• Small and Medium-Size Enterprises
• Industrial Parks
• Preferential Economic Zones
• Free Trade Zones

Foreign investors and Romanian investors are offered equal opportunities to invest in Romania. In general, incentives are intended to enhance the economic development of the country, particularly the acceleration of industrialization in disadvantaged zones, as well as the development of small and medium enterprises (SME), oil and gas industries, and micro-enterprises.
However, a foreign investor should be careful when planning business on the basis of the current incentives granted by Romanian legislation due to the frequent amendments of laws in this field that occurred during the past several years.

Small and Medium-Size Enterprises
Law No. 346/2004 which abrogated Law No. 133/1999 provides incentives for private investors that establish or develop small and medium-size enterprises (SME).

Romanian law defines a small and medium-size enterprise as one that has fewer than 250 employees, whose annual turnover does not exceed 50 million EUR, or their total assets value more than 43 million EUR. If more than 25% of the share capital or of the voting rights of a company are owned/hold solely or cumulatively by a public entity, that company cannot be SME.
Banking companies, insurance and reinsurance companies, companies managing investment funds, financial investments companies (that is, security trading companies) and companies which have external trade as sole object of activity do not qualify as SME.

Incentives pertaining to custom duties exemption, income tax exemption on reinvested profits, accelerated depreciation, and reduction of income tax were abrogated by Law on VAT No. 345/2002, Profit Tax Law No. 414/2002 (both of these acts presently abrogated as well) and by the Fiscal Code.

Preferential Economic Zones
According to Government Emergency Ordinance No. 24/1998, as further amended for the establishment of preferential economic zones in disadvantaged areas, these zones may be determined by Governmental Decision for a period of at least three years, but no more than 10 years. Law No. 507/2004 abrogated the provision granting the possibility of extending the said 10 years period.
Currently, there are 28 disadvantaged zones established in Romania, nearly all for a period of ten years, and located largely in the mining areas of the country.
The fiscal incentives granted to this type of establishment were also subject to various changes; presently such incentives include the following:

1. Exemption from customs duties paid on imported raw materials and spare parts to be used in the production process, except for those raw materials and spare parts utilized for the production, processing and conservation of meat;

b. Exemption from land-related taxes (i.e., the land is removed from the agricultural circuit);

c. Profit tax exemption for the new investments, while the area is qualified by the law as disadvantaged, applies only to the legal entities which obtained before 1 July 2003 the permanent investor certificate for the disadvantaged area;
d. Granting of funds for financing special programs, approved by Government Decision, (the above-mentioned funds are granted from the Special Development Fund, set up according to the Government Emergency Ordinance No. 59/1997 regarding the destination of the sums cashed by the State Ownership Fund during the privatization of state-owned commercial companies or from other Governmental sources).

Industrial Parks
Government Ordinance No. 65/2001 (the Ordinance) as further amended has replaced Law No. 134/2000 regarding industrial parks. These are considered strictly delimited areas where economic, research and technological development activities are performed. An industrial park may be set up only by a joint venture (asociere in participatiune) between the public authorities, legal entities, the research and development institutes and/or other interested partners, as applicable. The industrial park will be managed by a Romanian company to be established in accordance with the Company Law, and whose shareholders can be the aforementioned partners of the partnership.
The incentives granted to industrial parks have suffered cancellations and/or amendments during the time, and recently through the Fiscal Code.

The following incentives apply presently to the establishment and development of an industrial park:

1. Exemption from land-related taxes, when changing the destination of land afferent to the industrial park or for its removal from the agricultural circuit;

b. Tax reduction may be approved by the local public administration for the land and buildings destined for the use of the industrial park;
c. Other incentives that may be granted by local public administration in accordance with the law.

Free Trade Zones
Law No. 84/1992 as further amended regulates the free trade zones regime.

Free trade zones are precisely determined, being characterized by a specific custom regime: the custom supervision is limited to the borders of such areas.
Means of transportation, products and other goods are admitted within the free zones regardless of their country of origin, provenience or destination. However, import of goods subject to prohibitions under Romanian laws or under international agreements to which Romania is a party, is forbidden.
Currently, there are six free trade zones in operation in Romania located in Constanta Sud-Agigea (at the Black Sea, including the harbor area), Sulina, Galati, Braila, Giurgiu (along the Danube River), and Curtici-Arad (along the Romanian-Hungarian border).
All activities that can be carried out by the respective individuals or entities within a specific free trade zone are determined by the law, and should be licensed by the administrative authority of the respective free trade zone.
The profit tax exemptions initially granted through Law No. 84/1992 have been restricted through the subsequent legislation and further amended by the Fiscal Code.
Based on the provisions of the Fiscal Code, the following main incentives are available in the free trade zones:
- Exemption from profit tax for the investments in tangible depreciable assets made in the free zone before 1 July 2002, on condition that the investment value is at least USD 1 million and the ownership structure does not change with more than 25% within a calendar year. This incentive applies until 31 December 2006; the other investments in the free zones were subject to a 5% profit tax applicable only until 31 December 2004;
- Exemption from VAT payment for the import of goods into free zones for storage purposes only, without the performance of custom formalities, provided that such goods are subsequently removed from the free zone;
- Exemption from VAT for the sale-purchase operations of foreign goods between various operators from the free zone/free harbor or between these ones and other persons outside the free zone/free harbor;
- VAT exemption for services directly related to the operations mentioned at paragraphs above;
- VAT exemption for goods introduced in free trade zones from abroad and sold within the free trade zones.
When liquidating or restraining the activity carried out in the free zones, foreign individuals and legal entities are free to transfer abroad both capital and profit, after paying all obligations towards the Romanian State and their business partners.
The legislation also permits the lease or concession, to Romanian or foreign legal entities, of land or buildings located in the free trade zones, for terms of up to forty nine years.
Financial operations related to the activities carried out in free trade zones should be made in hard currency.

Energy

The directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC established that since 1^st of July, 2007, all the energy markets (electricity and gas) should be opened to all consumers.

What does the energy market “opening” imply ?

An “open” energy market allows companies to enter the market to provide to population the supply of electricity and gas. This means that, since 1^st of July, 2007, many competing suppliers have been allowed to enter the market and make offers to consumers. The consumers have the right to chose the most convenient offer; also, in case the consumers do not want to opt for another supplier than the traditional one, they are protected by regulations of the authorities as for their right to receive electricity at convenient, transparent and easily comparable prices. The Romanian Energy Regulatory Authority – ANRE is obliged to create the necessary guidelines so that the consumers should trust the market and choose the best offer. An open market is protecting in the same time the investors’ interests, which is vital for the proper functioning of the European internal market and for stimulating the competition, the innovation and the economical development.

Searching for the most suitable and profitable offer is in every consumers interest. The consumers is entitled to change his electricity and gas supplier without any tax. By exercising the right to choose the supplier, we are contributing to stimulating the competition in this field and to extend the use of new types of energy.

The supply of electricity to private consumers and small companies is regulated by standards contract only. These contracts are issued by the regulator for every consumer category and have minimum mandatory clauses regarding:

• Duration of the contract;
• Renewal and cancellation clauses;
• The applied tariff;
• The date of meter reading;
• The invoice period and payment conditions;
• Multiple payment methods (home- for some private consumers- to individual collectors, at the supplier’s pay office, by bank or at the postal office)
• Compensations for tension deviation from the nominal value;
• Supplier’s obligation to inform the consumer about the scheduled stoppages.

Mineral Resources
Romania is rich in mineral potential, especially oil, gas, salt, gold and silver ores, and non-ferrous metals. Recent geological and geophysical studies have shown that there are many mineral deposits (gold, silver, lead, zinc, copper, iron and manganese), as well as oil reserves (both near-surface and at depth) that have considerable potential for further investigation. These offer substantial opportunities for foreign investors interested in the country’s mineral resources.
Mining Law No. 85/2003, as further amended which has replaced Law No. 61/1998, regulates mining activities in Romania. Its defined scope is to ensure the maximum transparency of mining activities and fair competition without discrimination between operators, depending on the property type or origin of the capital/operators.
Mineral resources located on the ground and underground of the Romanian territory as well as those on the continental platform and in Romania’s Black Sea economic area, belong to the State’s public property.

Mining is carried out through a mining license granted by the National Agency for Mineral Resources (NAMR) for a maximum period of twenty years, and the right to extend it for successive periods of 5 years each in exchange for an annual mining royalty and surface tax.

Each mining license is established by Governmental Decision, and its provisions will remain valid throughout the license period, except when possible legal dispositions favorable to the license holder might come into effect.

Foreign operators should create a permanent subsidiary in Romania within ninety days of obtaining the mining license which will be maintained throughout the period.

Petroleum Law
Petroleum Law No. 134/1995, regulating all operations involving oil and gas reserves within Romania, was abrogated by Law No. 238/2004.

Oil resources located on the Romanian territory are exclusive object of the public property of the Romanian State.
The interests of the Romanian State in the mineral oil sector are represented by the National Agency for Mineral Resources. Through its representative authority – NAMR, the Romanian State, by oil concession, grants to a Romanian or foreign legal entity, for a limited period of time, the right and the obligation to perform oil operations, based on an oil agreement. The concession period may not exceed 30 years.

The oil operations can be conducted through exploitation licenses or exploration permits only within some perimeters, as delimited by NAMR. Titleholders of an oil license are liable to pay a petroleum royalty in accordance with the provisions of Petroleum Law No. 238/2004.
Foreign operators should create a Romanian permanent establishment (i.e., a branch or company) within ninety days of obtaining the oil and gas license which will be maintained throughout the period.

Unlike Law No. 134/1995, Law No. 238/2004 does not grant any incentives to the titleholders of an oil license.