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contract breaches in Romania

Contract Breaches in Romania

Understanding Contract Breaches in Romania: What You Need to Know

Contract breaches can be frustrating and lead to potential legal disputes.

In this article, we will dive into the topic of contract breaches in Romania to help you understand your rights and options when dealing with such situations.

What is a Contract Breach?

A contract breach simply means that one party fails to fulfill their obligations as outlined in a legally binding agreement.

It can involve various scenarios, such failing to deliver goods or services, not meeting project deadlines, or violating specific terms and conditions stated in the contract.

When a breach of contract occurs under the stipulations of the Romanian Law, the non-breaching party may seek legal remedies to address the situation appropriately.

Types of Contract Breaches in Romania

In Romania, contract breaches can be classified into two main types: material breaches and minor breaches.

  • Material Breaches:

A material breach is a significant violation of the contract that goes to the core of the agreement.

It occurs when the breaching party’s actions or omissions substantially prevent the other party from receiving the benefits they were entitled to under the contract.

Material breaches often give rise to substantial legal remedies for the non-breaching party.

  • Minor Breaches:

A minor breach, also known as a partial breach, refers to a lesser violation of the contract’s terms.

While it does not fundamentally undermine the purpose of the agreement, it still represents a failure to perform certain obligations. In such cases, the non-breaching party may be entitled to seek limited remedies, such as damages or specific performance.

Legal Remedies for Contract Breaches in Romania

When a contract breach occurs in Romania, the non-breaching party has several legal remedies available to properly address the situation. Let’s explore some of the common remedies:

  • Damages:

The non-breaching party may seek monetary compensation to cover any financial losses incurred due to the breach. The damages aim to put the injured party in the position they would have been in had the breach not occurred.

  • Specific Performance:

The non-breaching party may request the court to order the breaching party to fulfill their contractual obligations as originally agreed. This remedy is typically sought when the subject matter of the contract is unique.

  • Contract Termination:

In severe cases, the non-breaching party may choose to terminate the contract, releasing both parties from their obligations. However, reviewing the contract terms and consulting legal counsel is crucial before termination.

  • Seeking Legal Assistance:

Dealing with contract breaches in Romania can be complex, so seeking legal assistance from an experienced Romanian attorney is advisable to protect your rights and interests.

Minimizing Contract Breaches in Romania

While understanding remedies is essential, it’s equally important to take preventive measures to minimize the chances of a breach occurring in Romania in the first place:

  • Draft Clear and Precise Contracts: Ensure contracts clearly define the rights, obligations and expectations of all parties involved to avoid disputes.
  • Perform Due Diligence: Research the other party thoroughly before entering into a contract to reduce the risk of unreliable partners.
  • Include Dispute Resolution Clauses: Consider including mediation or arbitration clauses to resolve disputes efficiently, without going to court.
  • Regularly Review and Update Contracts: Review contracts periodically to ensure they reflect any changes in laws or regulations that may impact the agreement.

In summary, understanding contract breaches in Romania is key to protecting your rights and navigating disputes.

Seeking legal assistance from qualified Romanian attorneys ensures you can address any contract breaches effectively, while preventive measures help minimize breach occurrences.

Limited Liability Company in Romania

How to Set Up a Limited Liability Company in Romania


Set up a Limited Liability Company in Romania

The most common forms of companies in Romania are the Limited Liability Company, the Joint Stock Company and Branches.

The Limited Liability Company in Romania has:

  • The share capital is divided into equal shares and, according to Law no. 31/1990, it cannot be less than 1 RON.
  • A Limited Liability Company in Romania may have between 1 and 50 shareholders.
  • The shareholders are liable in the limit of the contribution to the share capital.

Documents requested by the Trade Register for the company formation are:

  • Proof of reservation of company name
  • Articles of incorporation for the new Romanian company
  • Excerpts issued by the Trade Register where the shareholders are incorporated- legal entities (if they are)
  • The identity document of the shareholders natural persons (ID, Passport)
  • Passport or ID of the future director of the Romanian company
  • The document attesting the right of use over the space with destination of registered office ( e.g. lease agreement, property) and the ownership property documents
  • standard application.

Taxation of LLC company in Romania 2023

The tax rates used for micro-company income tax are:

  • 1% for micro-companies with one or more employees.
  • 3% for micro-companies with no employees.

The standard corporate income tax rate is 16%. Taxpayers that are carrying on activities such as gambling and nightclubs are either subject to 5% rate of the revenue obtained from such activities or to 16% of the taxable profit, depending on which is higher.

Romanian micro company tax regime starting with the first fiscal year and will remain under this tax regime if it meets all of the following criteria:

  • The maximum threshold of annual turnover is EUR 500.000.
  • Income generated from consultancy and management activities is not more than 20% of the annual turnover;
  • It does not carry out any banking, insurance and reassurance, capital markets, gambling or upstream oil & gas activities;
  • The share capital must be held by entities other than the state or the local authorities.

Moreover, the Romanian company has to pay to the state the imposed social contributions (pensions, health, work contribution) and the income tax for each employee.

There are no citizenship or residency requirements in order to register a Limited Company in Romania.

Our team of Romanian Lawyers can assist you for the set up of a LLC in Romania and our team of Romanian accountants can take on the fiscal set up of your newly formatted company.


Contact us for more info in order to set up a Romanian Limited Liability Company.

Start a business in Romania, EU.

Low Costs, High Rewards: Why You Should Start a Business in Romania

Why Romania is a Cost-Effective and Attractive Location to Start a Business

 Low Taxes

Start a Business in Romania and Benefit from a Flat Corporate Tax Rate of Only 16%.

Affordable Labor Costs

Take Advantage of Affordable Labor Costs and a Skilled Workforce When You Start a Business in Romania.

Low Living Expenses

Keep Your Overhead Low with Low Living Expenses in Romania.

 Favorable Business Climate in Romania

Explore Romania’s Pro-Business Environment and Streamlined Business Registration Processes

Tax Incentives

Romania has one of the lowest corporate tax rates in the European Union, and there are also double taxation avoidance treaties in place to help businesses save even more money.

Romania offers various tax incentives to incentivize foreign investment and promote business growth in the country.

Some of the key tax incentives available for businesses in Romania include:

  • Reduced corporate tax rate: Romania has one of the lowest corporate tax rates in the European Union at only 16%. This flat tax rate applies to all businesses, regardless of size or industry.
  • Tax exemptions: Romania offers tax exemptions for certain types of income, including dividends and interest, which can help businesses reduce their tax burden.
  • VAT exemptions: Small businesses with an annual revenue of less than 220,000 EUR are exempt from charging and paying value-added tax (VAT) in Romania.
  • Research and development (R&D) incentives: Companies engaged in R&D activities in Romania are eligible for tax credits and exemptions on certain expenses related to research and development.
  • Employment incentives: Romania also offers various employment incentives to encourage job creation and workforce development. These incentives include wage subsidies, social security exemptions, and training grants.

Streamlined Business Registration Processes

To register a business in Romania, you’ll need to provide several documents and complete several steps.

Here’s an overview of the registration process and the documents required:

  1. Choose a legal entity: The first step in the registration process is to choose a legal entity for your business. Common legal entities in Romania include sole proprietorships, limited liability companies (LLCs), joint-stock companies, and partnerships.
  2. Obtain a unique registration code (CUI): Once you’ve chosen a legal entity, you’ll need to obtain a unique registration code (CUI) from the Romanian Trade Register. This code is required for tax and legal purposes and identifies your business in the Romanian business registry.
  3. Register with the Trade Register: You’ll need to register your business with the Romanian Trade Register by submitting a registration application and the required documents.
  4. Obtain tax registration: Once your business is registered with the Trade Register, you’ll need to obtain tax registration from the National Agency for Fiscal Administration (ANAF). You’ll need to provide your CUI, as well as other documents such as your articles of incorporation and identification documents.
  5. Obtain any necessary permits or licenses: Depending on the type of business you’re starting, you may also need to obtain additional permits or licenses from local or national authorities.

Stable Political and Economic Climate

Access to Skilled Labor

In Romania, you’ll find a highly skilled and educated workforce, particularly in fields such as IT, engineering, and manufacturing. This skilled labor pool is due in part to Romania’s strong education system, which emphasizes science, technology, engineering, and mathematics (STEM) fields. Additionally, many Romanians are fluent in multiple languages, including English, French, German, and Spanish, making them valuable assets for businesses with international operations.

When you start a business in Romania, you’ll have access to this highly skilled labor pool at a fraction of the cost of other European countries. Labor costs in Romania are among the lowest in the EU, which can help you reduce your overhead and increase your profit margins. Moreover, the Romanian government has implemented various programs and initiatives to support workforce development and training, ensuring that the labor force remains skilled and competitive.

Investment Opportunities

Nevertheless, Romania offers a wide range of investment opportunities across various industries. Some of the most promising industries for investment in Romania include:

  • IT and software development: Romania has a rapidly growing IT sector with a highly skilled and educated workforce. The country is home to numerous tech startups and multinational companies, making it an attractive destination for businesses in the industry.
  • Manufacturing: With a strong tradition in manufacturing and a location at the crossroads of major European markets, Romania offers favorable conditions for businesses in the manufacturing sector. The country’s low labor costs and skilled workforce make it an ideal location for companies looking to manufacture and export products.
  • Agriculture and food processing: Romania has a favorable climate and fertile soil, making it an ideal location for agriculture and food processing businesses. The country is a major producer of wheat, corn, and other crops, as well as wine and other food products.
  • Renewable energy: Romania has made significant investments in renewable energy in recent years, particularly in wind and solar power. The country’s favorable regulatory environment and abundant natural resources make it an attractive destination for businesses in the renewable energy sector.
  • Tourism and hospitality: With a rich history, diverse culture, and beautiful landscapes, Romania has significant potential for growth in the tourism and hospitality industry. The country is home to numerous historic sites, natural landmarks, and cultural attractions, making it an ideal destination for travelers.

 Legal Considerations

Ensure Compliance with Local Laws and Regulations with the Help of an Experienced Commercial Lawyer When You Start a Business in Romania.