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Attractions and challenges of the Romanian market

24. 10. 2016  | 

Thanks to its strategic geographical position and size, Romania provides a number of reasons why an investment in its territory can have a long and successful life. At present, Romania is seeing significant improvements and is becoming one of the most stable and attractive markets in the south-eastern and central Europe.

In the last few years, Romania has experienced significant growth of its gross domestic product (GDP) and also an important increase in foreign direct investments (FDI), which guarantees sustainable growth of the Romanian economy. The main assets of the Romanian market are a highly skilled workforce with low labour costs and reduced language barriers, abundant natural resources, access to the Black Sea and Asia, as well as 19 million consumers which help make it the 7th largest EU country by population.

On January 1, 2016 the new Tax Code came into force and brought fiscal loosening which will improve the investment climate. Consequently, VAT was reduced to 20% and will be reduced to 19% in 2017. The dividend tax was reduced from 16% to 5% and the profit tax will be reduced from 16% to 14% in 2019, making Romania a state with some of the lowest taxes in the EU. Some other tax exemptions were introduced into the new tax legislation as well, such as a tax exemption for profits reinvested in certain new non-current assets, an additional deductible allowance of 50% for eligible expenses related to research and development (R&D) activities, and a tax deferral related to the use of accelerated tax depreciation for specific categories of assets.

Nevertheless, investors may also encounter some difficulties during their business life in Romania. Some of the challenges that may arise in the Romanian market are related to the lack of transport connectivity, as currently Romania has only 700 kilometres of highway. Depending on a company’s sector of activity, the poor infrastructure may hold it back, so it is important to consider this aspect before opening a business in Romania. Also, Romania is dealing with instability of its legal environment, which is also caused by different interpretations of the law, and generous bureaucracy realities that can hinder the professional relationships of investors. Hence, prior information in this regard is indispensible. Another challenging aspect of the Romanian market is the lack of public investments which could pull back the economic evolution of the country.

Overall, despite its challenges, Romania is a country with great potential that can offer a good investment climate.

Author: Anca Calina

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