Differences between Branches and Subsidiaries in Romania

What can I do to expand my business in Romania?

Answer:  A foreign company has several options if being interested to organize its operations on the Romanian territory. The most important aspects regard the maneuverability that the mother company can exercise over the newly established enterprise.

Before going into details we would like to emphasize the importance of understanding of all legal terms describing this process and also the mandatory presence of a qualified lawyer able to assist you during this entire process. There are certain alternatives that might play an extremely significant role for the future of your business and becoming aware of all these options proves essential while examining all the possibilities that you have on the Romanian market.

Probably the crucial difference between these two concepts refers to having legal personality, and therefore managing to build strategies more or less connected to mother companies.

Our team of lawyers in Romania can provide a consultation before deciding which business form is more suitable for entering the local market.

The branch, an extension of the foreign company

Branches do not have a legal personality and they become highly dependent on the entity which created them.  As an instrument for establishing the legal terms in this matter, the Romanian Civil Code (Book VII, on private international law, which replaced Law no. 105/1992 in 2011) provides that a legal person is governed by the law of the state where it was incorporated, so the branch follows the national law of its parent company. From an economic point of view, the branch is dependent on the mother company. Consequently, the branch does not possess an individual share capital while assets and liabilities are under the authority of the mother company. The issue of liability can be further discussed with our Romanian lawyers.

It is believed that the branch is somewhat easier to incorporate and that the foreign company can thus have an advantage in terms of the time it takes to start the business activities in Romania. While this may be the case for some companies, we highly advise investors to reach out to our agents who specialize in company formation in Romania when deciding to incorporate. Our team can provide complete details about the steps and requirements after an initial discussion.

The subsidiary, an independent and autonomous entity

The subsidiary has legal personality and it is a separate entity with individual prerogatives as compared to the mother company. It represents a corporation that functions under Romanian law and it has its own share capital. The parent company may conduct activities which can be different from those carried out by the subsidiary. Being an independent and autonomous company, the subsidiary may conclude contracts and it is fully responsible for this. The parent company has the right to decide on three important features related to subsidiaries. It decides the setting up, the business activity and the termination moment. Creating a subsidiary actually translates into following the main steps which are common for company creation procedures. There are specific requirements to be fulfilled, including the minimum share capital (500 lei for a new SRL since December 2025, 90,000 lei for an SA). The parent company must submit a set of papers including a certificate of good standing, its article of association, a document mentioning the designated administrator of the subsidiary and also proofs indicating the registered office.

One of our lawyers in Romania can offer you more in-depth information about the subsidiary apart from the succinct information presented above.

What are the main differences between a branch and a subsidiary in Romania?

Answer: The table below highlights the main differences between a branch, dependent on the foreign company, and the independent subsidiary. We do include the dependency in the table below, however, investors should remember that the differences include more than this aspect. 

Issue	Subsidiary	Branch
Incorporation	he subsidiary is incorporated as a locally registered company and needs to be registered as required with the Trade Register.	The branch generally has lighter incorporation requirements, however, it does need to be registered with the Trade Register but does not require minimum capital.
Taxation	Subject to the corporate income tax rate on its worldwide profits.	Subject to corporate tax on in Romanian-derived income.
Assets	The subsidiary owns its own assets.	The branch has fewer assets and they are attributed by the parent company.
Activity	The subsidiary can undertake any type of activities in Romania.	The branch is limited to performing the same activities as the parent company.
Contracts	The subsidiary will enter into agreements with third parties in its own name.	The branch enters into agreements in the name of the parent company.

All of these issues can be detailed upon request by our Romanian lawyers.

The two types of business establishments can easily be used for similar purposes. However, the issue regarding the branch’s dependence on the parent company, and the fact that the latter remains liable for its branch’s activities in Romania is an issue that prevails and should be carefully taken into consideration.

Please keep in mind that the table below is only a rough guide on the main differences between the branch and the subsidiary. Investors who are interested in finding out more can reach out to our team of lawyers and company formation experts. Our attorneys in Romania can offer more details about taxation and other important matters, such as the applicability of the double tax treaties.

What taxes do I need to pay for a subsidiary or a branch in Romania?

Answer: Our specialized team of lawyers in Romania is pleased to inform you about the taxation aspects involved when opening a subsidiary and a branch.

Before starting and operating the business itself, the branch must be registered with the Trade Registry in the county where it will be conducting its activities. For the subsidiaries, tax registration is requested together with the registration with the Trade Register (the tax identification code is assigned by ANAF and appears on the registration certificate), since it is subject to Romanian Tax Law. Various aspects may be taken into account based on the double taxation conventions involving Romania as a signatory state. There are also some in-depth analyses which should be made in order to identify best strategies sustaining your basic financial interests. Cooperating with a legal expert helps in determining very important features related to future approaches. It plays a fundamental role in discerning what is to be considered an avoidable risk and what can be defined as a necessary action; it builds a clear perspective on how to identify profitable niches able to guarantee full success.

Below is a list of commonly required documents when opening a branch in Romania:

• the application form, original;
• the statement of the parent company that the business is compliant with the ongoing regulations (for example, sanitary regulations, environmental protection regulations and others).
• the Board’s decision to incorporate the branch, original;
• the Board’s decision to appoint the branch representative, original;
• the parent company’s Articles of Incorporation and the business registration certificate.
• Specimen signature for the branch representative;
• Special powers of attorney, if required to empower another individual to handle legal matters concerning the branch;
• Proof of registration payment, as required.

One of the experts at our law firm in Romania can provide investors with a complete list of the documents required by the Ministry of Justice for registering the branch as well as with general information about registration with the Trade Register.

The decision to open a branch or a subsidiary in Romania is an important one. As seen in this article, investors are advised to keep in mind a number of issues, including independence, taxation, registration requirements and the management of the relationships with third parties in Romania.

There are many foreign companies that have opened branches in the country, such as banks, while others have preferred to open subsidiaries.

The process of registering a company with the Trade Registry in Romania can be delayed if the person handling the issue is not an expert in legal matters. We want to help you avoid all the hassle when it comes to starting or expanding you business. Our Romanian law firm has a specialized team of lawyers in Bucharest that can help you open a branch or a subsidiary in Romania. Please contact us now for a free case consultation!