· Updated · Cristian Darie · Law · 6 min read
Open a Holding Company in Romania
How to open a holding company in Romania: what a holding is, how investors use it, the main setup steps and how a Romanian holding company is taxed.
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.
| Quick Facts | |
|---|---|
| Legal entities used | SRL or SA |
| Incorporation method | As per the Romanian Company Law |
| Incorporation time | Several business days, according to the chosen business form |
| Types of assets owned by the holding | Generally, shares or interest in other companies |
| Requirement for local bank account (Yes/No) | Yes |
| Residency requirements for the founder(s) | Not the case |
| Advantages | A capital gains tax exemption regime can apply, subject to conditions. Our team can give you more details. |
| Precautions | Certain conditions may apply concerning the holding company's net assets |
| Shareholding structure | The holding is commonly used to control (be the parent company) of one or more legal entities |
| Minimum capital | According to the chosen business form |
| Taxation | 16% standard corporate income tax rate; 1% of revenue for qualifying micro-enterprises (revenue of up to EUR 100,000 and at least one employee) |
| Control | Foreign, however, a local director can be appointed if deemed fit |
| Registered agent requirements | Not mandatory but can be used. Advisable in some cases, as can be explained by our Romanian company formation agents |
| Accounting and reporting | Annual financial statements. Romanian accounting standards apply. |
| Number of double taxation treaties | Romania has an extensive network of double taxation treaties |
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?
Romanian law does not provide a separate legal form for holding companies. A holding is set up as an ordinary company, usually an SRL or an SA, following the general rules of the Company Law, and its main activity is holding shares in other companies. Our experts in company formation in Romania highlight the following points:
- The holding can be founded by natural or legal persons, Romanian or foreign, and it can have a single shareholder if it is set up as an SRL;
- The founders draw up the constitutive documents of the holding, as for any other company;
- The level of control over the subsidiaries depends on the stake held: a majority of the voting rights allows the holding to appoint the management of a subsidiary, while certain tax benefits require minimum holdings, such as at least 10% held for an uninterrupted period of one year for the exemption from dividend withholding tax and from tax on gains from the sale of shares, and at least 75% for tax consolidation.
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% of revenue in the case of a Romanian micro company (revenue of up to EUR 100,000 and at least one employee);
- 16% dividend tax, withheld at source, subject to exemptions and to reductions under double tax treaties;
- 21% standard value-added tax rate, with a reduced rate of 11%.
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.