A branch is one way for a company to set up a business in Romania. Opening a branch has many drawbacks, mainly that the foreign parent carries full liability for the branches operations and that lengthy and complicated dealings with the tax authorities may be needed regarding the branches tax obligations.

The disadvantages of a branch office are:

  • The parent company is fully liable for the liabilities of the branch
  • The branches representatives may be held jointly and severally liable for tax debts
  • The financial statements of the parent must be lodged at the Companies Registry
  • The branches obligations are the same as the parent, including filing VAT returns, employees returns and corporation tax returns, so there are few savings in administering a branch
  • Banks and clients may prefer dealing with a Romania company rather than a foreign branch
  • A branch is rarely ideal for substantial projects because the parent company runs the entire risk
  • Upon registration of a branch, evidence has to be provided of the legal existence of the parent
  • Any public act by the branch, is likely to need ratification by the board of the foreign parent. A company that signs contracts in front of a notary on a regular basis, should incorporate for administrative ease
  • Branches can only operate in the same field of activity as their parent companies.

The advantages are:

  • Less obligations to present accounts than with corporations

It is possible under Romanian Law to establish branches of an existing foreign company starting its business activities in Romania.

Romanian Sucursala

Similar to the sub-company, the branch constitutes a way of expanding the parent company for national or international objectives. Unlike the sub-company, the Romanian branch does not become a distinct legal entity, being part of the structure of the parent company.

How is a Romanian Sucursala incorporated?

A Sucursala is incorporated with the approval of the local Trade Register, however the type documents requested by the Trade Register judge will differ.For instance the Romanian authorities will require certain accounting documents of the foreign company.

What are the setup costs?

Costs will be higher than when incorporating a filiala as the procedure is more complicated requesting a larger number of documents

Features of a branch office in Romania

According to Romanian law, a branch is governed by the laws of its parent company’s country of incorporation.

A branch in Romania is not legally separate from its parent company, and therefore it has no independence in its dealings.

In having no separate status from the parent company, a branch is merely carrying out activities on behalf of the parent in Romania.

A foreign parent therefore is liable for all activities of a branch office, including any debts to creditors and all employment issues.

In order to establish a branch office, a parent company will need to follow the same steps as if they were setting up a subsidiary of their company, although they would not need to establish incorporation statutes.

You will need the following to set up a branch:

  • Notarized articles of incorporation of the foreign parent
  • Registration certificate of the foreign parent
  • Documentation that shows the companies solvency
  • Evidence that the board of directors wish to establish a branch in Romania
  • Registration at the local office of the National Trade Register Office (provided the branch application is accepted)
  • A general Manager for the branch who needs to be appointed by the Board of Directors of the parent comapny. Managers can be foreign citizens.

Differences between a branch and subsidiary

A subsidiary has its own legal standing and is differentiated from the parent company, therefore the parent company is not responsible for the subsidiaries liabilities. It is also considered a Romanian company.

A branch on the other hand is not considered separate. This means that a Subsidiary is subject to Romanian laws where as a branch is subject to the country of its parent companies incorporation.

After your branch is registered

All stationery, order forms and similar documents used by your branch are required to show:

  • The place of registration of the parent
  • The number with which it is registered
  • The legal classification of the company
  • The address of its registered office
  • The place of registration of the branch, and its registration number

Also the following particulars must be shown at the branch office:

  • The company name
  • The name of the country in which the company is incorporated
  • The parent of the branch has limited liability

A Romanian limited company is often a better option than a branch office

Branches in Romania are corporate entities that have no legal status. They can be set up by Romanian or foreign companies as long as they fulfil the requirements of the relevant trade registry.

Given that a branch needs to go through the same process to register as both SRL’s and SA’s, it is likely to be more cost effective and efficient to set up your own limited company in Romania to carry out business rather than a branch office. This can also be beneficial for the company because the parent no longer carries liability for the branches operations.

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