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Branch Formation in Romania: Requirements and Procedures


How to Establish a Branch in Romania: A Guide for Companies




If you are a company that wants to expand your business activities in Romania, you might consider establishing a branch. A branch is a secondary office that operates under the same name and legal personality as the parent company, but has a separate management and accounting system. A branch can perform any activities that are authorized by the parent company and are compatible with its object of activity.




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Establishing a branch can be beneficial for your company, as it can help you reach new customers, increase your brand awareness, reduce your operational costs, and adapt to the local market conditions. However, establishing a branch also involves some legal and administrative procedures that you need to follow. In this article, we will explain what are the main steps for establishing a branch in Romania, as well as the advantages and disadvantages of this option.


Steps for Establishing a Branch in Romania




To establish a branch in Romania, you need to follow these steps:


Adopting the Resolution of the General Meeting of Shareholders or the Decision of the Sole Shareholder




The first step is to obtain the approval of the parent company's shareholders for establishing a branch. This can be done by adopting a resolution of the general meeting of shareholders (if there are more than one shareholder) or a decision of the sole shareholder (if there is only one shareholder). The resolution or decision should include:



  • The name and address of the parent company



  • The name and address of the branch



  • The object of activity and the scope of operations of the branch



  • The duration of the branch (if it is not indefinite)



  • The name and powers of the branch manager



  • The share capital allocated to the branch (if any)



  • The date of establishment of the branch



The resolution or decision should be signed by all shareholders or by the sole shareholder, and should be authenticated by a notary public. The resolution or decision should also be translated into Romanian by an authorized translator.


Obtaining the Consent of the Landlord and the Neighbors




The second step is to obtain the consent of the landlord and the neighbors for using the premises where you want to establish your branch. You need to have a valid contract that proves your right to use the premises, such as a lease agreement or a loan for use agreement. You also need to have an agreement from the landlord that allows you to use the premises for commercial purposes.


In addition, you need to have an agreement from your direct neighbors and from the association of owners or tenants (if applicable) that allows you to perform your activities in your premises. This agreement should state that your activities do not disturb or affect their rights or interests.


All these agreements should be signed by all parties involved and should be authenticated by a notary public.


Registering the Branch with the Trade Registry




The third step is to register your branch with the Trade Registry in Romania. You need to submit an application form along with several documents, such as:



  • The resolution or decision of establishing the branch with the Trade Registry



  • The original and a copy of the parent company's documents (articles of association, certificate of incorporation, etc.)



  • The original and a copy of the resolution or decision of establishing the branch



  • The original and a copy of the contract that proves the right to use the premises



  • The original and a copy of the agreement of the landlord



  • The original and a copy of the agreement of the neighbors and the association of owners or tenants



  • The original and a copy of the identity document of the branch manager



  • A declaration on the activities that will be performed by the branch



  • A proof of payment of the registration fee



All these documents should be translated into Romanian by an authorized translator and authenticated by a notary public. The registration process can take up to 5 working days, depending on the workload of the Trade Registry. Once registered, the branch will receive a registration certificate and a fiscal identification code.


Obtaining the Necessary Authorizations and Permits




The fourth step is to obtain the necessary authorizations and permits for conducting your activities in Romania. Depending on the type and scope of your activities, you may need to obtain various authorizations and permits from different authorities, such as:



  • The local tax office



  • The environmental protection agency



  • The labor inspectorate



  • The health and safety inspectorate



  • The fire department



  • The sanitary-veterinary authority



  • The consumer protection authority



  • The national agency for food safety



  • The national authority for tourism



  • Other sector-specific regulators



You should check with each authority what are the specific requirements and procedures for obtaining their authorizations and permits. Some authorizations and permits may have a validity period and may need to be renewed periodically.


Advantages and Disadvantages of Establishing a Branch in Romania




Establishing a branch in Romania can have some advantages and disadvantages for your company. Here are some of them:


Advantages:





  • You can expand your market presence and reach new customers in Romania



  • You can increase your brand visibility and reputation in Romania



  • You can reduce your operational costs by taking advantage of lower taxes, labor costs, and rent prices in Romania



  • You can adapt your products and services to the local market preferences and needs



  • You can benefit from double tax treaty access between Romania and your home country



Disadvantages:





  • You have to comply with additional legal and administrative requirements in Romania



  • You have to pay additional taxes, such as corporate income tax, value added tax, local taxes, etc.



  • You have to bear full legal liability for any debts or obligations incurred by your branch in Romania



  • You have to maintain separate accounting records and financial statements for your branch in Romania



  • You have to deal with potential cultural and language barriers in Romania



Conclusion




In conclusion, establishing a branch in Romania can be a good option for your company if you want to expand your business activities in this country. However, you should also be aware of the legal and administrative procedures that you need to follow, as well as the advantages and disadvantages that this option entails. Here are some tips and recommendations for establishing a branch in Romania:



  • Do a thorough market research before deciding to establish a branch in Romania



  • Choose a suitable location for your branch that meets your business needs and objectives



  • Hire a professional translator and a notary public to assist you with the translation and authentication of your documents



  • Hire a local lawyer and an accountant to advise you on the legal and fiscal aspects of establishing a branch in Romania



  • Obtain all the necessary authorizations and permits for conducting your activities in Romania



  • Keep track of your branch's performance and compliance with the Romanian laws and regulations



FAQs




Here are some frequently asked questions about establishing a branch in Romania:


What is the difference between a branch and a subsidiary?




A branch is a secondary office that operates under the same name and legal personality as the parent company, while a subsidiary is a separate legal entity that has its own name and legal personality. A branch has limited powers, being dependent on the parent company's decisions, while a subsidiary has more autonomy, being able to make its own decisions. A branch does not have its own share capital, while a subsidiary does. A branch is fully liable for any debts or obligations incurred by a branch in Romania. This includes the time for preparing and authenticating the documents, registering the branch with the Trade Registry, and obtaining the authorizations and permits.


How much does it cost to establish a branch in Romania?




The cost of establishing a branch in Romania depends on several factors, such as the type and size of the branch, the location of the premises, the fees of the notary public and the translator, the registration fee of the Trade Registry, and the fees of the authorities that issue the authorizations and permits. A rough estimate is that it can cost between 500 to 1,000 EUR to establish a branch in Romania. However, this does not include the operational costs of running the branch, such as rent, utilities, salaries, taxes, etc.


What are the main obligations of a branch in Romania?




A branch in Romania has to comply with several obligations, such as:



  • Keeping separate accounting records and financial statements for its activities in Romania



  • Filing and paying corporate income tax on its profits derived from Romania



  • Filing and paying value added tax (VAT) on its taxable supplies in Romania



  • Filing and paying withholding tax on its payments to non-residents



  • Filing and paying social security contributions and personal income tax on behalf of its employees



  • Complying with the labor, environmental, health and safety, consumer protection, and other sector-specific regulations in Romania



  • Reporting any changes in its legal or factual situation to the Trade Registry and the relevant authorities



Can a foreign company establish a branch in Romania?




Yes, a foreign company can establish a branch in Romania, as long as it meets the same conditions and follows the same procedure as a Romanian company. However, a foreign company may need to provide additional documents for establishing a branch in Romania, such as:



  • A certificate of good standing or a similar document that proves the existence and legal status of the foreign company



  • A certificate of fiscal residence or a similar document that proves the tax residence of the foreign company



  • A certificate of registration or a similar document that proves the registration of the foreign company with its home country's Trade Registry or equivalent authority



  • A power of attorney or a similar document that authorizes a person to represent the foreign company in Romania



All these documents should be translated into Romanian by an authorized translator and authenticated by an apostille or a legalization stamp.


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