Open Subsidiary in Romania

An overseas corporation has multiple options if interested in opening a secondary office in Romania. Among all the alternatives our Legal System provides, we can easily distinguish between two general types. One category gathers business entities with legal personality and the other one includes those offices without legal personality.

Prior to creating a Romanian subsidiary in 2024, clients should know that this company holds a legal personality but it is still controlled by the parent company. The subsidiary is, therefore, to be considered as a Romanian entity and it can be treated accordingly by the local authorities.

If willing to open a subsidiary in Romania, you should also be informed that even if this business entity is created as an independent company that works independently and autonomously. It has its own office and being established on a permanent basis, the parent company is able to decide on three important aspects.

Quick Facts
Applicable legislation (home country/foreign country)	Romanian
Best Used For	Expanding the operations of a foreign company while being able to also engage in other business activities
Minimum share capital for those who open a subsidiary in Romania	No prescribed minimum for the SRL company
Time frame for the incorporation (approx.)	7 days
Documents to be filed by parent company	Filled in application for registration, the general meeting's decision to incorporate the subsidiary, company formation documents for the chosen business form (SRL constitutive documents), proof of name approval, documents for the subsidiary appointed representative and others which may be industry-specific
Legal representative required (YES/NO)	Yes
Local bank account in Romania (YES/NO)	Yes
Independence from the parent company	Fully independent
Liability of the parent company	The parent company abroad is not liable for its subsidiary in Romania
Corporate tax rate for those who open a subsidiary in Romania	The standard corporate income tax rate in Romania of 16%
Annual accounts filing requirements	As per the general accounting rules for filing and payment (quarterly submissions, a final income statement and calculation at the end of the financial year) Companies are required to keep their accounting documents at the registered address
Possibility of hiring local staff	Can hire Romanian staff
Travel requirements for those who open a subsidiary in Romania	Not mandatory when working through a legally appointed representative with a power of attorney
Double tax treaty access (YES/NO)	Yes

The parent company is the one that determines the establishment, modification and termination of activities for its subsidiary. The subsidiary in Romania has its own patrimony, it can conclude contracts on its own behalf and is fully responsible for this. It can be also the holder of one or more bank accounts.

Our team of company formation agents in Romania presents the main characteristics of the subsidiary below.

You can also reach out to us if you want to open other business forms or wish to know more about micro-companies and their advantages.

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Creating a Romanian Subsidiary – Specific Features

Unlike the branch, the subsidiary is a separate legal structure from the parent company abroad. The following features are relevant when discussing this business form:

according to legal provisions, the subsidiary must be registered with the Trade Register in Romania;
the subsidiary’s articles of association are separate from its parent company; new constitutive documents are drawn up for the purpose of opening this business form;
the Romanian subsidiary can engage in business activities different from those performed by the mother company;
from a fiscal standpoint, the subsidiary is considered a distinct entity and it has its own management structure.

In practice, in order to open a subsidiary in Romania in 2024 one has to follow the same steps as those imposed by the registration process of companies. The costs for creating a Romanian subsidiary vary, depending on the type of business entity it represents.

Generally speaking, the decision to open a subsidiary in Romania implies that this new office may benefit from brand popularity which was already leveraged by the mother company. It also enjoys the advantage of undertaking a set of procedures and a working system already verified by the mother company.

Our Romania company formation agents have extensive experience in dealing with these processes being highly qualified in delivering optimal solutions for each request. We can guide you and fully assist you in order to successfully complete your project goals.

Subsidiary independence

A subsidiary represents a company that is controlled or fully owned by another business entity, named holding company or parent. It operated on its own, as a distinct corporation from its parent, which is a benefit regarding liability, law regulations, and taxation.

If another party sues the subsidiary the parent company will not be affected. In addition, the subsidiary obligations are also separate, not being a liability for the parent company and the minimum 51% ownership gives the parent the right to appoint the subsidiary’s board this way having control over decision-making.

Besides the fact that the subsidiary and the parent do not operate in the same location, they can even be in different business branches. The subsidiary may even have its own subsidiaries, this way forming a corporate group with different levels of ownership.

Advantages and disadvantages of a subsidiary

Opening a subsidiary might be an expensive long process and offers limited control. When owned by another parent company, the management control is also owned by the company and the decision-making must follow the command chain before taking any action.

On the other hand, it is a very efficient tool for risk reduction as the subsidiary will be a separate legal entity. The losses of the subsidiary will not transfer to the parent company. Still, if bankruptcy occurs, the subsidiary’s obligations will be transferred to the parent if there is proof that they are effectively or legally the same.

Very large companies can benefit from splitting the business into smaller companies that are easier to manage and control. Therefore, subsidiaries offer greater operational efficiency. Subsidiaries offer some benefits as well in order to reduce tax liability through deductions according to state legislation. For instance, the losses by one subsidiary may be covered through the gains of another subsidiary.

You can also watch the short video below for more information:

Subsidiary requirements

Romania is a very resourceful country when it comes to foreign investments as it offers many benefits, such as double taxation treaties, reductions in tax, and repatriation of profits and dividends. The Law on Commercial Companies is the one that regulates subsidiary establishment in Romania.

Requirements for opening a subsidiary in Romania in 2024:

Application for registration – the filled-in form and the form for the fiscal registration; an additional form for foreign investments may be required;
Certificate of good standing of the parent company (or equivalent);
Memorandum and Articles of Association of the parent;
The subsidiary’s Articles of Association;
Resolution of the parent company regarding the decision to open the subsidiary;
Proof of registered or physical office (depends on the activity of the subsidiary);
Information on the Administrator of the subsidiary – the appointed individual; along with the relevant identification documents;
Signature specimen of representatives for both subsidiary and parent;
Proof of company name availability.

When the subsidiary is registered by a third party, proof of appointment if required. This is in the form of a power of attorney and our team can act on behalf of interested foreign companies willing to incorporate a subsidiary in Romania.

All of the above-mentioned documents must be submitted to the National Trade Register Office and must be translated.

The preliminary name check is required for the subsidiary, just as for a locally registered company, the SRL, for example. This is an essential step and it ensures the use of a company name that is not already taken by another legal entity operating on the market.

The name is included in all of the registration documents, thus explaining the need to perform the name check before drafting the subsidiary’s constitutive documents.

The name check request is submitted to the National Trade Register Office. Our team can help foreign companies handle this stage in advance through a power of attorney.

Subsidiary company name requirements in Romania

The name of the subsidiary does not need to be identical to that of the branch in most cases. However, the foreign company may conduct a preliminary name check (and reservation) for a name that will make the link between the two entities apparent.

Company names are checked and reserved upon request, following the application and the submission of a standard application form. The applicant will need to include 3 different names, in order of preference.

Some of the main requirements for company names, along with part of the restrictions in place, are highlighted below by our team:

a company name is available when it does not belong to another natural or legal person registered in the commercial register or is not reserved for registration;
the name is considered distinctive when it is not generic and is different from other firms previously registered in the commercial register; the technical elements of specificity of the firm are established by methodological rules, approved by order of the Minister of Justice;
a name that is already reserved, for the period prescribed by law, or registered in the commercial register cannot be reserved and registered;
proof issued after the verification and the reservation of the name are complete is valid for a period of one month from its issue date;
limitations apply on the registration of company names containing the words: “scientific”, ”academy”, ”academic”, ”university”, ”university”, ”school”, or their derivatives, as well as ”notary”, ”executor”, ”lawyer”, ”legal adviser”, ”legal consultancy” or words which are associated with professions involving the exercise of public authority;
a name may not be registered if it contains the words “national”, “Romanian”, or “institute” or their derivatives or words or phrases characteristic of central public authorities and institutions if this is likely to create confusion with the name of a central or local public authority or institution.

The following shall be considered as not constituting elements of technical specificity such as to ensure distinctiveness:

the articulation of words;
the inversion of the order of the words which have entered into the composition of a registered or reserved name;
the use of semantically different but phonetically identical words;
the use of abbreviations of words that form part of a registered or reserved firm;
the use of symbols equivalent to letters and words;
the use/non-use of diacritics;
the addition of the word “Romania” irrespective of the language in which it is rendered, and others.

Foreign company representatives who require assistance to open a subsidiary in Romania will also benefit from counsel and aid in company name reservation and making the necessary submissions with the National Trade Register Office.

Subsidiary taxation in 2024

Subsidiaries must request a tax identification number from the National Agency for Fiscal Administration, known as the unique identification number.

The annual tax returns and monthly VAT returns are submitted accordingly to the same agency.

An alternative VAT cash accounting system is available for certain local suppliers established in the country. One of the conditions is for the taxpayer to have an annual turnover below RON 4.5 million.

The tax experts in our team can give you more details about VAT registration, which is mandatory when the taxpayer has an annual turnover of over RON 300,000.

Below, our team of company formation experts highlights the most important corporate taxes:

Corporate income tax: the standard corporate income tax rate is 16%, however, a lower rate is available to micro-companies, of 1% or 3% of their revenue (with certain exceptions), depending on the annual turnover and whether or not they have employees in the respective tax year;
Withholding tax: an 8% withholding tax rate applies on dividend payments made to a non-resident company unless reduced by a tax treaty;
Value-added tax: a standard 19% tax rate applies, and two other lower rates of 5% and 9% are available;
Social security contributions: the employer pays 2.25% of the gross salary as employment insurance; in some cases, the contribution also includes the employer’s portion for the pension.

The tax year applicable in Romania is the same as the calendar year. However, subsidiaries can change the date for the completion of their financial statements in accordance with the parent company. This can mean that the parent company abroad will adjust its reporting date.

When a foreign company engages in activities in the country through multiple permanent establishments, the common requirement is for the said foreign entity to designate one of its permanent establishments to fulfill the tax obligations.

Comparison summary: branch vs. subsidiary

Our company formation agents in Romania have highlighted some of the most important characteristics of the subsidiary in this article. Below, we list some of the key differences to take into account by foreign companies when they consider their options to expand on the Romania market via a branch or a subsidiary.

Types of activities: the same activities as the parent company in case of the branch; the same activities or more, or different ones in case of the subsidiary;
Separate legal identity: the branch does not have a separate legal identity while the subsidiary does;
Accounts: they are prepared separately or jointly in the case of the branch and separately for the subsidiary;
Ownership interest: the parent company has 100% ownership in the branch and between 50 and 100% interest ownership in the subsidiary;
Liabilities: the liabilities of the branch extend to the parent company while the liabilities of the subsidiary are limited to the subsidiary.

Our team can give you more information on how these differences (and others) may impact the foreign company’s decision to open one business form compared to the other.

Open a Romanian subsidiary with our help

Our team provides complete assistance to foreign investors interested in opening a subsidiary in Romania.

The differences between the available business forms can be further explained upon request.

Foreign companies that wish to maintain a certain level of independence from their Romanian counterpart are advised to take into account the incorporation of a subsidiary, compared to the branch. The latter is not an independent business form, and the parent company is liable for the debts and obligations of its Romanian branch. Moreover, the branch is limited to performing the same business activities as the parent company, while the subsidiary can engage in the same activities and in additional ones, as may be required.

The business activities a Romanian subsidiary can engage in are listed in the NACE codes.

Another option available to foreign companies in Romania is to open a representative office. Unlike the branch and the subsidiary, the office is not permitted to engage in any commercial activities, and it can be used solely for market research or promotional activities.

The representative office can be the first step for foreign companies willing to test the Romanian market, followed by opening a branch or opening a subsidiary in Romania.

Companies in Romania

The National Trade Register Office offers us a glimpse into the number of company formations in January 2024. Our team lists the data below:

1,925 private limited liability companies were registered in Bucharest and 608 such legal entities in Ilfov county;
By comparison, the total number of LLC (SRL companies) registered in Brasov County was 308 and the number of SRL companies registered in January in Cluj County was 580;
The number of SA companies (joint-stock companies) was 1 for Bucharest and 2 for Iasi County;
The total number of legal entities registered in Bucharest alone in January 2024 was 2,630 (this number includes SA and SRL companies, along with sole traders and other business forms).

Contact our team of Romania company incorporation specialists if you wish to know more about the subsidiary or any other type of business form.

by Cristian Darie