There are two different types of incentives: concerning sustainable development, taxation, and job creation.
Note: All legal documents are in Romanian.
Romania offers equal opportunities to invest for foreign and domestic investors.
Under the Fiscal Code, [ Law 571 / 2003 regarding the Fiscal Code, Art.24 , paragraph (6)b], machinery and equipment, computers and their peripherals, as well as patents, may be depreciated by using the accelerated method, under which a maximum of 50% of the fiscal asset's value may be deducted during the first year of usage, while the rest of the asset's value can be depreciated over the remaining useful life.
Special Incentives for expenses related to research and development activities
Companies can benefit from an additional deduction of 20% from the eligible expenses in respect of the research and development activities performed by them. Moreover, accelerated depreciation may be applied for devices and equipment used in the research and development activity. This incentive is applicable provided that the beneficiary participates in a state aid scheme supporting research, development and innovation. Deferred taxation: accounting revaluation recognised for tax purposes
Fixed assets revaluation pursuant to an accounting requirement is also recognised for corporate income tax purposes. In other words, if a Romanian company revalues its fixed assets at a value higher than the book value, due to the increase in their net fiscal value thus achieved, the company can benefit from increased tax depreciation, as well as a lower tax on the profits obtained through a sale of these assets. The taxable moment for these revaluations is when the related realised revaluation reserves, which were previously deducted, are distributed to the shareholders.
Therefore, these tax provisions have the advantages that the moment of taxation can be deferred, controlled and 100% of the cash from the investment can be used for reinvestment.
Dividend tax exemption for reinvestments as of 2009
Distributed dividends are exempted from taxation as of 1 January 2009 if they are invested in the same or in another Romanian company's share capital. To benefit from this exemption, dividends must be reinvested to preserve and increase the number of employees and to boost existing lines of business.
Reduced VAT rate of 5% for sale of buildings
Companies selling buildings can apply a reduced VAT rate of 5% in the following cases:
if the buildings are part of a social policy, such as old people's homes, retirement homes;
orphanages, rehabilitation centres for children with disabilities;
the building is supplied as housing to an individual / family and has a maximum useful surface of 120 square metres and a value of less than RON 380,000 (exclusive of VAT).
Local tax exemptions for business located in industrial parks, and scientific and technological parks
No property tax is due for buildings and constructions located in an Industrial Park. Also, land within Industrial Parks is exempt from land tax.
The incentives granted for the set up and development of industrial parks includes:
lower taxes on tangible assets and land used by the park;
exemption of specific taxes on land;
deferred payment of VAT for materials, equipment and connection to the public utilities networks during the investment period, until the park is put into operation;
development programmes for infrastructure, investments and equipment endowments granted by the local and central public administration, companies and foreign financial assistance;
donations, concessions and structural funds for development.
The companies operating within the park benefit from:
various services offered by the park administrator free of charge or with reduced fees;
advantageous conditions with regard to location, use of the infrastructure and communications of the park, with payment in installments.
Special tax regime for micro-companies
Companies can opt for the micro-company regime if several criteria are met:
annual turnover up to EUR 100,000
have between 1 and 9 employees
derive more than 50% of their turnover from activities other than consultancy and management
Micro-enterprises are subject to tax on revenues of 3% applied to the micro-enterprise's annual turnover, excluding certain types of income. Failure of the above conditions will put the company in the profit tax payer situation.
State aid scheme for new investments
State aid scheme, delivered by the Romanian Government to companies who are implementing investments in Romania, is stated by the Government Decision 160/2008 and is applicable from 1st of January 2009.
Limitations of the scheme are referring to:
An initial investment between 5 to 10 Million Euro and generating a minimum number of 50 jobs following the initial investment;
An initial investment between 10 to 20 Million Euro and generating a minimum number of 100 jobs following the initial investment;
An initial investment between 20 to 30 Million Euro and generating a minimum number of 200 jobs following the initial investment;
An initial investment above 30 Million Euro and generating a minimum number of 300 jobs following the initial investment;
Other limitations referring to the impact of the investments within the specific industrial sector, the increase of the dimensions of the project, a decrease of the time for implementation and a direct influence of the state aid in the decision of the company to invest in that specific region.
The state aid scheme is valid for 5 years, starting with 1st of January 2009 and has a total budget of 1 billion Euro but not more than 200 Million Euro per year.
The facilities granted for job creation are calculated based on the reference social indicator, whose value is adjusted by the government based on the forecasted consumer price growth index. [Law 76/2002 regarding the system of unemployment insurance and the stimulation of employment]
The reference social indicator of the unemployment insurances and the stimulation of employment, hereinafter referred to as the reference social indicator, is the unit in lei used for expressing the money contributions, except for the unemployment benefit, paid from the state budget, granted both for insuring people within the system of unemployment insurances and for stimulating certain categories of people to seek employment, as well as stimulating employers to employ people looking for a job. [Law 76/2002, art. 5, paragraph IX]
The value of the reference social indicator is adjusted through government decision, depending on the forecasted year-on-year consumer price growth index. [Law 76/2002, art. 127 (3)]
- Employing fresh graduates: The employers employing fresh graduates for an indefinite period are exempted from the payment of the contribution to the unemployment ensurance budget concerning those fresh graduates and will receive, on a monthly basis, for each fresh graduate employed:
a) an amount equal to the value of the reference social indicator in effect at the time of the employment, for graduates of lower secondary school or of arts and crafts schools;
b) an amount equal to 1.2 times the value of the reference social indicator in effect at the time of the employment, for graduates of higher secondary education;
b) an amount equal to 1.5 times the value of the reference social indicator in effect at the time of the employment, for graduates of higher education. [Law 76/2002, art. 80, paragraph 1]
- Employing disabled graduates: The employers employing graduates with disabilities for an indefinite period will receive, on a monthly basis, for each graduate, the amounts mentioned in paragraph (1) over a period of 18 months. [Law 76/2002, art. 80, paragraph 2]
The employers employing graduates under the terms of art. 80 must maintain the labour or employment relations of these graduates for at least 3 years following the conclusion of the employment contract. [Law 76/2002, art. 83 (1)]
- Employing unemployed people: The employers employing, for an indefinite period, unemployed people over the age of 45 or who are single parents, are exempted for 12 months from the payment of the contribution to the unemployment insurance budget for these persons and will receive, on a monthly basis over this period, for each employee belonging to this category, an amount equal to the value of the reference social indicator in effect, with the obligation of maintaining the labour or employment relations for at least 2 years. [Law 76/2002, art. 85 (1)]
- Training expenditures: In order to prevent unemployment and consolidate jobs by increasing and diversifying employees' professional skills, those employers that organize professional training programmes for their employees based on the annual training plan, carried out by legally authorized professional training suppliers, will receive an amount representing 50% of the expenditures for the training services organized for no more than 20% of the employed staff. [Law 76/2002, art. 83^1 (1)]
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