Foreign Investments in Romania. Commercial Law Attorney.
Foreign direct investments (FDI) play a significant role in the economic development of Romania, bringing not only capital but also advanced technologies, managerial know-how, and job creation. Romania has implemented numerous legislative measures to attract and stimulate foreign investments, two of the most relevant being Emergency Ordinance No. 46 of April 14, 2022, and Emergency Ordinance No. 92 of December 30, 1997. These legislative acts have created a favorable framework for investors, ensuring a stable and attractive business environment.
Foreign direct investments are essential for the economic growth of a country. They provide the necessary financial resources for infrastructure development, contribute to the modernization of industrial sectors, and enhance the competitiveness of the local economy. In the case of Romania, attracting FDI has been a constant priority, given the need to improve infrastructure and reduce regional economic disparities.
What is a "foreign investment" under GEO no. 46/2022? Commercial law attorney.
Emergency Ordinance no. 46/2022, was adopted to update the legal framework for foreign investments in Romania when they originate from outside the European Union. GEO no. 46/2022 implements Regulation (EU) 2019/452 of the European Parliament and of the Council of March 19, 2019, establishing a framework for the screening of foreign direct investments into the European Union.
"Foreign direct investment" refers to any type of investment made by a foreign investor with the aim of establishing or maintaining lasting and direct links between the foreign investor and the entrepreneur or enterprise to which these funds are intended for the conduct of economic activity in Romania. This includes investments that allow effective participation in the management or control of an enterprise carrying out economic activities.
A foreign direct investment also occurs when there is a change in the ownership structure of a foreign legal entity investor, if this change regarding the legal entity makes it possible to exercise control, directly or indirectly, by:
an individual who is not a citizen of a member state of the European Union;
a legal entity whose registered office is not in a member state of the European Union; or
another legal entity without legal personality, organized under the laws of a state that is not a member of the European Union.
What other laws are relevant for foreign investments, such as buying equity in a limited liability company (SRL)? Commercial Law Attorney.
The initial regulations for foreign investments were adopted through GEO no. 92/1997, which establishes the general framework regarding the guarantees and facilities that direct investments in Romania benefit from. GEO no. 92/1997 represented an important step in stimulating direct investments. It was one of the first legislative measures aimed at creating a favorable investment climate during the transition to a market economy.
According to GEO 92/1997, direct investment represents participation in the establishment or expansion of an enterprise in any of the legal forms provided by law, the acquisition of shares or social parts of a commercial company, except for portfolio investments, or the establishment and expansion in Romania of a branch by a foreign commercial company, through:
financial contribution, in national currency or convertible currency;
contribution in kind of immovable or movable property, tangible and intangible;
participation in the increase of an enterprise's assets, through any legal method of financing.
Who qualifies as a foreign investor according to GEO No. 46/2022? Commercial law attorney.
According to GEO No. 46/2022, a "foreign investor" is defined as a natural or legal person who meets the following criteria:
a natural person who is not a citizen of a European Union member state and who has made or intends to make a foreign direct investment in Romania.
a legal entity whose registered office is not in a European Union member state and who has made or intends to make a foreign direct investment in Romania.
a legal entity whose registered office is in a European Union member state and who has made or intends to make a foreign direct investment in Romania, where control is exercised directly or indirectly by: a natural person who is not a citizen of a European Union member state, a legal entity whose registered office is not in a European Union member state, or another legal entity without legal personality, organized under the laws of a state that is not a member of the European Union.
the trustee of an entity without legal personality that has made or intends to make a foreign direct investment in Romania, or a person in a similar position, if this person is not a citizen of the European Union, in the case of a natural person, or if the registered office is not in a European Union member state, in the case of a legal entity, or if this entity was established under the laws of a state that is not a member of the European Union.
Can a foreign investor make an investment in Romania, including through participation in an SRL-type commercial company, without prior authorization?
According to Emergency Ordinance no. 46/2022, it is prohibited to make a direct foreign investment before its authorization by the competent authority.
Which authority authorizes investments according to GEO No. 46/2022? Ask a lawyer online.
CEISD stands for the Commission for the Evaluation of Foreign Direct Investments. This is a governmental entity responsible for the evaluation, monitoring, and approval of foreign direct investments in Romania. The main role of CEISD is to ensure that foreign investments comply with national and European economic and strategic security interests. The Commission collaborates with various ministries and governmental agencies to assess the impact of these investments and to provide support and assistance to foreign investors, thereby ensuring a transparent and favorable investment environment.
Who can notify CEISD regarding the non-fulfillment of conditions concerning foreign investment? Commercial law attorney.
CEISD can self-notify regarding the non-fulfillment of authorization conditions for a direct foreign investment.
CEISD can also be notified by:
a public authority that justifiably finds it necessary to initiate the examination procedures of the foreign investment.
economic operators, civil society representatives, or social partners, such as trade unions, concerning a direct foreign investment that may affect security or public order.
CEISD can request the involved parties to go through the procedures provided by law.
What are the sanctions if a foreign investor does not seek CEISD authorization before making a foreign investment in a limited liability company (SRL) in Romania?
If a foreign investor does not notify the investment to the Commission for the Evaluation of Foreign Direct Investments (CEISD) and does not obtain the necessary approval before implementing the investment, several types of sanctions may apply, including:
Cancellation of the investment.
The investment made without CEISD approval can be declared null and void, and the authorities may order measures to restore the previous situation.
Article 12 (3) ind. 1 of GEO No. 46/2022: Any commitments, agreements, or contractual clauses directly or indirectly effecting a foreign direct investment, an investment from the European Union, or a new investment are null and void if the respective investment has not been authorized under the conditions of this emergency ordinance and under Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union.
Financial sanctions.
The investor may be subject to substantial fines. These fines can be determined based on the value of the investment and the severity of the legal violation.
Article 12 (1) of GEO No. 46/2022: It constitutes a contravention, if the act does not constitute an offense, and is sanctioned, by way of derogation from the provisions of Article 8 (2) letter a) of Government Ordinance No. 2/2001 on the legal regime of contraventions, approved with amendments and completions by Law No. 180/2002, as subsequently amended and supplemented, with a fine not exceeding 10% of the total worldwide turnover from the financial year preceding the sanction, for the following acts by the foreign investor and the European Union investor:
a) Intentionally or negligently providing inaccurate, incomplete, or misleading information in an application for authorization of foreign direct investment, new investment, or, as the case may be, investment from the European Union;
b) Implementing a foreign direct investment, new investment, or, as the case may be, investment from the European Union without it being authorized under the conditions of this emergency ordinance, committed intentionally or negligently;
c) Implementing the foreign direct investment, new investment, or, as the case may be, investment from the European Union without respecting or violating the commitments assumed through the conditional authorization decision provided for in Article 9 (2) letter b), committed intentionally or negligently;
d) Failing to communicate the information necessary for examining and approving the foreign direct investment within the legal deadlines and in a complete and correct manner.
Criminal liability.
In severe cases, if it is found that failure to notify has significant consequences on national security or Romania's strategic interests, the investor may be subject to criminal liability.
Administrative liability.
In cases provided by law, the foreign investor may face administrative liability. The fine that can be applied is up to 10% of the SRL’s global turnover for the previous financial year.
Administrative sanctions for newly established liited liability companies (SRL): For a newly established SRL as a result of a foreign direct investment, new investment, or, as the case may be, investment from the European Union that has not recorded turnover in the year prior to the sanction, the fine will range between 10,000,000 RON and 50,000,000 RON.
Complementary sanctions
Disregarding the notification requirements can lead to prohibition on making other investments. The investor may be prohibited from making other investments in Romania for a certain period of time.
These sanctions ensure compliance with the legal requirements for foreign investments in Romania and protect national and strategic interests.
What is the statute of limitation for sanctioning a limited liability company (SRL) for disregarding notification regime?
According to GEO no. 46/2022, the statute of limitations for administrative liability in cases where a foreign investor fails to notify the investment to the Commission for the Evaluation of Foreign Direct Investments (CEISD) is either 3 or 5 years from the date of the offense, depending on its nature. It follows that the competent authorities have a period of 3 or 5 years to identify and sanction the foreign investor who did not notify the investment in accordance with legal provisions.
The statute of limitations generally begins to run from the date the offense is committed, meaning the date on which the specific action constituting the contravention was taken without prior notification. In the case of continuous or repeatable violations, the statute of limitations begins to run from the date of the cessation of the last anticompetitive act or conduct in question.
In certain cases, the statute of limitations may be suspended or interrupted, for example, if there are ongoing administrative or judicial procedures that prevent the application of the sanction.
What is the examination fee for foreign investment in the case of a limited liability company (SRL)?
According to the 2023 amendments to Law No. 21/1996 on competition, foreign investors who need to authorize an investment must pay an examination fee of 10,000 euros at the time of submitting the authorization request. The equivalent in lei of the examination fee is calculated at the exchange rate communicated by the National Bank of Romania valid for the last day of the month preceding the date of submission of the authorization request.
The examination fee is refundable if the Commission for the Evaluation of Foreign Direct Investments (CEISD) finds that the conditions for examining the authorization request are not met.
What guarantees do foreign investors have in Romania? Commercial law attorney.
Foreign investors in Romania benefit from a series of guarantees that ensure the protection and security of their investments, in accordance with Romanian legislation and international treaties. Here are the details of these guarantees:
Possibility of making investments in any sector and legal forms provided by law. Ask a lawyer online.
Foreign investors have the right to make investments in any economic sector permitted by Romanian legislation, whether it is industry, agriculture, services, or other fields. They can also choose any legal form provided by law, including the establishment of commercial companies (SRL-type firms), partnerships, branches or subsidiaries, or through the use of commercial contracts (models).
Equal treatment - fair, equitable, and non-discriminatory. Ask a lawyer online.
Foreign investors benefit from equal treatment with Romanian investors. This means they are subject to the same rules and regulations, without discrimination based on nationality or residency status. Equal treatment applies in all aspects, including access to resources, public services, and business opportunities.
Guarantees against nationalization, expropriation, or other measures with equivalent effect. Ask a lawyer online.
Romanian legislation protects foreign investors against nationalization or expropriation without fair compensation. Expropriation is permitted only for public utility reasons, under legal conditions, and with prior, fair, and effective compensation. Other measures with equivalent effect are also prohibited.
Customs and fiscal facilities. Commercial law attorney.
Foreign investors can benefit from various customs and fiscal facilities, which may include exemptions from customs duties for importing equipment and raw materials necessary for investments, as well as reductions or exemptions from profit tax, VAT, or other local taxes, depending on the nature and location of the investment.
Assistance with administrative formalities. Commercial law attorney.
Foreign investors receive assistance from Romanian authorities to facilitate the administrative formalities necessary for establishing and operating their businesses. This includes support in obtaining authorizations, licenses, and other required documents, as well as guidance through bureaucratic processes.
Right to convert investment amounts in lei to foreign currency and transfer the currency to the country of origin.
Foreign investors have the right to convert the amounts in lei obtained from their investments into foreign currency and to transfer the respective currency to the country of origin. This is done in accordance with foreign exchange regulations, thus ensuring the repatriation of profits and other revenues.
Right to choose competent courts or arbitration bodies for dispute resolution.
Foreign investors can choose to resolve their disputes either in Romanian courts or through international arbitration. This provides flexibility and the ability to choose a dispute resolution forum that is perceived as impartial and competent. Read about the differences between arbitration and courts.
Possibility of carrying forward losses to offset taxable profit in subsequent financial years.
Foreign investors have the right to carry forward losses incurred in one financial year to offset the taxable profit of subsequent financial years. This allows for efficient tax management and reduces the tax burden in future years.
Possibility of using accelerated depreciation.
Romanian legislation permits the use of accelerated depreciation for fixed assets, which means that investors can more quickly deduct capital costs from taxable profit. This encourages investments in modern equipment and infrastructure.
Possibility of deducting advertising and marketing expenses from taxable profit
Foreign investors can deduct expenses incurred for advertising and marketing from taxable profit. This facilitates marketing activities and the promotion of their products and services, contributing to increased visibility and competitiveness in the market.
Possibility of hiring foreign citizens.
Foreign investors have the right to hire foreign citizens, in accordance with the legal provisions in force. This includes obtaining the necessary work permits and visas for foreign employees, allowing investors to bring in the expertise needed from other countries. Check the labor law section of Docs & Deeds for an individual employment contract template, an internal regulation template, and custom made contracts.
These guarantees contribute to creating a safe and attractive business environment for foreign investors, thus stimulating investment flows and the economic development of Romania.
Docs & Deeds offers contract templates, templates for court statements of claim, and access to commercial law attorneys or specialists in other business fields.
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