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Company Branch Romania

As opposed to the status of subsidiaries, the branch is just an extension of the parent company and therefore has no legal personality and no independence. Law no. 105/1992 on the Regulation of the Private International Law Relationship adopts the accepted international practice by which a branch is governed by the national law of its parent company. Consequently, if intending to establish a Romanian branch, clients should be informed that this business entity remains dependent on the mother company at the economic level. A branch is a secondary unit that must be commercially equipped by the main company in order to conduct an activity falling within the objects of the parent company.

 Quick Facts  
 Applicable legislation (home country/foreign country)

Local

Best Used For

Expanding the same business activities performed by the parent company to Romania

Minimum share capital for the company branch in Romania (YES/NO)

 No
Time frame for the incorporation (approx.) 3 or more business days 
Documents to be filed by parent company Registration form, proof of fiscal registration in Romania, the parent company's constitutive documents, documents emplowering the branch representatives and their IDs, proof of registered office in Romania, the parent company's financial situaion, other documents and local authorizations (for branches in regulated fields)
Management (Local/Foreign)

Foreign

Legal representative required (YES/NO)

Yes

Local bank account (YES/NO) Yes
Independence from the parent company No
Liability of the parent company The parent company is fully liable for the debts and obligations incurred by the company branch in Romania
Corporate tax rate in Romania 16% 
Annual accounts filing requirements  Yes
Possibility of hiring local staff in Romania (YES/NO) Yes 
Travel requirements for incorporating branch/subsidiary (YES/NO) No
Double tax treaty access (YES/NO) No
 

Establish Romanian Branch - Key Elements


The process to set up a branch in Romania in 2022 requires this business unit to be registered with the National Trade Register. The mother company is entirely liable for all actions of managers and other employees of the branch. Representatives of the branch can conclude contracts even if this type of unit does not have a legal personality. It is still authorized to conclude transactions on behalf of the parent company. Thus, a legal document signed by the branch is legal action on behalf of the parent company. 

All foreign entities that decide to open a company branch in Romania should also know that the setup process follows the main steps mentioned for the subsidiary. The dossier required for such a procedure does not contain the Articles of Association, as for the subsidiary. The most important information which needs to be added to this dossier includes a notarized copy of the articles of incorporation of the parent company, evidence of registration of the parent company in its country of origin, and the proof of solvency of the mother company. The proof of solvency is actually a financial soundness certificate from the bank used by the mother company in order to conduct its major operations.

As this brief presentation showed, in order to open a company branch in Romania in 2022, certain procedures need to be followed and, in some cases, foreign investors may require specialized assistance, given the language barrier and the bureaucratic procedures. Our company developed accurate approaches able to guarantee favorable final results. Our experts can assist any client willing to establish a Romanian branch explaining rigorously each phase of this process and delivering optimal solutions for all particular cases.

According to Romanian legislation, branches are secondary headquarters of a commercial company that has no individual legal personality. Secondary headquarters like agencies, branches, work points, representative offices or other legal entities similar to those must be mentioned in the Articles of Association of the company and registered at the Trade Registry linked to the Romanian main office.

In order to open a branch in Romania you will need to submit the following documents at the Trade Registry: a special declaration, a company decision and a document that proves your rights to use the space. Only after the branch has been registered with the Trade Registry, you can start your activity. If the branch will be opened in the same city as the company it will be registered separately at the same Trade Registry.

Opening a branch in Romania when the headquarters are in another European Country


In order to open a branch in Romania, no matter the European country your headquarters is based in, you will need to submit at the Trade Registry the following documentation:
 
  • The power of attorney
  • Translated and authenticated copies of the Articles of Association of the company
  • Documents related to the Romanian branch
  • The decision of the company board to set up the branch, indicating the address, the activity object, and the person that represents the branch, including identification document and mandate limits
  • Translated and authenticated copies or original affidavits of the person who will represent the branch that shows they have legal authorization for this position and their specimen of signatures
  • Copy of Article of Registration, holographic certified by the applicant, the text must be translated by an authorized translator, the copy must be authenticated by a notary and signed by the translator as well
  • Special attorney’s POA in original for the nominated person to handle the legal formalities
  • The last financial situation of the company that is approved, verified or published according to the legislation of the state in which the company resides. The document must be authenticated by a notary, translated by an authorized person, and signed by the translator as well
  • Proof for legal fees payment in original
  • An original affidavit regarding operation authorization
Our team of experts who specialize in Romania company formation can help you prepare the documents for the branch and submit them to the authorities.
 

Opening a branch in Romania when your headquarters is based in Romania


For companies that have their headquarters based in Romania, the process is a bit easier. However, they are still required to present the following documents to the Trade Registry:
 
  • The decision of the Associates’ General Assembly for setting up the branch which mush include the address, activity object, identification document of the person appointed to represent the branch and the mandate’s limits, all of this must be presented in original
  • Registration Certificate of the company, certified copy
  •  Articles of Association, updated in a certified copy
  • Evidence for the headquarters
  • Evidence for approvals of the competent authorities to register (when required by the law) in certified copy
  • Tax record information for the branch’s representative, in an original copy
  • Affidavit of the person representing the branch as proof that they meet the legal conditions for their position, certified and authenticated by a lawyer, in original
  • Affidavit regarding authorization of operations
  • Signature specimen of the person representing the branch, in original
  • Proof of payment of the legal fees, in original
  • Special attorney’s POA (power of attorney) in original for the nominated person to handle the legal formalities
     
For a foreign company to be able to carry out its activities on the territory of Romania, it is necessary to open a branch or a representative office. In order to establish a branch, the following documents are required:
 
  • Establishment Act and Certified Legal Status, along with all modifications to these documents
  • Documents certifying the registered office of the foreign company, its object of activity and the value of subscribed capital annually for foreign companies that are not members of the EU or EEA (if this information is not included in the articles of association or status of the legal person )
  • Certificate from the register where the legal person is registered, to certify its existence, certified translation
  • The annual financial statements of the company, approved, verified and published in accordance with the law of the statute in which they have their registered office, subject to the formalities of advertising of Romanian legal persons
  • Proof of branch office
  • Financial statements, if the legal entity has its registered office in one of the EU countries
     
The Branch does not have the legal personality of the company, being autonomous within the limits stipulated by the company. It does not participate in the legal circuit in its own name, and the legal acts are concluded by the representatives appointed by the mother company. A branch is a form of expansion of the main enterprise. Moreover, the branch is subject to the national law of the company that has established it, being identified by reporting to its registered office. Taking all these features into consideration, the branch is a simple dismemberment from a territorial point of view.

The branch has a set of clear characteristics that make it suitable for use in certain business fields, such as the financial sector. Indeed, there are many bank branches present in Romania, counterparts of larger international banks. The Romanian Financial Supervisory Authority is the one in charge of licensing and supervision for a number of industries, including but not limited to insurance companies.
 
When opening a branch in Romania, foreign companies will need to obtain the needed licenses from the authorities. These will be issued for the same business sector as that in which the parent company activates, as the branch will be its extension in Romania and will be involved in the same activities (for example, if the parent company is an insurance company, the Romanian branch will also be licensed for the same purpose).
 
Our team can help you submit the application for license approval in 2022. We also remind investors that a number of fees apply to companies in this business field, in addition to the regular branch tax rate which is listed below by our tax experts:
 
  • Transaction value percentage share in case of financial instruments (with certain exceptions): 0,06%;
  • Fees applicable to transactions with derivative financial instruments carried out in the places of
  • supervised trading: 0,03% or 0,01% per contract;
  • Rates charged for transaction monitoring performed outside the places of trading under the supervision of Financial Supervision Authority: 0,06% or 0,02%.
 
Our team can give you more details on these fees, how they apply, and the cases in which they apply.

Differences between the branch and the subsidiary
 

Foreign companies can set up their operations in Romania in one of three ways: by opening a branch, a subsidiary, or a representative office.

The characteristics of the branch have been discussed above, including the high level of liability that is reserved for the parent company in this case. As far as the representative office is concerned, this does not have legal capacity (just like the branch), however, unlike the branch which can engage in the same activities as the parent company, the representative office can only engage in marketing or promotional activities. It can be a first step for entering the market, before opening a Romanian branch, however, companies that wish to trade will opt for the branch or the subsidiary. 

Some of the most important differences between the branch and the subsidiary are listed below:
 
  • Assets: the assets in the branch belong to the main company, which founded it, unlike the subsidiary which owns the assets; the Branch does not have its own patrimony, a distinct company without the parent company, while the subsidiary owns it
  • Contracts: the branch may conclude contracts with third parties, in its own name or on behalf of the mother company, but the Founding Employer is responsible so that it cannot have its own debtors or creditors;
  • Liability: the foreign company is not fully liable for the debts and obligations of its subsidiary; the parent company has a certain shareholding in the Romanian subsidiary and it can be liable up to the extent of that value (it can act as a shareholder in a private limited liability company, as a legal entity is allowed to do so, for example); on the other hand, the foreign company, as previously mentioned, is fully liable for the debts and obligations of the branch;
  • Activities: the branch’s activities are limited to those of the parent company; the subsidiary can also engage in other types of activities, if suitable, or if the parent company decides that these are to be pursued on the Romanian market.
If the foreign legal person wishes to open several branches on the territory of Romania, it is not necessary to file separate files for each of them but only one file will be filed with the ONRC for one of the branches chosen by the company, being registered there and the other branches.

Branch taxation in Romania in 2022

 
Another issue to keep in mind when opening a branch in Romania is the taxation regime applicable to this business form. While there are many notable differences between the subsidiary and the branch, the corporate tax rate is not one of them.
 
A branch is considered a permanent establishment for taxation purposes and it is subject to the full scope of the corporate income tax. It calculates and declares the profits tax according to the provisions set forth in the Fiscal Code by using the forms provided by the authorities (in most cases, forms 100 and 101).
 
The foreign company can apply for a tax certificate for the profit paid in Romania, so that it may deduct it/obtain fiscal credit in its country of origin.
 
Our Romania company formation agents list the most important types of taxes below:
 
  • 16% branch tax rate;
  • 5% withholding tax on the dividends paid to a non-resident company, unless reduced under a double tax treaty;
  • 19% standard value-added tax rate, with two reduced rates of 5% and 9%;
  • no branch remittance tax applies.
 
As far as the accounting principles are concerned, a branch has the obligation to prepare the annual financial statements and accounting reports. When the foreign company has more than one branch in Romania, these documents will reflect the activity of all its registered permanent establishments.
 
Contact our team specializing in Romanian company formation. We can help you with additional information about the Romanian branch, its registration, licensing, control and taxation.

by Cristian Darie

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