The Local Romanian Law

By: Eli Doron, Adv; Yaron Tikotzky, Adv, (C.P.A); Dr.Slomo Nass, Adv, (C.P.A)

1/1/1900

In 1991, by referendum, a constitution was adopted in Romania. The new constitution, based on the French constitution, but implementing principles from the German, Italian and Belgium systems, is codified as a European-Continental system. In 2003, Romania amended its constitution with 79 new articles in order to harmonize it with the European Union’s legal system, including determining it as a Democratic-Republic system.

On January 1st, 2007, Romania joined the European Union and simultaneously instigated a dramatic alteration of its legal system. Part of the changes included improving efficiency of the legal system, promoting transparency, fighting corruption and improving the information security systems. Moreover, as a result of the reformation, Romania increased and strengthened her international relations with Western nations, especially those of the European Union, which consist of approximately 70% of their foreign international commerce, but also increasing trade with the United States and Israel.

As a matter of fact, throughout modern history, the Israeli-Romanian relations have always been warm and tight. For instance, Romania was one of the few nations that continued to execute steady diplomatic relations with Israel after the Six Days War, and also participated immensely in the negotiation and implementation of the Israeli-Egyptian peace.

Economic stability, growth, decrease of inflation and low unemployment rates, after 2000, are of the symptoms of the economic and judicial growth of Romania, who’s heading toward a first class European and worldwide nation. The Romanian export, which is vital for her development, is based mainly on textile and footwear, metals, minerals and machinery. She can easily be defined as a steady economy, but also described for her outstanding growth. These phenomena have aspired vast Israeli-Romanian trade.

In 2005 Romania changed her progressive tax system in a 16% unified tax rate both for corporate tax and income tax. This rate is amongst the lowest in Europe, and thus the Israeli vast investment in Romania is well understood. Moreover, Israel and Romania have a Double Taxation Treaty, that came into power in 1999, and eases dual Israeli-Romanian commercial and trade.

In addition, with similarity to the Israeli Company Law, the Romania laws define similar types of companies. It is possible, therefore, to found a private or public company and with full or limited liability. Also, the Romanian law acknowledges partnerships, both limited or not.

A private limited company is limited to participation of up to 50 people and cannot sell her share to the market. However, the public company must have at least 5 shareholders, and the management’s liability for it, similarly to the private company, does not exceed the registered value of the company.

These companies, registered in Romania, are considered local Romanian companies for any legal issue. However, according to the Romanian law, it is possible to establish subrogate companies or branches in Romania, to be controlled by foreign companies that are not registered in Romania. This possibility enables to subject them to the foreign law and manage them according to foreign principles. However, these companies are still limited by certain local Romanian criteria.

For that matter, a foreigner who is interested in working in Romania must receive a working visa from the local authorities. Yet, due to the policy of promoting foreign investment and trade, they enable business, work, trade or professional visas fairly easily. However, it is necessary to receive both the Labor Office’s permit and the Romanian Foreign Bureau.