What is a representative office?
A representative office is a Romanian legal form authorized by the Ministry of Foreign Trade to represent companies and foreign economic organization in Romania. This way, they can promote their commercial interests here through specialized offices, on contract. Usually, most foreign companies are looking for representative offices in order to gather information about their niche, product promotions or prosecution of contract that were signed with suppliers or partners in Romania. On the other hand, opening a representative office will not allow the company to perform provision of services or works or production activities.
According to Romanian legal regulations, the representative office functions as an intermediary agent between mother companies and other external business partners. In broad terms it can be considered a broker for the main company. If interested to open representative office Romania, clients should know that such a secondary establishment cannot engage in commercial revenue-generating activities such as concluding contracts and opening of letter of credit. Any company choosing to set up representative office in Romania may take into consideration some specific roles that can be fulfilled by these business entities. Through these offices, the mother company can promote its brand and, as previously mentioned, can work with local agencies and distributors. The representative office has no separate social capital and, if willing to create representative office Romania, individuals need to know that this type of business entity must not be registered with the Trade Register Office. A representative office is not an independent legal entity and therefore the mother company must be held responsible for actions taken by the representative office.
If interested to open representative office Romania clients should know that there are specific regulations to follow in this particular case. First of all there should be submitted a dossier file to the Ministry of Economy, Commerce and Business Environment (according to Decree-Law No. 122/1990). This dossier must contain specific details such as: the location of the representative office's headquarters, the expected duration of the office's operations, the number and positions of personnel that will be employed and the object of activity. Procedures to create representative office Romania indicate that the operating permit is issued within 30 days of the submission. According to legal requirements, within 15 days of the issuance of this authorization, the representative office must be registered with the Tax Office where is located.
In order to set up representative office in Romania, any foreign legal entity who owns this kind of secondary office must pay an annual tax in RON equal to the equivalent of EUR 4.000. If a foreign legal person establishes or closes an office in Romania, during a fiscal year, the tax payable for the year is calculated taking into account the number of months during which the company conducted activities.
The necessary papers needed in order to open a representative office in Romania are the following: the official document confirming the legal existence, the activity and the capital of the mother company; a good standing certificate from the bank used by the mother-company for financial transactions; a certified copy of the statute of the company indicating the specific type of the business entity; the official power of attorney document for the director of the representative office released by the mother company and certified by a notary. The above mentioned documents together with the certified translations and the tenancy agreement contract (where the registered office will be listed) must be submitted to the registry of the Ministry of Economy. It has to be submitted as well a certificate issued by the National Agency for Fiscal Administration (ANAF), The General Directorate of Public Finances - the Department for Foreign Missions and Embassies, certificate which confirms that the business operating fee was paid. The operating permit should be issued in 30 days after submitting all documents.
So if deciding to create representative office Romania, the mother company should be rigorously assisted by a legal professional, trained and familiar with the business environment in this area. Our company is able to provide comprehensive approaches fitting all expectations and always serving our clients’ best interests. Our lawyers develop unique strategies which will result in great financial rewards.
A representative office is not a legal entity and has no right to perform trades. It will only allow the foreign company to perform activities according to the activity object authorized. The headquarters company is responsible for its representative office activity in Romania. The permits are issued by the Ministry of Economy, Trade and Tourism. In order to open a representative office in Romania, the foreign company must submit a request and the proper documentation at the authorized bodies, as following:
- Registered office proof
- Subject of representative activity
- Functioning period of the representative office
- Number of functions of the person that will be in charge of the representative office, name, residence and identification document
- Bank confirmation regarding the creditworthiness of the foreign company
- Original certificate from the Chamber of Commerce or other authority from the state in which the company resides, to confirm the legal existence, social capital and object of activity
- Authenticated credentials of the representative office
- Status providing the form of organization and operation modality
It is very important to know that any change that occurs in the legal status of the company during the authorized period for the representative office must be communicated to the Ministry of Economy, Trade and tourism in 30 days in order to change the operating license.
The authorization may be withdrawn before expiration in the following cases:
- Exceeding the object of activity that was authorized
- Violation of legal provisions by the staff of the representative office
- Incompliance with tax obligations
If one of the above cases occurs, the Ministry of Economy, Trade and Tourism will notify the company of the authorization 90 days before liquidation.
Another important issue that requires attention is tax registration, as the person in charge for the representative office must register with the tax office (form 010) within 15 days from when the authorization has been issued. In addition, a fiscal declaration on the establishment or abolition of a representative office during the fiscal year must be submitted to the competent tax authority in maximum 30 days after the representative office was abolished or established. In 30 days after submitting the declaration, the authority will recalculate the taxes that must be paid.
Representative office fall under the regulation of law no 571/2013 of the Tax Code. According to this law, the representative office must pay a tax of 4.000 euro per year, calculated in the local currency in the day of the payment. This tax is calculated proportionally to the period of time in the fiscal year in which it was established or abolished. Also, the tax is equally split in two rates of 2.000 euro each, one payable until 25th of June and the other until 25th of December.
Moreover, the company that owe a tax for the representative office must submit and annual statement for representative office taxes to the competent tax authority until the last day of February of the year of taxation.
Regarding the accounting of the representative office, it depends on their specifics of activity and can be held in single or double entry. If they opt for double entry accounting, they won’t have to prepare financial statements regulates by the European directives ad they lead their own accounts at trial balance.