Why Invest in Romania

Romania is a land of great beauty, abundant natural resources, and vast untapped potential. This Eastern European nation has been actively seeking direct investment, taking proactive steps to improve its business climate, and encouraging foreign investors to explore its wealth of opportunities. When embarking on a trip to Romania, it's imperative to keep in mind that obtaining a Romanian visa is a requisite for your visit.

In this comprehensive guide, we will delve into the compelling reasons why you should consider investing in Romania. 

Why Invest in Romania

Alt tag:(Euro coin leaving Romania, 3d rendering)

1. Strategic Location and Accessible Markets

European Union and NATO Membership: Romania joined the European Union (EU) in 2007 and is a member of NATO. This dual membership ensures stability, security, and access to a vast market.

Geographical Advantage: Situated at the crossroads of Europe, Romania is strategically located for transportation and import/export activities. It serves as a convenient gateway to both Middle Eastern and European Union markets.

Abundant Natural Resources: Romania boasts a treasure trove of natural resources, including mineral deposits (e.g., petroleum, natural gas, salt, coal, iron ore, copper, zinc, gold), ample timber, and highly fertile agricultural land, providing diverse investment opportunities.

2. Valuable Workforce

Talented Workforce: Romania's workforce is known for its skills and adaptability. With a significant portion of the population being bilingual or trilingual, and English widely spoken, you'll find it easy to communicate and collaborate with the workforce.

Competitive Labor Costs: Compared to many other European countries, Romania offers cost-effective labor solutions, making it an attractive destination for businesses aiming to optimize operational expenses.

Entrepreneurial Spirit: Romania is home to a growing number of young, highly educated entrepreneurs who are enthusiastic about investing their time, resources, and innovative ideas in the country.

3. Key Investment Areas

While Romania is progressing across various sectors, some areas stand out as particularly promising for investors:

  • Infrastructure: Ongoing infrastructure development projects create opportunities in construction, transportation, and logistics.
  • Industry: The manufacturing sector, including automotive and aerospace industries, is rapidly expanding.
  • Agriculture and Farming: Fertile land presents opportunities in agriculture and agribusiness.
  • Education: The education sector is experiencing growth, with potential investments in schools, universities, and edtech.
  • Information Technology: Romania's IT market is booming, with a constant influx of investments and a tech-savvy workforce.
  • Tourism: Romania's picturesque landscapes and cultural heritage make it an attractive destination for tourism-related investments.

4. Favorable Tax Environment

Romania offers an appealing tax structure for foreign entrepreneurs:

  • Low Corporate Income Tax: With a corporate income tax rate of 16%, Romania boasts one of the lowest rates in Europe.
  • Income Tax Incentives: A 5% income tax applies to dividend revenues, and reinvested profits in technological equipment are exempt from taxation.
  • Low VAT Rate: Romania maintains a low VAT rate of 19%, reducing the tax burden on businesses.

5. Well-Developed Industrial Parks

Romania hosts around 94 industrial parks, providing a conducive environment for businesses. Benefits for foreign companies in these parks include tax exemptions for buildings and lands owned or rented. Industrial parks are distributed across the country, offering flexibility and convenience.

6. Investments in Major Cities

Apart from the capital, Bucharest, several cities in Romania are highly sought after by foreign investors:

  • Cluj
  • Brasov
  • Timisoara
  • Oradea
  • Sibiu
  • Arad
  • Targu Mures

These cities offer favorable logistics, affordable employment costs, and workspace rentals. Sectors like retail, FMCG, and construction are thriving, and Romania's government continues to improve infrastructure and logistics to support economic growth.

7. Protection Against Double Taxation

Romania has signed numerous double taxation agreements, ensuring that businesses and their profits are protected against tax evasion. 

This means taxes are only paid once, either in the country where the profits are recorded or in the country of origin. In case of double taxation, mechanisms like tax credits or tax treaties are in place to prevent overpayment.

8. Trends and Figures in the Construction Sector

Despite challenges in 2020, Romania's construction sector has been on an upward trend. It contributed approximately 7.8% to the country's GDP, with a value of over EUR 20 billion in 2020. 

Residential and non-residential building projects, along with engineering constructions, have thrived. While there are still some bureaucratic hurdles, the construction sector remains balanced and structured, with potential for further growth.

9. Robust IT Sector

Romania's economy is significantly bolstered by the IT industry, particularly the software sector. Investment specialists continue to support its development, with investors from Luxembourg, Germany, Great Britain, the Netherlands, and Cyprus playing key roles. The IT sector represents 7% of the country's GDP and offers attractive fiscal incentives, including no income tax within the IT and research and development sectors.

10. Positive Investment Climate

Romania is undoubtedly a popular investment destination, offering numerous advantages to support foreign businesses. With support in areas such as taxes, registration, and payments, investors can navigate the Romanian market with confidence. 

Romania's government is actively committed to fostering a favorable investment climate, reducing bureaucracy, and supporting business growth.

Investment Tips for Foreigners in Romania

  • Explore Investment Opportunities: Start by exploring the diverse investment opportunities Romania has to offer.
  • Stay Informed: The legislative landscape may change, so it's crucial to stay updated and align your business strategy accordingly.
  • Know Your Market: Understand your customers and consumers to provide optimal services and products.
  • Build Relationships: Establish strong business relationships and collaborate effectively with local partners and collaborators.

Top 5 Reasons to Invest in Romania

  • Ease of Company Formation: Registering a company in Romania is straightforward, especially with the guidance of experienced business incorporation agents.
  • Diverse Business Sectors: Romania presents various opportunities in well-developed sectors such as manufacturing, textiles, real estate, tourism, and education.
  • Attractive Tax System: Romania offers a competitive corporate income tax rate of 16%, one of the lowest in Europe.
  • Generous Incentives: Holding companies in Romania benefit from tax exemptions on capital gains, dividends, and share sales, among others.
  • Skilled Labor Force: Romania boasts an experienced and multilingual workforce, offering a valuable resource for businesses.

Romania's Investment Outlook

Romania continues to attract foreign direct investment (FDI) with a positive investment climate and supportive government policies. In 2019, the country received approximately USD 97 billion in FDI stock. 

It ranks 55th out of 190 economies in the world, according to the 2020 Doing Business report. Key investors in Romania include Austria, Germany, the Netherlands, Cyprus, and Italy. The country also saw a total value of approximately USD 6 billion in greenfield investments in 2019.

If you are considering starting a business in Romania or need more information about the country's legislation regarding foreign investments, our team of Romanian accountants is here to assist you. Feel free to reach out for guidance and support as you embark on your investment journey in Romania.

Romania's New Investment Agency and Its FDI Outlook

Romania is gearing up for the launch of a new agency dedicated to investment and foreign trade. This agency, named Arice, will operate under the Prime Minister's office and is set to absorb the existing InvestRomania agency, previously under the Ministry of Entrepreneurship and Tourism. 

George Agafitei, State Counsellor to Prime Minister Nicolae Ciucă, played a pivotal role in shaping the country's investment policy and strategy, with the agency expected to become operational within the next few months. 

In a conversation with fDi, Agafitei shed light on the agency's objectives, Romania's impressive 2022 performance in foreign direct investment (FDI), and the country's image versus its reality.

Why is the government establishing this new agency?

The idea behind creating Arice stems from extensive discussions with investors on areas that need improvement. We identified the need for a single government contact point to streamline processes and cut through bureaucratic red tape

Arice will serve as this point of contact, offering support to companies right from the initial stages of their investment. Although the final legislation was approved in February, it will take a few months to fully staff and set up the agency.

Integration with Existing Investment Promotion Efforts

InvestRomania, the investment promotion authority, will be integrated into Arice. While they have done commendable work, it's crucial to empower them further to handle the increasing influx of investments into the country. 

Additionally, we plan to expand the network of economic diplomats in our foreign embassies to enhance our ability to attract more FDI.

FDI Performance and Outlook

Central bank data indicates that FDI in Romania reached €10.7 billion in the previous year, marking the highest volume on record. My objective for 2023 is to further increase this to a range of €14 billion to €15 billion. 

The influx of EU funds through the National Recovery and Resilience Plan (NPPR) and the significant allocation for investment in the government's 2023 budget (112 billion lei; €22.8 billion) are positive indicators for achieving this goal.

Key Sectors: Renewables and IT

Romania's favorable geography and substantial NPPR funding have naturally driven growth in the renewables sector. The energy crisis and the need to reduce dependency on Russian energy sources have accelerated developments in this field.

The IT sector represents 7% of our GDP and has thrived due to fiscal incentives, such as no income tax within the IT sector and research and development. This approach aims to boost Romania's production of value-added products.

Significant Investments

Nokian's investment is highly significant for Romania. The decision to establish the factory in Oradea followed assessments of eight countries and meetings with Romania's Prime Minister. 

The state aid scheme, available for investments of at least €1 million or those employing 100 or more people, played a pivotal role. Romania's government is in the process of obtaining EU approval for providing Nokian with €99.5 million in state aid.

This investment is expected to create 500 jobs and benefit Romania's growing automotive industry. In the southern region, we already have a Ford factory and Renault's Dacia plant.

Addressing Past Concerns

Romania's image lags behind its reality, as significant improvements have been made. In 2022, the European Commission lifted its monitoring of the country under the Cooperation and Verification Mechanism, and we've initiated the OECD accession process, a privilege not extended to every nation. 

The government is focused on digitization, recently introducing electronic ID cards, illustrating our commitment to modernization and efficiency. Romania has come a long way, and these advancements bode well for its continued growth as an investment destination.

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