents for incorporation: these include the Articles of Association, the founder’s documents, and any documents concerning the company’s appointed representatives;
- Register: to open a holding company in Romania, the founders will register the new business with the National Trade Register Office in the city in which the business will be based.
How is a Romanian holding company taxed?
Romanian companies are subject to the following general taxes:
- 16% corporate income tax;
- 1% or 3% of revenue in the case of a Romanian micro company;
- 10% dividend withholding tax in some cases;
- 19% standard value-added tax rate.
Those who open a holding company in Romania can enjoy an exemption from the dividends withholding tax, under certain conditions. This is relevant as the parent holding company will be receiving dividend payments from its subsidiary.
If you want to know more about the holding company regime in Romania, our team can answer your questions. Contact us for more information.