Info Business

General Information

Location and Resources

Population and Human Resources

State Organization 

Infrastructure and Transportation  

Other Useful Information

Economy

     Overview

The Economy in Figures  

Sectors and Products with Export Potential

Privatization  

Main Trends of the Governing Program

Foreign Trade

Overview

Export Licenses  

International and Regional Integration  

Romania’s Participation in International Agreements

Destination and Structure of the Romanian Export and Import in 1999

Destination and Structure of the Romanian Export and Import in the First Three Months of 2000

Free Trade Zones

Foreign Investments

     Fields of Foreign Investments

Legal Type of Business Organizations  

Registered Capital  

Legislative Framework on Foreign Investments

Investments in Disadvantaged Areas

Public procurement  

Banking & Insurance

Banking

Insurance

TAXATION

Direct Taxation

Indirect Taxation

GENERAL INFORMATION

Location and Resources

Location: Romania is situated in South-Eastern part of Central Europe, North of the Balkan Peninsula and with borders with Republic of Moldova to the East, Ukraine to the North and East, Hungary to the North-West and West, Serbia to the South-West, Bulgaria to the South and the Black Sea to the South-East

Area: 238,391 sq. km (31% mountains, 36% hills and 23 % plains). Romania is a midsize European country. It is slightly smaller in area than Great Britain and it is the twelfth largest nation in Europe.

Natural resources: Of the country's total area, farm land covers 39.6%, forests 27%, pastures and hayfields 19.9%, vineyards and orchards 2,5%, waters and lakes 3.8%, other lands 6.2%. Romania is also endowed with important under-ground resources, such as: crude oil, natural gas, coal (lignite, pit and brown coal), ferrous and non-ferrous ores (copper, lead, zinc), gold and silver ores and salt.

A very important wealth of Romania is the natural beauty. The visiting foreigners may enjoy the marvelous panorama formed by the natural conjunction between affronted mountains, charming hills, forests volcanic and artificial lakes, rivers, sea shores and the Delta of the Danube River where the wild landscape seems to belong to remote times. The wonderful landscapes of Romania are still unknown by the most of foreigners and when they hit them are very much appreciated.

Population and Human Resources

Population: 22,456,000 inhabitants (January 1, 2000). Nearly 89,4% of the population are Romanians and about 10,6% minorities (Hungarians, Germans, Serbs, Jews, Armenians etc).

Population density: 95.2 inhabitants per square km.

Religion: Orthodox 86.81%, Roman Catholics 5.1%, Protestants 3.5% and other religions 4,59% (Greek Catholics, Unitarians, Armenian - Georgians, Moslems).

Education: The average level of education of the people fit for work is secondary school- which indicates a high capacity of the labor to adjust to the requirements of the modern production. Specialists in scientific, technical engineering and design units represent an important segment of Romania’s human potential.

The number, quality and structure of the population are one of Romania’s most important assets of development. 

In the university year 1999/2000, the persons following a high education form accounted for 2.4% of the country’s population.

State Organization

Official name: ROMANIA

Capital: BUCHAREST (228 sq. km; 2,016,131 inhabitants in January 1998).

Form of government: Romania is a republic with parliamentary democracy. According to the Constitution of November 21, 1991 a President is elected by universal vote for a 4-year term and may be reelected only once. The President represents the Romanian state, watches over the activity of the public authorities, fulfils the offices of the Supreme Commander of the Armed Forces and Chairman of the  Supreme Defense Council. He nominates a candidate for the office of the Prime Minister and appoints the Government on the basis of the confidence vote received from the Parliament. The Constitution sets out the separation of the three public authorities: the legislative, the executive and the judiciary.

Legislative power: The two chamber Parliament - the Chamber of Deputies and the Senate- elected by universal vote for a four-year term, is the people's supreme representative body and sole low-making authority.

Executive power: The Government ensures the implementation of the country's domestic and foreign polices and provides general management of public administration. Public administration in the territorial administrative units is grounded on the principles of local autonomy and decentralization of public services. Local councils and mayors, elected by direct vote, are the public administration authorities in communes and towns. The country council is public administration authority that co-ordinates the activities of all commune and town councils in the county. The Government appoints a "prefect" (governor) at the head of each county and of the Bucharest Municipality.

Juridical power: The Supreme Court of Justice

Judicial power: The judicial power comprises the low courts, the Public Ministry and the Higher Council of Magistracy. The judiciary is made up of the Supreme Court of justice, The county courts, other courts and military tribunals.

National Day: 1^st of December-anniversary of the 1918 union of all Romanians into one single state.

Administration: The country is divided into 41 counties (districts) and Bucharest municipality, 263 cities and towns, 2,685 communes (with 13,285 villages).

Main cities: Iasi (348,070 inhabitants), Constantza (342,264), Cluj-Napoca (332,498), Galati (330,276), Timisoara (324,304), Brasov (314,225), Craiova (313,530), Ploiesti (251,348) and Braila (233,756).

5 cities have a population exceeding 100,000 inhabitants.

Infrastructure and Transportation

Romania has an important airline network:

- International Airway Centers in Bucharest, Timisoara and Constantza;

- Domestic: airports in Bucharest, Arad, Bacau, Baia Mare, Caransebes, Cluj - Napoca, Constantza, Iasi, Oradea, Satu Mare, Sibiu, Suceava, Timisoara, Tirgu Mures and Tulcea.

Railways network counts over 11,000 km, of which one third is electrified.

Public roads network counts over 72,000 km, of which 17,000 are modernized roads. The traffic keeps to the right, doubling on the left side. Traffic signs are those generally accepted on international level.

Ports: Along the Romanian Black Sea shore, long of 244 km, three sea ports are located Constantza, Mangalia and Midia. Constantza Harbor, the most important port to the Black Sea, is the maritime gate of Romania.

Alongside Danube River, 1075 km long, there are 13 ports, which offer conditions for connections between Romania and Western and Central European partners. Three of these ports Braila, Galati and Tulcea can be used both by river and sea going ships at a maximum draught of 7.3 m.

The digging of the River Danube-Black Sea Channel shortened the maritime way to Bosphorus and the Middle East with 400 km. and the recent opening of the Danube-Rhine-Main Channel provides an easier access to Western European countries and the North Sea for ships with a capacity up to 1500 tons.

Other Useful Information

Time zone: Romania is two hours-ahead Greenwich Mean Time.

Business hours: Monday to Friday, usually from 8:00 a.m. to 4:00 p.m.

Official holidays: January 1-2 (New Year’s Day), first and second Easter Days, December 1 (The National Day), Christmas Days (December 25, 26).

Official language: Romanian (belonging to the family of Romance languages).

Foreign languages: French, English and German.

Currency unit: Romanian LEU (ROL), plural LEI. Domestic cash payments, compensations and credits, as well as other financial and capital dealings are made in national currency (ROL).

Legal frame: Romanian legislation encompasses public and civil law. The penal code and code of penal procedure guarantee real protection for the individual and for its property.

A key element of business law is the Commercial Code, which was adopted in 1887, based on the Italian Commercial Code and revised as required until 1940. Since December 1989 the Commercial Code has been supplemented by new legislation based on current European standard.

Since 1864, Romania has used a Civil Code for contractual law, based upon Napoleon's Civil Code. With regard to negotiable instruments Romanian law follows the stipulation of the Geneva Convention of 1930. Since 1989, Romania has expanded its body of law concerning civil and business matters.

ECONOMY

Overview

Romania has great economic potentialities. Some social and economic features distinguish it as the second country, after Poland, in Central Europe, as size of the market and economic potential.

The human resources (number, quality and structure of population) are Romania's most important potentialities. Among other specialists, Romania has a well educated industrial workforce, beginning with well-trained operators, technicians, engineers, a developed network of research and design institutes and a moderate wage structure.

The enormous agricultural potential and a number of important industrial and energetic raw materials ensure good prospects for the development of many economic sectors.

Romania has developed major industrial sectors like machine-building, aerospace, chemistry, electrical equipment and consumer goods industries. In spite of the unbalances and low economic performances, inherited from the former communist regime, some of these sectors, can reach high technological and economic performances through privatization, restructuring investments and a better management, according with free market economy principles.

Tourism and service sectors can turn to good account the extraordinary natural and cultural riches, as well as the geo-strategic location of the country, offering unlimited development prospective.

Since 1990, Romania took the path of deep changes for the better on political, social and economic levels, aiming at a market economy. The choice for democratization and a market economy was beyond any doubts. 

During the transition process, Romania’s economy suffered a sever recession that led to the production and investments decline, inflationary pressures, deficits of the balances of trade and payment, unemployment, having social consequences that had and still have to be taken into consideration. 

During the period already passed, the transition was incoherent and incomplete because of certain factors, some domestic, some external. The mechanism preserving macroeconomic balance - the monetary base objective pursued by the National Bank of Romania as a means of reining in inflation - was certainly insufficient and fragile when faced with the diversity and complexity of the problems raised by the transformation of the entire Romanian society.

1999 was a difficult year for the Romanian economy that had to face important payments in the framework of the service of external debt, the lack of foreign financial assistance to ensure the macro-economic stability and to reduce inflationary pressures, as well as to continue the painful process of restructuring and privatization of loss making commercial companies.

As a result of all these difficulties the economic activity continue to decrease but some indicators  like the important reduction of foreign trade deficit and of inflation prove that the most difficult moment was overcome and the year 2000 can be the turning point towards the recovery of economic activity.

The economy has been shrinking in 1999 by 3.2 % as against 1998. Industrial production in 1999, as the major economic sector, has been decreasing by 8.0 % in absolute volume and by 8.8 % in comparable conditions in terms of number of working days, as against 1998. As compared to the similar period of the previous year, the industrial production level during 1.I.-31.III.2000 period was by 0.3% lower in absolute volume and by 2.7% under comparable conditions from the viewpoint of the working days number. (Source: The National Commission for Statistics).

In 1999, the total volume of exports amounted to 8,504.7 million USD, by 2.4 % above the level achieved in 1998. The total volume of imports amounted to 10,392.1 million USD, decreasing by 12.2 % as against 1998. The trade deficit in 1999 amounted to 1,887.4 million USD, decreasing as against a level of 3,535.8 million USD in 1998.

The total volume of foreign investments during December 1990 – March 2000, was 4.5 billion USD and the main investing countries, for this period, were: Holland (12.1 %), Germany (10.3 %). 

The Government is committed to a tight fiscal and monetary policy to combat inflation and secure macroeconomic stability. As a result, in 1999 the inflation rate reduced to 45,8 % as compared to 59,1 % in 1998. Inflation rate, determined based on the increase in consumer prices for the population, was 1.8% in March 2000 as against previous month and 8.5% as compared to December 1999.

During 1.I. -31.III.2000, the monthly average inflation rate was 2.8% as against 4.1% during 1.I.-31.III.1999.

Registered unemployment has been about 11.5 % in December 1999, reported at total civil active population (11.1 %, in November 1999 and 10.4 %, in December 1998). The number of unemployed persons registered at the end of March 2000 was 1166.7 thousand persons, by 30.0 thousands less than during the previous month. As against the same month of last year, the number of unemployed persons registered in the agencies for employment and vocational training was by 16.0 thousand persons lower.

At the same date, women accounted for 44.8% of total unemployed persons registered.

Substantial hidden unemployment still remains another serious problem.

Romania is now entering a new historical age since being invited to the negotiations for joining the EU. The new situation can reverse the negative perception in the international financial circles regarding the solidity of Romania’s commitment to the reform.

In the year 2000, the Government intends to take several measures representing a continuation of the efforts and achievements scored in the field of reform by the previous Cabinets, along with a series of fresh measures.

The Economy in Figures

Sources: National Commission for Statistics,

                                                   Ministry of Finance– General Directorate for Forecast

GDP by categories of resources, in 1998: Services (43.0 %), Industry (27.5 %), Agriculture, forestry and fishing (14.5 %) and Construction (5.3 %). 

Sectors and Products with Export Potential

Industry is the major sector of the Romanian economy, in 1998 sharing by 27.5 % in GDP. 

Romania exports certain products such as salt, sulphur, cement, etc., which, in 1999, according to the provisional data, accounted for 5.90% of total exports. As regards mineral products, Romania is a net importer, buying from abroad, mainly crude oil, natural gas, minerals and coke (12.03 percent of Romania’s total imports).

Main branches of the Romanian Industry are: 

	Mining & quarrying,
	Manufacturing industry,
	Intermediate goods industry,
	Capital goods industry,
	Durable goods industry and Current use goods industry,
	Electric & thermal energy, gas & water.

Most of the employees work in the following three industrial branches: mining & quarrying, processing industry and electric, heating, gas and water supply industry. 

The decrease of the industrial production is a consequence both of the continuous diminishing in the domestic consumption, as well as of the  decline in export (in 1998). 

As regards the main achievements in the reform of industrial sectors, the following aspects can be mentioned: 

	the dismantling of the monopolies and the adjusting of industrial activities;
	the decrease of losses, especially in mining industry;
	the diminish/elimination of state and cross subsidies;
	the decrease of the financial arrears.

The industrial sectors and products with export potential are: textile and garments, machine-building, electronic and electro-technical products, wooden products and furniture, chemical and petrochemical products, metallurgical products, leather products, construction materials, food industry and agricultural products. 

The textile and garments as well as leather industry account for an important share in the country’s export. In 1999, textile and clothing accounted for 25.8 % of the country’s export and the share held by the leather industry, in total exports, was 0.76 %. Since the country benefits from a highly qualified and low-cost labor force, availability of natural resources in the country and the proximity to Western European markets, exports are expected to increase over the long run. The textile and leather sectors have already improved their efficiency in recent years mainly by gradually shifting from low-cost, low-quality production towards low-cost, high-quality branded goods for export to Western European markets. Despite the achievements a high volume of Romania’s export business in clothing depends on imported textiles, often on the basis of outward processing arrangements.

The shoe industry substantially works under subcontracting arrangements. In 1999, this industry accounted for 8.03 % of exports. However, the leather, shoe and textile industries suffer from increasing costs of energy, as well as the poor quality of domestic inputs.

Manufactured products represent about two-thirds of the Romanian exports (64 %). This sector employed almost 1.9 million workers in 1999, which accounts for 40.7 % of the total active population, but the performance of the sub-sectors varies widely (37.88 % is employed in processing and electric power industries). The processing industry, electrical and thermal energy producing companies, as well as the food industry attracted a large share of total investments in recent years. 

Other manufacturing industries include the production of radios, TV sets and communications equipment, which attracted large amounts of foreign investment and increased output significantly.

The chemical industry includes petrochemicals, production of artificial fibers, synthetics, as well as fertilizers and caustic soda. Large amounts of chemical products are traditionally exported. In 1999, the exports of chemical products (organic chemical products and fertilizers) amounted to 327 million USD and the imports of chemical products amounted to 974 million USD. The Government envisages an export share of 30 % of the total chemical production by the year 2000.

Production in the car industry diminished between 1989 and 1993. Daewoo invested in a co-enterprise with the Romanian producer Rodae with an expected production of over 100,000 cars in the year 2000. In 1999, the Renault vehicle producer took over the major share in Dacia Pitesti plant. Dacia cars are still exported to Latin America and China.

Construction materials are of great importance to Romania, which produces cement (6.25 million tons in 1999) and exported 1.95 million tons in 1999. It is expected that exports will be sustained if ports are modernized.

Romania is a traditional exporter of wood and wood products, especially furniture. Annually, the Romanian parliament decides on the wood quantities that may be cut, with a view to protecting the forests and environment. In 1999, the exports of wood and wood products, excluding paper, accounted for 5,82 % and, as regards the exports of wood furniture, they accounted for 5.90 %. This sector, however, needs to be modernized in order to be more competitive in international markets.

Agriculture is of critical importance to Romania’s economy and the subsistence of a large part of its population. However, it suffers from a lack of infrastructure such as the availability of warehouses, port facilities, roads and rail transportation. Despite the major role of agriculture in the Romanian economy, exports of agricultural products remained relatively low in the past. This was the result mainly of the structural problems at the supply side (uneconomic size of land holdings, lack of an efficient system of purchase and distribution of foodstuffs, poor financial resources for supporting the agricultural production, etc.). Nevertheless, Romania is competitive in some crops, such as wheat, sunflower, corn and wine.

In 1999, the Romanian exports of agricultural products had the following structure: live animals and animal products – 1.33 %, products from vegetal field – 2.90 %, animal or vegetal oils and fats – 0.63 % and foodstuffs, beverages and vinegar  - 0.75 %.

In the food industry large “complexes” have been broken up, especially in the meat industry. After 1989, the food industry experienced a decline due to a decrease in national purchasing power, a narrow domestic market for national products, increasing import competition and shortages of raw materials. The industry suffers from low productivity, increasing import competition and shortages of raw products, as well as from increasing energy costs and from lack of hard currencies, which hampered imports of necessary inputs. Nevertheless, the food industry has a high growth potential which could be fully utilized  once the restructuring and privatization process has been completed and a new well performing management able to attract foreign investment is set in place. In 1999, a law for privatizing the former State Agricultural Enterprises by turning them into private owned companies was passed.

Sectors for investments in agriculture are: land reclamation, animal breeding and food industry. 

Privatization

The State Ownership Fund (SOF) established in 1991 with the task to administrate and to sell the shares it holds in state owned companies, according with the Government policy is going to complete its mission by the end of 2000. SOF has the target to diminish the state and public administration authority commitment in the economy by selling their shares, and to manage the state owned shares. 

Initially, SOF stock represented 70% of registered share capital of the state owned commercial companies, associated companies with the state as the only shareholder and public utilities turned into commercial companies by Government decision.

Up to February 29, 2000, the SOF performed the privatization of 6,635 companies, of which 252 big, 1,434 medium and 4,949 small sized. 

Significant privatization deeds in 1999 were: 

	Automobile Dacia Pitesti – total transaction: 270 million USD;
	Bank Post – total transaction: 92 million USD;
	Romaero Bucharest – total transaction: 80.5 million USD;
	Astra Vagoane Arad – total transaction: 50 million USD;
	Galati Shipping Yard – total transaction: 25 million USD.

At present, in certain industrial branches, the privatization process is almost completed: 

	the manufacturing of cement, leather and leather substitutes articles, fur products, oils and fats;
	the recovering of wastes and recycling materials;
	the manufacturing of varnishes and paints;
	the building and building upgrade;
	printing;
	wood processing industry;
	metal constructions and metal products industry;
	medical and precision instruments and apparatus, optics and watchmaker industry.

The Government of Romania has applied for a Public Institution Building Loan from the International Bank for Reconstruction and Development (IBDR) under which the services of investment banks and sales agents will be sought.

SOF organizes international tenders for the selection of privatization agents for:

	5 large state owned enterprises to be privatized by investment banks;
	5 large state owned enterprises for work-out/liquidation, by work-out firms/agents in charge of closing down;
	50 large/medium-sized state owned enterprises offered in pools to privatization agents.

Prestigious International companies have already been short-listed for the tendering process: Merrill Lynch, Salomon Smith Barney, Citibank, Chase Manhattan Bank, Credit Suisse First Boston, Deutsche Bank, Flemings, Societe Generale.

SOF will privatize in 2000 the Romanian Commercial Bank (BCR) and the Agricultural Bank and it will also finalize the sale of the Romanian Bank for Development (BRD) shares.

SOF estimates that it will obtain, in 2000, almost 500 million dollars from the sale of the shares of the last 3,150 companies that remained in the SOF portfolio.

Main Trends of the Governing Program

The Government’s economic program for the year 2000 is designed to carry on the efforts aimed at privatization, liberalization, macroeconomic stability and the functioning of market mechanisms. These efforts are strengthened by the fact that Romania was invited to the negotiations for joining the EU.

The main purposes considered at domestic level are: 

	halting the downward spiral of production concomitantly with significantly reducing the inflation and the resumption of economic growth;
	correlating macro-stability in the field of nominal economy with the situation of the real economy by laying stress on the indices that mirror the productivity/standard of living ratios;

As regards the external objectives, the Government will be responsible for the actual start of the process of joining the European Union; the continuation of the multilateral foreign financing (IMF — the stand-by agreement; IBRD — PSAL, EU, EIB, EBRD) and the resumption of the private foreign financing the scope of which must be expanded as a vital prerequisite for the modernization of the Romanian economy.

According to the above mentioned aspects, the current governing program provides for the following directions in relation to pursuing the economic reform:

Consolidation of the progress made so far and improvement of existing regulations:

	Revising the forms of adjusting the prices of public utilities in order to stimulate the efforts to reduce costs, without restoring any discretionary price-control mechanisms;
	Improving the regulation and practical utilization of commercial protection instruments (anti-dumping and compensatory measures, safeguards) to the end of counteracting unfair practices and/or serious market perturbations, without resorting to unilateral measures disproportionate with the damage;
	Eliminating unjustified limitations of the freedom of transactions (e.g. the obligation of issuing operation licenses; prohibition of compensations outside the MIC system).

The Government will focus in adopting the legislation related to capital markets and to the insurance market with the purpose of aligning them to the European Guidelines.

Efforts will be made toward restructuring and privatizing those parts of the public utilities that do not constitute a natural monopoly, generate major losses in the economy and consume subsidies from the Budget.

A better utilization of the agricultural potential will be based on market-oriented measures such as:

	returning the land to former owners and creating a genuine real estate market;
	privatizing the state-owned agricultural companies.

Keeping a tight rein on the fiscal deficit and the foreign balance of payment is the most important constraint, and, in this respect, the inflation target for 2000 is 27 %.  Likewise, in order to avoid putting supplementary pressure on the balance of payments and the rate of the national currency (Leu), the efforts should focus on continuing to restructure economic activities depending to a great extent on imports of raw energy materials.

The reduction of taxes must create supplementary revenue sources. 

The main directions of the fiscal reform will be:

	The consolidated budget deficit will be limited to maximum 3% of the GDP.
	The relaxation of tax rates, on the support of an enlarged taxation base and an improved collection of taxes.
	Tax exemptions and shelters, which are profoundly inequitable, will be diminished until they are eliminated.

FOREIGN TRADE

Overview

The Import Customs Tariff is the main trade policy instrument used by Romania. Customs duties are applied on an “ ad-valorem” basis. The Import Customs Tariff is based upon the customs classification and denomination set up by the Harmonized System, at an eight-digit level.

The evolution of the Romanian foreign trade was enhanced, during the past period, by several foreign and domestic factors, such as:

Foreign factors:

	the enforcement of the agreements concluded within WTO as well as the enforcement of free trade agreements concluded by Romania as part of the European economic integration (Romania’s Association Agreement to the European Union, Free Trade Agreement with EFTA Countries, CEFTA Agreement and the free trade agreements concluded with Republic of Moldova and Turkey);
	the extension by the USA, on a  permanent bases, of the MFN clause;
	the extension of the preferential trade regime with Russian Federation, Belarus and Kazakhstan;
	the facilities to the Romanian export products granted by USA, Canada, Australia, Japan and New Zealand as part of Generalized System of Preference

Domestic factors:

	the ongoing restructuring and privatization of national economy;
	securing free trade initiative in foreign trade for business operators, reflected in a positive evolution of the achievements of the private foreign trade operators, as follows: in 1999, the share held by them in total export was 65.7%, as against 28% in 1992, and 71.9% in 1999 in total imports, as against 33%, in 1992;
	export and import liberalization.
	the establishment of export and export production promotion and stimulation system enabled the approximation of the guarantee, financing and insurance conditions for the Romanian exports with the conditions from the competing countries;
	the application of the Import Customs Tariff and the new Customs Code has given the business operators the possibility of using the facilities provided by the preferential agreements, as well as the possibility to perform import operations that benefit from a customs  regime with duty exemptions (active improvement, goods’ processing under customs transformation, temporary admission, warehousing, transit of goods);
	since January 1, 2000 the income tax is 25% and VAT is 19%;
	the fee paid to the customs authority for the use of the automatic processing system of the customs clearance form was reduced from 12 Euro to 8 Euro.

Export Licenses

The exports and imports of goods from and into the customs territory of Romania are liberalized and the export and import transactions can be performed only by the economic operators entitled by their legal object of activity to carry out such operations.

Export licensing is used only for a few products and operations, all traders having equal and non-discriminatory access to it.

Since January 1, 1998, Romania has no quantity restrictions regarding exports and there are no articles banned for export. 

Automatic export licensing applied, in 1999, only to 511 tariff lines (out of the total of 10.587 tariff lines) for the following products: few raw materials, products containing precious metals and stones, oil and petroleum products, iron and steel products for countries destinations others than EU countries. The export of iron and steel products to the EU countries is subject to ECSC type export license, within the double-checking system agreed with the EU. According to the schedule of customs reductions between Romanian and the EU, the Ministry of Industry and Commerce issues annually Orders regarding the import in Romania of products coming from the EU as part of tariff quotas.  

Considering that since January 1, 1998, all quantity restrictions and interdictions at export were removed, and, at present, there are only a few categories of goods that need license, according to the international agreements in this respect.

Import and export licenses are used for the following categories of goods: 

	for goods under quantitative restrictions, which are subject to the control regime according to Romania’s international commitments;
	for entering into counter trade operations or for being registered in clearing, barter or co-operation accounts, a specific form of import and/or export license is required. These licenses are to be used for banking purposes only.

For these categories, the licensing regime has been improved and adapted to the international requirements, being reduced the period for analyzing the licenses and being simplified the content of them.

International and Regional Integration 

Romania is a member of UNO, WTO (since 1995), IMF, EBRD (since 1972), IBRD and other international organizations and institutions. Since 1993, Romania has been a member of the Council of Europe and an associate member of the European Union. Romania has diplomatic relations with 176 states.

Romania’s Participation in International Agreements 

Romania’s participation in World Trade Organization

Since January 1, 1995, Romania is a founding member of World Trade Organization (WTO).

Its participation in WTO is materialized by undertaking all the agreements, understandings, decisions and memoranda of agreement (157) with multilateral nature, as well as by participating in the following multilateral agreements: trade with dairy products; trade with beef, trade with civil aircraft; public tenders.

Romania has consolidated all its import customs under the following conditions:

	for industrial products, the consolidation was achieved at a ceiling of 35%;
	for the products covered by the Agreement on information technology, gradual liberalization took place, so that starting January 1, 2000, the customs duties were removed by all WTO members;
	as regards the trade with agricultural products, the customs duties were consolidated at a very high ceiling, and Romania committed to reduce them by 24% in a period of 10 years;
	commitments were undertaken for opening current and minimal access quotas.

Besides the commitments to liberalize the trade with industrial and agricultural products, Romania committed in the field of trade with services by granting MFN treatment for most services.

Romania and the European Union

Romania’s Association Agreement with the EU is the juridical framework of the economical and co-operation relations between the two parts. It entered into force on February 1, 1995, and it provides for the establishment of a free trade zone between the parts, based on asymmetrical concessions granted by the EU in favor of Romania, during the first stage and then Romania, during the second stage. 

Based on this principal, at the import into the EU of industrial products coming from Romania, the customs duties were completely abolished since January 1, 1996. At the import in Romania of industrial products coming from the EU, a progressive calendar for the customs duties removal was established as to maintain the protection of sensitive products until 2002. As regards the agricultural products, the two parts granted each other limited concessions on a mutual base. Romania’s starting membership negotiations for joining the EU calls for the complete liberalization of the trade with agricultural products

The official launch on February 15, 2000, in Brussels, of the accession negotiations with other six applicant countries, including Romania, is the start of a new phase of the relations between Romania and the European Union. 

Romania and CEFTA

The agreement regarding Romania’s CEFTA membership entered into force on July 1, 1997. It provides for the establishment of a free trade area among the participating countries for the trade with industrial products and for facilitating the trade for a wide range of agricultural products.

The Romanian exports of industrial products are free of customs in a proportion of 96-98% in Czech Republic, Slovak Republic and Slovene Republic, about 80% in Hungary and over 40% in Poland.

As regards the trade with agricultural products, the agreement provides for:

	the application of the liberalization concept which calls for two joint lists of concessions, one including the products where customs duties were completely removed and another one with low customs duties;
	granting bilateral concessions, negotiated and agreed with each member country.

Romania and EFTA countries

The agreement entered into force on May 1, 1993 and it provides for the establishment of a free trade zone, by 2002, for the industrial products and some fish products.

The Free Trade Agreement between Romania and Republic of Turkey

It entered into force on February 1, 1998, it provides for the gradual establishment of a free trade area – by January 1, 2002 – and will cover all the industrial products, processed agricultural products and some basic agricultural products where the parties granted concessions to the EU also. 

The Free Trade Agreement between Romania and Republic of Moldova

It entered into force on November 17, 1994, on an unlimited period and the customs duties for the products coming from the two countries were completely removed when the agreement entered into force.

Generalized System of Preferences (GSP)

As part of Generalized System of Preferences, USA, Canada, Australia, Japan, New Zealand, Russian Federation, Kazakhstan and Byelorussia granted customs facilities to the Romanian export

Global System of Trade Preferences (GSTP)

The system is in force among most of the developing countries and enables the access of certain Romanian export goods, free of duties or with low duties, on these markets. On its turn, Romania agreed for, the imports from the developing countries, either low customs duties or exemptions. 

Protocol of 16

It is a preferential customs system, it is similar to GSTP, and the countries that participate in this protocol are: Bangladesh, Brazil, Chile, Egypt, Israel, Mexico, Pakistan, Peru, Korea Republic, Romania, Turkey, Tunisia and Uruguay.

Destination and Structure of the Romanian Export and Import in 1999

The volume of the Romanian exports continued to increase in 1999, as well, but at a lower pace because of the unfavorable trends from the international market and because of a lower production level in industry and agriculture. The export decreased mainly with South Asia and with Russian Federation further to the financial crises from these regions, while the Romanian export increased significantly with the EU and CEFTA countries due to the free trade agreements. 

The imports decreased significantly in 1999, by 12.2% as against 1998, which led to the improvement of Romania’s trade balance (-1.8 billion USD as against –3.5 billion USD in 1998), this decrease being due to the trade policy measures applied by the government. 

As regards the share held by the private business operators, in total foreign trade, it had a positive evolution and in 1999, the private companies accounted for 65.7% in export and 71.9% in import.

Export by main commodities in 1999

Source: General Directorate for Customs

Import by main commodities in 1999

Source: General Directorate for Customs

 Romanian Exports by Geographical Zones in 1999 

                                                     Romanian Imports by Geographical Zones in 1999

Source: General Directorate for Customs

Forecasts regarding the structure of  export 

Forecasts regarding the structure of import

Source: General Directorate for Customs

                                Ministry of Industry and Commerce (forecasts)

  Forecasts regarding the geographic orientation of exports 

 Forecasts regarding the geographic orientation of import

Source: General Directorate for Customs

                                                                             Ministry of Industry and Commerce (forecasts)

Destination and Structure of the Romanian Export and Import in the First Three Months of 2000

According to the data supplied by the General Direction of Customs, within the activity of foreign trade in the first three months of 2000, exports amounted to USD 2,399.17 million.

The main five countries partners to export of Romania, in this period were: Italy (23.5%), Germany (16.7%), France (5.8%), United Kingdom (5.8%), Turkey (5.8%).

The main countries partners to export in the first three months of 2000

- % of total exports -

An important share of exports was held by textiles and articles thereof (25.5%), followed by basic metals and articles thereof (15.6%), electric machinery, appliances and equipment; recording and reproducing sound and image apparatus (11.8%), mineral products (8.3%) and footwear, headgear, umbrellas and similar articles (7.8%).

  Export by main commodities in the first three months of 2000

 - % of total exports -

  
During the same period, imports amounted to USD 2,642.64 million.

The main five countries partners to import from Romania, in this period were: Italy (19.2%), Germany (14.9%), Russian Federation (10.4%), France (5.9%), United Kingdom (4.8%).

  The main countries partners to import in the first three months of 2000

                         - % of total imports -

In the structure of imports, the highest share was held by electric machinery, appliances and equipment; recording and reproducing sound and image apparatus (21.9%), followed by mineral products (18.6%); textile matters and articles thereof (17%); chemicals products (9%) and basic metals and articles thereof (6.4%).

  Import by main commodities in the first three months of 2000

 - % of total imports -

The geographic orientation of Romanian exports in the first three months of 2000

 - % of total exports -

The geographic orientation of Romanian imports in the first three months of 2000

- % of total imports -

Source: General Directorate for Customs

FREE TRADE ZONES

The legal frame setting up the activity of Free Trade Zones in Romania is represented by Law no.84/1992, concerning the regime of free zones in Romania and Romanian Government Urgency Ordinance no.31/1997, concerning the regime of foreign investments in Romania.

Incentives offered by the Romanian legislation are:

	the means of transport, merchandise or other goods coming from abroad or bound to other countries which enter or exit the Free Zone  shall be exempt of custom duties and taxes.
	for the activities carried out within the free zone, the companies will be exempted from the payment of VAT, excises and income taxes throughout the period of their activity.
	the means of transport, the merchandise  and other goods of Romanian origin or imported entering in the free zone from the Romanian customs territory may be introduced in the free zones providing that the legal formalities regarding export or temporary export are fulfilled
	the materials and accessories that enter the free zones to be used for the manufacturing of other goods shall be exempt from customs duties, provided that formalities for export are carried out;
	the goods of Romanian origin used for constructions, repairs and maintenance of objectives within the free zones are free of customs duties
	the goods may be transported from one free zone to another without any customs duties
	upon liquidation or reducing of the activity carried out within the free zone ,foreign natural or legal persons may transfer abroad the capital and the profit , after having paid all their debits toe Romanian state and to their contractual partners. 100% foreign ownership is possible;

Explosions, drugs, arms, ammunitions, psychotropic substances, radioactive and toxic substances, as well as any other substance or material prohibited by Romanian law are forbidden to enter into the free trade zones.

The activities which may be carried out within Free Trade Zones are: handling, storing, sorting, measures, packing, conditioning, processing, assembling, manufacturing, testing, auctioning, buying, selling, hiring and concession of land and buildings (concession may be done for a period up to 50 years), the quantitative and qualitative control of goods, surveying, repairing, dismantling, exhibitions, stock's exchange operations, commercial-financial operations, inner or international transports or forwarding, brokerage, agency and ship handling services, as well as other free zones' specific activities. For all of these activities and for the goods entering or leaving or leaving the free zone, there is necessary to be issued all documents, requested by Romanian laws in force. All mentioned activities may be carried out by any natural or legal persons, foreign or Romanian, on grounds of a license issued by the Free trade Zone Administration.

At the national level, the activity of the Free Trade Zones is coordinated by the "Free Trade Zone Agency", in the frame of the Ministry of transportation, 7000 Bucharest-1, 38 Dinicu Golescu Str., tel: +40-1-6377996,      fax +40-1-3110728.  

Constanzta South Free Zone- 37,5 ha. The port Constantza South, one of biggest ports in the Europe, is along the fourth and seventh pan - European transport corridors, and moreover has the privilege of being the biggest Black Sea harbor, where large tonnage ships can be operated because the wharves in that free zone are 13.5 m deep. Due to its position and dimension, the Constantza port has a particular prospect for the attraction of the port traffic and the development of the economic activities as well as for the international carriage of goods by sea. Only 6 hectares out of about 37 hectares are not yet leased. 

Basarabi Free Zone. Is a branch of Constantza South Free Zone, with an area of 11 hectares. This zone became operational by the end of March 1999. Feasibility studies have been elaborated for setting up of other three branches in Constantza, Medgidia, Cernavoda and Mihail Kogalniceanu airport. 

The Administration of South Constantza and Basarabi Free Trade  Zone

General Manager: Constantin SUCIU

Phone: 0040-41-741601/02/03- 602301/04

Fax: 0040-41-741600

Ferry Boat Terminal

P.O.Box 6

8711-Agigea Constantza 

Giurgiu Free Zone. This free zone includes many commercial companies, the industrial park of Giurgiu County, and 40 hectares of forest. The area to be leased is very small, of only 25 hectares, out of which 80-85 % of the entire area has already been leased. 

Arad-Curtici Free Zone. The first such zone in the western part of the country, and its main advantage lies in fact that it is situated along the fourth pan - European corridor. The first enclosure of the free zone has an area of 15 hectares and is located near Arad airport. The second enclosure of 75 hectares is close to the international marshalling yard in Curtici. The advantage of that free zone lies in its flat land, which does not need special arrangements because that the necessary utilities for beginning of activity are already in place. 

The Administration of Arad-Curtici Free Trade Zone

General Manager: Adrian NITU

Phone/Fax: 0040-057-285848-282434

http://freezone.arad. ro

e-mail: freezone@arad.ro

81, Revolutiei Av, 2 900 Arad-Romania

Sulina Free Zone. (101 ha). The river and the maritime is the only transport means of Sulina Free Zone. Those who are using Sulina Free Trade Zone have access in the same time -through International Sulina Channel -to West and North Europe and to the Middle East region- through Black Sea. 

The Sulina Free Zone has over 70 000 sq m of platforms, fenced and equipped for open storage, more than 5000 sq m covered areas, in warehouse, fit to accommodate any general cargo, 3 floating cranes of 16 tf capacity, provided also with grabs, 2 floating cranes of 32 tf, perfectly fit for 20 ft and 40 ft containers handling all cranes being self-propelled, 2 river pushers, each of 840 HP and one sea/river tugboat of 630 HP, 2 covered river barges Europe 2A-type of 1500 MTS capacity each, several 3,5-10 tf forklifts, bobcats for bulk cargo trimming, tractors and trailers etc., all serving 5 operational berths. These can accommodate any sea vessel whose draft does not exceed the 23 ft limit, imposed still by Sulina Bar. 

The Administration of the Sulina Free Trade Zone 

General Manager: Sergean ABDURAMAN

Phone: 0040-40-543241/2/3-543664-543294

Fax: 0040-40-543294

202 INTAI Street, 8829, Sulina, Romania

Bucharest office - tel: 0040-1-6138723

Tulcea office tel: 0040-40-517 632

Galati Free Zone (137 ha) is located inside the area of Galati harbor very near to the border of Romania with the Republic of Moldova and Ukraine. The Galati harbor is the gateway to the Community of the Independent State .It has direct access to the Danube . Those Galati free Trade Zone is connected with the Mediterranean Sea and through the Black Sea  with the Western Europe on the route Danube-Main-Rhin.

Within Galati free Trade Zone there is the terminus point of the railway with wide gauge from the CIS territory. There is a rich railway network with ordinary gauge, with direct access in Galati Free Zone, which assures the connection with Western Europe.

Roads: The access inside Galati Free Zone is connected with the road network of Romania, thus being connected with all the countries from the East and the west of Europe. 

For supplementary information, you can contact:

Galati Free Trade Zone Administration 

Phone: 0040-36-411222/412420/412430

Fax:  0040-36-414929

E-mail: azl@elia40.elia.eu.com

Galati, Galati county, Romania, Cristal Building, Al. Ioan Cuza Str., 6200 Galati

Braila Free Zone. It covers a 110,4-hectares area divided into three enclosures, with necessary utilities (electricity, water, telecommunication) 20 % of total area is leased. 

The Administration of the Braila Free Trade Zone

General Manager: Ionel MIHALACHE

Phone/Fax: 0040-39-611655/615700

10-12 Mihai Eminescu Str., 6100 Braila, Romania

FOREIGN INVESTMENTS

Foreign investments may be made in all Romanian economic sectors, except for some strategic branches, internationally acknowledged, such as health services, education and public administration. 

Fields of foreign investments: 

	establishment of a new company, subsidiary or a branch;
	participation to the increase the equities of an already existing company or the purchase of equity shares of such companies concessions, leases or agreements to manage the economic activities;
	purchase of ownership rights on chattels and land property, except for the land and residential buildings not related to the investment;
	purchase of industrial and intellectual property rights;
	exploration, exploitation and production sharing agreements related to the extraction of natural resources.

Legal type of business organizations: 

	general partnership,
	limited partnership,
	limited partnership with shares,
	joint-stock company,
	limited liabilities companies.

Evolution of foreign investments
(at the capital incorporated of setting-up companies)

Source: National Trade Registry Office

Registered capital:

	joint-stock company – not lower than 25,000,000 lei;
	limited liability company – not lower than 2,000,000 lei and it shall be divided into equal participation shares which can not be less than 100,000 lei each.

Procedure to register a corporation in Romania: It was significantly simplified. The investor comes into contact with only one institution – Trade Registry Office within which the company will be located.

Legislative framework on foreign investments 

As regards the foreign investments in Romania, the legal framework is represented by the following laws and government ordinances: Law no. 143/1999 regarding the state aid, Ordinance no. 73/1999 regarding the tax on income, Ordinance no. 215/1999 regarding VAT, Urgency Government Ordinance 217/1999 on the modification and completion of the Government ordinance no. 70/1994 regarding tax on profit.

The main provisions are: 

	equal treatment for the domestic/foreign investors
	the investments, as well as the ownership, the use or disposition of an estate, including the administration, support, turning to account, extending or liquidation of an investment are guaranteed and they can not be discriminated against.

Guarantees and common facilities granted to foreign investors:

	equal treatment,
	guarantees against nationalization and expropriation,
	customs and fiscal incentives,
	the right to convert the value of the investments in foreign currency according to the corresponding value in ROL, as well as the right to transfer the foreign currency to the investors‘ originating countries,
	the possibility to carry forward losses registered on the basis of the taxable profit from future investments,
	the possibility to deduct the expenses incurred by publicity and advertisement from the taxable profit,
	the incentives already extended by the laws in force;
	investors are exempted from paying customs duties and VAT for the import of goods earmarked as in-kind contributions to a company’s share capital, necessary for the main companies activity; import of equipment - machinery and machine tools that are considered as assets according to the regime of the redemption fixed capital in corporal and non-corporal assets, made through direct investments, is exempt from customs duties, investors benefit from the possibility of choosing, in case of a new investment, one of the following ways to improve their financial conditions: a deduction from the taxable profit of expenses incurred by redemption, or the deduction from the purchasing price of the technological equipment that present redeemed assets in the respective financial exercise.

The Government of Romania, according to tax year regulations in force, may grant further incentives to the strategic foreign investors that fulfill the following criteria: 

	the amount of investments made, during a period of maximum 2 years, is at least 50 million USD. For the privatized companies, the total investment in the first year, including the purchasing price of shares, will be of minimum 50 million USD.
	the amount of the investment made, during a period of minimum 3 years, is at least 50 million USD, for commercial companies established in regions other than the disadvantaged zones, where the average unemployment rate registered in the last 2 years is over 10%, and as result of the investment there are created minimum 700 new jobs, during the same period of time the amount of the investment made, during a period of maximum 3 years, is at least 60 million USD and the investment is made in the house-building field.
	the investment made, during a period of maximum 3 years, is at least 60 million USD and the investment is made in the house-building field.

In order to incorporate a company, the following documents must be submitted with the Trade Register: 

	articles of incorporation;
	proof of the transfer of the money according to the articles of incorporation;
	documents concerning the ownership over the distribution in kind;
	documents attesting the operations concluded in the company’s account and approved by the partners;
	the statement on their own responsibility of the founders, administrators and auditors showing that they fulfill the conditions from Law No. 31/1990.

As regards the representations of the foreign commercial companies in Romania, the laws ruling their establishment are the following: the Decree-Law No. 1222/1990, Government Decision No. 1222/1990, Government Ordinance No. 24/1996 and Order of the Minister of Finances No. 109/1998.

Investments in disadvantaged areas 

According to Law 20/1999 for disadvantaged areas, the investments made in these areas benefit from the following facilities:

	exemption from customs duties and VAT payment;
	repayment of the customs duties;
	exemption from the payment of profit tax;
	exemption from the payment of taxes to be paid in case it is modified the destination, or are taken off, lands from farming use, for investment purposes;
	granting funds from the Special development Fund for:

- incentives for export production; 

- foreign credit guarantees; 

- financing of some special programs; 

- financing of investment projects. 

Sectors: agriculture and animal breeding; production – except for alcoholic drinks; services except public food not included in an investment in tourism; trade – except trading of goods which are not made through the activities performed in the area, environment. 

Public procurement

New Law on public procurement was adopted as Ordinance of the Government no. 118/1999. This Ordinance should have been gone into effect beginning with 01.01.2000 in accordance with Emergency Ordinance no. 202/1999, the date for going into effect was postponed until 01. 07. 2000.

The provision of the Ordinance shall apply for awarding the public procurement contracts by public authorities or any public institution and either by contracting  entities which exercise an relevant activity in the sectors of public utilities (water, energy, transport, telecommunication).

The foreign product supplier, works or service provider shall benefit in Romania by the same treatment like the one applied to the Romanian product supplier, works or service provider in the country where the foreign product supplier, works or service provider is resident.

The Ordinance includes provisions relating to internal preferences, as follows:

A.   The contracting authority has the right to impose a domestic preference, that means to limit the participation to the applied procedure for awarding the contract only to the Romanian legal or physical persons, including branches or office of representation foreign persons having own legal status and being registered in Romania.

B.   The contracting authority has the right to request that the completion of the public procurement contract to be made, using:    

a)   Romanian labor force representing a percentage from the total labor force used for carrying out the contract, or

b)   Products manufactured in Romania and representing a percentage from the total value of the products used for completion the contract; or

c)    Subcontractors being Romania legal or physical persons which are subcontracting a percentage from the total value of the contract;

d)   Any combination between cases of letters a)- c).

BANKING and insurance

Banking

After 1990 the classic banking system was re-adopted and it resulted in the organization of a two level banking system.

On one hand is the National Bank of Romania, which has no longer the status of a commercial bank, but of Central Bank, which adopts and runs the monetary and credit policy, is the sole authorized to issue money and Romania's currency regulations, as well as to participate on behalf of the state to external negotiations on financial, monetary and payment matters.

On the other hand there are the commercial banking corporations.

The Romanian banking system consists of 49 fully operational banks – January 1999, of which 38 have foreign shareholders or are foreign banks’ branches. 

The minimum share capital of a bank is 50 billion ROL. 

Banks are forbidden to provide brokerage, leasing and insurance activities, but they may participate in the share capital of such companies. 

A number of well known foreign banks operate in Romania: Bank Austria - Creditanstalt, Citibank, ING, Banque Franco – Roumaine, MISR Romanian Bank, Societe Generale. 

The Romanian Development Bank has been recently privatized  with Societe Generale of France. 

Bank Post is under privatization and in 2000, the Romanian Government intends to privatize Banca Agricola and Banca Comerciala Romana. 

Legal framework: Law no. 33/1991 on banking activity; Law no. 83/1998 on banking bankruptcy; Law no. 83/1997 on privatization of banks.

In order to manage the non-performing debts and the movable and non-movable assets entered into the patrimony of a bank, it was established the Agency for the Recovery of Non-performing Banking Assets.

The deposits in the banking system are guaranteed by a fund established according to Government Ordinances No. 39/1996 and No.110/1999. The fund is a legal person of public law.

Insurance

The insurance activity is governed by the Law no. 47 /1991 concerning the setting up, organization and operation of commercial undertakings for insurance activities. The Supervisory Office for Insurance and Reinsurance Activity (SOIRA) is a department of the Ministry of Finance and it is co-ordinated by the minister himself.

SOIRA drew up the draft Law regarding the insurance undertakings and insurance supervision with the support of British Know- How Fund’s experts. This draft Law is going to gradually harmonize the Romanian insurance legislation with the provision of EU insurance directives.

SOIRA, with the approval of the Ministry of Finance, issue a form letter regarding the limitation of the credit insurance and financial risk insurance.

In accordance with the Art. 53 of the Law no. 136/1995 regarding the insurance and reinsurance in Romania, the regulations regarding third party liability for motor vehicles insurance (the Government Decision no. 1054/1999) were approved. These regulation settled the level of insurance indemnities, the payments terms, the sanctions and the requirements for the insurers which want to carry on this class of insurance.

In 1998, there were 160 insurance companies and 45 insurance – reinsurance companies. 

The activity is divided into 10 insurance activities. 

Minimum capital for setting up an insurance company: ROL 25 million for each insurance or reinsurance category. Insurance/reinsurance operations conducted by licensed companies are exempted from VAT. 

Foreign investors can establish an insurance company only in association with a Romanian partner. Types of audits in Romania: 

	statutory audit – for individual companies with turnover of over ROL 10 billion;
	financial statement audit.

TAXATION

Direct taxation

Tax on profit

Beginning on 1^st January 2000 there are in force the provisions of the Emergency Ordinance no. 217/30 December 1999 amending and completing the Government Ordinance no. 70/1994 concerning tax on profit.

Now the tax rate is 25% for the tax payers who purchase technological equipment (machines, outfits and work installations) and transport vehicles benefit of the deduction from the taxable profit of the financial exercise of a 10% rate from the procurement price.

Global income tax

Starting from the realities of Romania, for the beginning, in the system of global taxation were included wages, incomes from independent activities and from giving up the utilization of the goods. In the same time, for the incomes from dividends, interests and other revenues, the Ordinance no. 73/1999 on income tax which applies starting on 1^st January 2000 provides a final taxation by retaining at the source on each source of income.

Following the principle of fiscal and social equity, the fiscal base was enlarged by taxing the incomes from dividends and those obtained from transferring the ownership right on movable values.

Through this ordinance, the following objects were in view:

	establishing the taxable subject at individual person level and the taxation right depending on the residence; for the Romanian individual person resided in Romania, the taxation is on the incomes obtained in the country and abroad and for the foreign individual persons or the Romanian individual persons resided abroad, the taxation is limited on the incomes made in Romania;
	establishing a fiscal regime of the loses from different categories of incomes, influencing this way the amount of the global annual taxable income; through this system of taxation arises the possibility of compensation, within certain limits, of the incomes with the loses recorded for different categories of incomes;
	establishing calculating rules and the fiscal regime for deductions for each category of income;
	in case of independent activities, a difference is made between the assets of the individual person within the business and the private assets of the individual person, with different fiscal consequences;
	the statement of all incomes that are subject of the global income tax and are obtained by an individual person during an year, both in the country and abroad and these statements  are the base for the calculation of the global annual taxable income and of owed tax, in correlation with the system of collecting the tax during the year by retaining at the source and by making tax payments in advance;
	the enlargement of the system of collecting the tax at source and of making tax payments in advance with the view of completing the taxation until the end of the year, taking into account the amount paid during the year, both in country and abroad;
	providing protection to the inflation by regular indexation of the fixed amounts and of the tax quota;
	some categories of incomes are not taxable: interests of the state deeds, of the open accounts, as well as of the bonds of The National Agency for Dwelling, with the aim to stimulate savings and to increase the interest of the population in building houses; awards and other advantages in money or in kind obtained by the pupils, students at the international or domestic conquests; scholarships received by the persons who are studying or improving their professional capacity within an institutional framework.

Conventions of avoidance of double taxation  

Romania has concluded and applies the provisions of  the conventions for the avoidance of double taxation with 13 countries among the 15 member states of the European Union (at this moment the conventions for the avoidance of double taxation with Portugal and with Ireland are not applicable).

When there are not concluded conventions for the avoidance of double taxation, the income derived by the individuals and the legal persons non-resident are liable to tax according to the Ordinance of the Government no. 83/1999 regarding the taxation of some income derived from Romania by the individuals and the legal persons non-resident:

	interest paid off to the non-residents;
	commissions paid off to the non-residents for the starting, carrying on or the intermediate of the foreign trade activity;
	income derived from the services carried on the Romanian territory;
	royalties paid off to the non-residents;
	income paid off to the non-residents for the international transport by ships, aircraft, railway of road vehicles and
	income derived by the non-residents as prizes at the organized contests of from gambling.

The rates of tax of these income are applicable to the gross income derived by the non-residents from Romania and their level is between 10% and 20%.

Where the activity raising such income is carried on through a permanent establishment of a fixed base belonging to a non-residents set up on the territory of Romania, this income will not be withhold but in accordance with the taxation rule of the profit of a permanent establishment of a fixed base.

Indirect taxation

The VAT Romanian legislation is, mostly, harmonized with the provisions of the EU Fourth Directive. It was adopted the Emergency Ordinance no. 215/1999 on amending and completing the regulations concerning VAT. Recent changes in VAT legislation refer to: implementation of a sole rate of 19% for the operations concerning deliveries of goods, real estates transfers and performance of services, from Romania and from importation.

To continue VAT legislation harmonization process, Ministry of Finance will take the following measures:

	improvement of the provisions on VAT reimbursement methods meant for goods selling and services supplies for non-resident natural and legal persons;
	application of special taxation regime for small enterprises, farmers, tourism agencies, occasional goods, art and collection objects and antiques.