Regional Factbooks

3rd Qtr - 2000

Significant changes to indirect tax regulations in Romania were introduced at the beginning of October 1999. One such amendment is the suspension until the end of the year of all new temporary exemptions or reductions of customs duties rates. In effect this means that there should be no more concessions in terms of duty rates this year.

The treatment of in-kind contributions to the share capital of a Romanian company has changed again and this will have an impact on the import of vehicles. There are provisions in law to allow imports to be made VAT and duty-free if they are an in-kind contribution to share capital. This concession was suspended for 1999. The latest changes will apply when or if the suspension is lifted. Vehicles imported into Romania as an in-kind contribution will no longer benefit from the exemption.

A further change affecting vehicles is that vehicles (with the exception of ambulances) either imported or received as donation or aid by non-profit organizations will no longer benefit from exemption from import duties and VAT at the border. Vehicle leasing benefits are improved.

Excise tax for locally produced vehicles has been reduced by 35 percent. This is a temporary reduction that applies up to the end of the year to vehicles manufactured in Romania provided that locally manufactured parts and components used in the production of these vehicles exceeds 50 percent of the total.

Taken together, these provisions represent a shift of tax treatment in favor of local vehicle manufacturers.

Amendments to the leasing law and a new law on small and medium-sized enterprises were introduced earlier in the year. Both of these offer potential indirect tax savings to new businesses, but with both, the practical application of the law remains unclear in places.

FREE TRADE ZONES

One form of fiscal incentive that is likely to become increasingly popular is the use of free trade zones (FTZs).

FTZs are coordinated by the National Agency of Free Trade Zones, which currently functions under the authority of the Ministry of Transport. Romania has six FTZs, all located in ports with one exception - the newly established Arad-Curtici FTZ. Because of its location, this last one could become one of the most attractive for investors.

Among the activities that can be performed inside a free trade zone are, handling, warehousing, packaging, manufacturing, labeling, testing, repairing, assembling and disassembling operations, auctions, showrooms, stock and commodities exchange, quality and quantity control, renting of buildings and warehouses and transport operations.

To perform activities in a free trade zone an operating license must be obtained from the FTZ's Administration. Romanian companies or foreign ones can obtain such a license. The cost depends on the type of activity performed in the FTZ.

Law 84/1992, which regulates FTZs, mentions a number of fiscal incentives for investors. These include exemption from the payment of custom duties, excise taxes and profit tax for the activities performed in FTZ.

Tax authorities could have a very aggressive approach in allowing the profit tax exemption because of the lack of detail in the provisions. More specifically, they could try to impose a limited interpretation of profits from activities developed in FTZ. To help ensure that exemption is gained, investors should identify as clearly as possible the costs and income relating to the FTZ and separate that from other activities.

Goods brought directly from abroad into the FTZ are exempted from the payment of VAT. However, services performed in the FTZ could be subject to the VAT, since there is no specific exemption in this respect.

Goods can be stored in the warehousing facilities in an FTZ without paying or guaranteeing import duties. Import formalities should be performed, and import duties paid, only when foreign goods are removed from the FTZ to be imported into Romania, and export formalities when Romanian goods are introduced in the FTZ.

FTZs and other fiscal incentives will continue to play an important part in Romania's economic strategy and changes are likely in the future. But investors regularly express their wish for stability in the framework of tax law.

The National Agency of Free Trade Zones has elaborated the Law no. 84/1992, which regulates the legal regime of the free zones, set up through government resolutions, six important free zones: Sulina, Constanta Sud and Basarabi, Galati, Braila, Giurgiu and Curtici-Arad.

INDUSTRIAL / BUSINESS PARKS

In 2000, the Romanian Senate passed a draft law on industrial/business parks, stipulating that companies relocating within industrial/business parks benefit from several tax advantages - exemptions from the payment of custom duties, VAT and Profit taxes.

Industrial/Business parks are precisely delimited areas in which commercial activities are carried out under a specific system of facilities. The propositions to establish industrial parks are approved by the National Agency for Regional Development (ANDR). This institution also manages the budget and out-of-budget funds especially created for developing industrial parks. Companies based in Romania, specialized only in industrial park management, may establish these parks.

The Senate has approved the extension of the the law for application to 'IT development parks'.

In March 2001, there is one Industrial/Commercial park Iride Business Park being developed on the northern side of Bucharest on a site of 100,000 sq.m with planning for office space for 7,000. Companies already established on this site include Rank Xerox, Global One, Nestle, JTI Reynolds Tobacco. Development of this extensive project is being financed by the EBRD and Raffeisen Banks. For further information on availability of space - please contact Andrew Stear CEO of the management company BPD Associates.

 

BPD Management (Romania) srl 9-9a DimitriePompei Bld. Sector 2 Bucharest Romania Andrew Stear +40 (0) 1 242 1524 +40 (0) 1 242 0180 email: bpd@softnet.ro

 

Ministry of Finance Str. Apolodor 17, Bucharest Traian Decebal Remes, Minister Tel. (40-1) ) 410-1189, 410-1784, Fax. (40-1) 312-1630

 

Ministry of Transport Bd. Dinicu Golescu 38, Bucharest Anca Boagiu, Minister Tel. (40-1) 222-3636 Fax. (40-1) 312-5419

 

Ministry of Industry and Trade Calea Victoriei 152, Bucharest Radu Berceanu, Minister Tel:(40-1) 231-0262; Fax: (40-1) 312-10513

 

National Agency for Regional Development (ANDR) Str. Ministerului 2-4, etaj 3 Gabriel Friptu, Director General, underprivileged regions Tel. (40-1) 314-6187

Demographics & Economic Situation

Source: Factbook.net