Investment incentives

Accelerated depreciation

Under the Fiscal Code, machinery and equipment, computers and their peripherals, as well as patents, may be depreciated by using the accelerated method, under which a maximum of 50% of the asset’s fiscal value may be deducted during the first year of usage, while the rest of the asset’s value can be depreciated using the linear method over the remaining useful life.

Special incentives for expenses related to research and development activities

Companies can benefit from an additional deduction of 20% of the eligible expenses from research and development activities performed by them. Moreover, accelerated depreciation may be applied for devices and equipment used in research and development activity.
In order to benefit from this additional deduction, the research and development activities have to be conducted to obtain results leverageable by the taxpayer for it’s own use.

Dividend tax exemption for reinvestments

Distributed dividends are exempted from taxation as of 1 January 2009 if they are invested in the same or in another Romanian company’s share capital.
To benefit from this exemption, dividends must be reinvested to preserve and increase the number of employees and to boost existing lines of business.

Reduced VAT rate of 5% for sale of buildings

Companies selling buildings can apply a reduced VAT rate of 5% in the following cases:
- if the buildings are part of a social policy, such as old people’s homes, retirement homes, orphanages, rehabilitation centres for children with disabilities;
- the building is supplied as housing to an individual / family and has a maximum useful surface of 120 square metres and a value of less than RON 380,000 (exclusive of VAT).

Local tax exemptions for business located in industrial parks, and science and technology parks

No property tax is due for buildings and constructions located in an Industrial Park. Land within Industrial Parks is also exempt from land tax.
The incentives granted for the set up and development of industrial parks include:

- lower taxes on tangible assets and land used by the park;
- exemption from taxes on land;
- deferred payment of VAT for materials, equipment and connection to the public utilities networks during the investment period, until the park is put into operation;
- development programmes for infrastructure, investments and equipment endowments granted by local and central public administration, companies and foreign fi nancial assistance;
- donations, concessions and structural funds for development.

The companies operating within the industrial park benefit from:
- various services offered by the park administrator free of charge or with reduced fees;
- advantageous conditions with regard to location, use of the infrastructure and communications of the park, with payment in instalments.

For employment of recent graduates, employers can apply for a monthly grant of 1 - 1.5 (depending on the level of educational background) multiplied with the reference social indicator (currently set at RON 500) for each new graduate of a recognised institution for a period of 12 months. Employers benefi ting from this incentive are obliged to keep this employment relationship for a time period of at least three years.

Moreover, employer may also be exempt for these 12 months from paying the unemployment contribution due for these graduates. In addition, grants amounting to the social security contributions for two years for recent graduates are available if they are still employed by the company for two additional years after the fi rst three years pass.

The same incentives apply for the employment of recent graduates with disabilities, except that the period for which the exemption from contributions to the unemployment fund and the monthly grants apply is extended to 18 months.

Employers can also apply for exemption from unemployment fund contributions and for a monthly grant equal to the reference social indicator for each unemployed person with an age exceeding
45 years, or for each such person who is the sole family supporter. This monthly grant is available for a period of 12 months. Employers benefi ting from this incentive have the obligation to keep this employment relationship for at least two years.

Employers running professional training programmes for their employees may apply for a refund of 50% of their expenses for up to 20% of their workforce, subject to certain conditions and limitations.

Regulations on state aid have been in place in Romania since 1999. However, their implementation has not been efficient until recently, when Romania’s preparation for EU accession prompted the alignment of national laws with the EU acquis in the field. Nevertheless, certain efforts are still to be made, specifi cally in terms of state aid rules implementation and compliance with EU procedures (especially regarding the obligation to provide notification of certain individual state aid). Given Romania’s accession to the EU, the Competition Council (the national authority previously holding full competence in state aid matters) has transferred all of its state aid clearance powers to the European Commission since 1 January 2007. The Competition Council currently has the role of supporting and monitoring the state aid granted in Romania.

A new National State Aid Policy was approved by the Government for the period 2006 – 2013, promoting an extensive focus on the state aid schemes, currently underway with the competent central authorities.

In January 2007, the European Commission approved the regional aid map for Romania for the period 2007 - 2013.

Other state aid schemes are now in the pipeline to foster the absorption of Structural Funds available to Romania from 1 January 2007.

State aid schemes available for large investments

In 2011, the following types of investment incentives can be granted based on state aid schemes or on individual aid:

- Non-refundable amounts for the acquisition of tangible or intangible assets;
- Financial contributions from the state budget for newly-created jobs;
- Subsidised interest on contracted loans, as well as other types of incentives prescribed by the legislation in force (for example, state guarantees).

At the same time, depending on the particularities of each regulator bill, state aid schemes / individual aid for investments can be granted for the following objectives:

- Acquisition of tangible or intangible assets regarding the setting-up of a new unit, the extension of an existing unit, the production diversification or a fundamental change of the production process;
- Acquisition of fi xed assets directly linked to a closed unit or to one that that would have been closed;
- Commencement of certain research and development projects;
- Creation of new jobs;
- Professional training of employees;
- Commencement of projects regarding the use of renewable energy resources, environment protection and sustainable development.

Moreover, in order to benefit from state aid for investments made in Romania, the latter should contribute to the achievement of one of the following objectives:

- development and regional cohesion;
- environment protection and rehabilitation;
- increasing energy effi ciency, production and use of energy from renewable resources;
- encouragement of research and development and innovation processes;
- employment and workforce training.

The main areas of activity which are eligible for this incentive include:

- agro-industrial processing;
- manufacturing industry;
- energy production and supply;
- environment protection;
- water supply, sanitation, waste management;
- IT&C;
- research, development and innovation;
- services related to the workforce.

State aid scheme for sustainable economic development

Out of the normative acts which regulate the incentives stated above, we mention Government Decision no. 1680/10.12.2008 for instituting a state aid scheme for sustaibable development (GD 1680/2008) applicable to companies which are registered in accordance with the Company Law (Law no. 31/1990), are investing in Romania and fall within one of the following categories:

- the value of the initial investment is the RON equivalent amount of between EUR  5 million and EUR 10 million inclusively, and at least 50 new jobs are created as a result of the initial investment.
- the value of the initial investment is the RON equivalent amount of between EUR  10 million and EUR 20 million inclusively, and at least 100 new jobs are created as a result of the initial investment.
- the value of the initial investment is the RON equivalent amount of between EUR 20 million and EUR 30 million inclusively, and at least 200 new jobs are created as a result of the initial investment.
- the value of the initial investment is is the RON equivalent amount of above EUR 30 million, and at least 300 new jobs are created as a result of the initial investment.

GD 1680/2008 is not applicable to companies found in one of the following situations:

- are declared “in difficulty” as defined by the European Community Guidelines no. 800/2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General block exemption Regulation);

- are subject to a state aid reimbursement decision, if this decision has not been executed yet, in accordance with the legislation in force.

Also, in order to be eligible, the investment should not start prior to the signing of a principle approval with the competent authority.

In addition to the provisions regarding the initial investment and the number of jobs created, companies have to prove that the state aid so obtained has a “stimulative effect”, namely:
- it provides a substantial increase in the size of the project / planned activity
- it provides a substantial increase in the area of applicability of the project / planned activity
- it provides a substantial increase of the costs borne by the benefi ciary
- it provides a substantial reduction of the duration for fi nalising the project
- the project would have not been performed had it not been for the state aid.

As a rule, the gross intensity of the regional state aid may not exceed 50% of the eligible costs of the investment or the salary costs for a period of 2 years for the newly hired staff. For the investments or the jobs realised in the Bucharest and Ilfov district, the maximum intensity of the state aid is 40%.

The annual average budget allocated for this scheme is EUR 200 million.

Scheme for regional development by encouraging investments

This state aid scheme, regulated by Government Decision no. 753/16.07.2008 for constituting a state aid scheme regarding the regional development by encouraging investmens (GD 753/2008), is issued based on national procedures and state aid policies and follows European Union rules for regional state aid.

In order to benefit from this State aid scheme, a large company has to be registered under Romanian Company Law (Law no. 31/1990), have registered offi ces, perform activities in Romania and have to plan initial investments which fulfil the following criteria:
- are the RON equivalent of above EUR 100 million, and
- eligible costs are higher than EUR 50 million, and
- at least 500 new jobs are created as a result of the initial investment.

All domains of activity are eligible for state aid schemes, except the primary production of the agricultural products in annex 1 to the Treaty establishing the European Community, fishery, coal industry, steel industry, transport, maritime ship building and synthetic fibres.

Incentives under this State aid scheme are available in the form of non-reimbursable funds,
subject to a double cap limitation:

- the maximum amount granted as state aid is determined based on a specific ratio called “intensity”. The maximum intensity level is computed as a percentage of the eligible expenditures for investment. Moreover, specific intensity levels are indicated for investments below EUR 50 million and for those exceeding EUR 50 million, but these also depend on whether the investment is in Bucharest and Ilfov district or in other territories within Romania.

- the maximum absolute value, established based on the budgeted funds (i.e. the same entity can benefi t from up to EUR 30 million for investments in Bucharest and Ilfov district and EUR 37.5 million in any other region).

Eligible expenditures are defi ned as the higher of:
- the investment costs for tangible and intangible assets in the initial investment or
- employment costs estimated for the investment project.

Companies may benefit from the state aid scheme if they:
- do not have outstanding debts to the State Budget;
- have not been declared “in diffi culty” as defined by the European Community Guidelines on state aid for rescuing and restructuring fi rms in diffi culty;
- have not been subject to a state aid reimbursement decision;
- have not obtained state aid for the same eligible costs from other state aid suppliers or for other types of regional state aid schemes;
- keep the initial investment for a certain period of time after fi nalisation (i.e. fi ve years for large enterprises);
- contribute at least 25% of the investment costs.

GD 753/2008 is not applicable to companies found in one of the following situations:

- are considered companies in difficulty, as defined by the EU Guidelines regarding state aid for saving and restructuring companies found in difficulty;
- are subject to a state aid reimbursement decision, if this decision has not been executed yet in accordance with the legal provisions in force.

EU membership enables companies to seek financial support through the EU structural and cohesion funds. In most cases incentives take the form of development grants. A range of investment incentives are available to qualified applicants active in different economic sectors, in particular to small and medium size enterprises.

Around EUR 27.9 billion are available for 2007 - 2013 for Romania under the European Social Fund, European Regional Development Fund and European Agricultural Fund for Rural Development. These funds are designed to reduce regional disparities and to promote economic and social cohesion within the European Union. They are intended to be used to support projects which directly address locally identified needs (e.g. to help train people in new skills, or help develop existing businesses).

The implementation of these European funds is usually done by programmes which set allocation priorities and give information about the type of projects financed. Applicants for EU grants need to identify the programmes which would best fi t their projects. The selection of projects is carried out by the national authority competent for each programme.

For companies, the most relevant national programmes implementing EU funds are:
- The Sectoral Operational Programme “Increase of Economic Competitiveness” (POSCCE), The Regional Operational Programme (POR), The Sectoral Operational Programme "Human Resources Development" (POSDRU) and The “National Programme for Rural Development” (PNDR).

At the end of 2010, according to data published by the Public Finance Ministry, the total of the amounts paid to beneficiaries was RON 7.4 billion (approximately EUR 1.74 billion.), representing an absorbtion degree of the funds of under 9%. With payments of RON 2.52 bln, respectively RON 2.039 bln, POR and POSDRU have the highest absorbtion degrees, respectively 14.89% and 13.36%.

POSCCE is managed by the Ministry of Economy, Commerce and Business Environment, has a budget of EUR 3,011 billion and it’s main objective is to increase Romanian companies’ productivity. The main types of investments funded are:

- Productive capacity: The target benefi ciaries are existing enterprises especially from the processing industry and construction sector that need to modernise and develop their products and technological processes.

- Research and development: Companies could get EU funds for industrial research and precompetitive development activities that generate results of economic interest and support the transformation of the research results into new or improved products, technologies and services with high demand on the market. Different forms of collaboration between enterprises and R&D institutions are encouraged with the aim of enhancing their R&D activities and fostering the technology transfer. In order to raise their level of innovation and their market competitiveness and to create new R&D jobs, support is provided for the development of the research capacities in enterprises. The procurement of instruments, equipment, computers, software, etc necessary for R&D activity is fi nanced.

- Information and Communication Technology:Financial support is directed towards ICT applications and their interoperability, adoption of integrated solutions for companies leading to long-term cost-cutting thus facilitating the access to internal and international market and sustaining more effi cient management processes, observing at the same time the increased security of the electronic networks and the adoption of anti-fraud solutions in order to develop a secure and dynamic E-Business sector.

- Energy: The Programme also finances projects aimed at improving end-user energy effi ciency and promotes specifi c types of investments in installations / equipment of industrial operators in order to achieve energy savings, based on energy balance. Investments in installations to reduce industrial users’ energy consumption and investments in upgrading and building new power and heating production capacities by valorisation of renewable energy sources are also eligible for fi nancing.

For details, access the website of the POS CCE Management Authority of the Ministry of Economy, Commerce and Business Environment: http://amposcce.minind.ro

POR is managed by the Ministry of Regional Development and Tourism, has a total budget of approximately EUR 4.4 billion and it’s main objective is to reduce disparities of economic and social development between more developed and undeveloped regions, by improving the infrastructure conditions and the business environment.

Projects financed by POR aim, amongst others, the sustainable development of the support structures of businesses of regional importance; the growth, development, and modernising of the tourism infrastructure for the exploitation of natural resources and the improvement of touristic services; rehabilitation of unused polluted industria sites and preparation for new activities.

For details, access the website of the POR Management Authority of the Ministry of Regional Development and Tourism: http://www.inforegio.ro

POSDRU is managed by the Ministry of Labour, Family and Social Security, with a budget of 4,089 billion EUR, and has the objective of developing human capital and increasing employee competitiveness, by linking education and lifelong learning with the labour market. One priority of the Operational Programme is to promote entrepreneurial culture, flexibility and adaptability by supporting skilled, trained and adaptable labour force. The programme supports individuals in creating new business; innovative forms of work organisation, including better health and safety at work and diversity of contractual and working arrangements, with a view to improving quality and productivity at work. The actions also cover support for enterprises on specifi c training, with a focus on new technologies and organisational improvement.

According to the proposed indicative calendar of request launches for proposed projects in 2011, opportunities for companies target accredited suppliers of continuous professional training, which will be able to to request financing for employee qualifying/re-qualifying projects.

For details, access the website of the POSDRU Management Authority of the Ministry of Labour, Family and Social Security: http://www.fseromania.ro


PNDR is managed by the Ministry of Agriculture and Rural Development, has a budget of EUR 8,022 billion and supports the restructuring and modernising of the processing and marketing of agricultural and forestry products, while observing the principles of sustainable development. Promoting the investments in agricultural holdings, both in the vegetable and animal breeding sectors, for new buildings and / or the modernisation of existent agricultural buildings as part of the holding, as well as the connected utilities, the acquisition of new equipment and machines and the setting-up of plantations is also a Programme priority.

According to the proposed calendar of the submitting sessions, in 2011 are available, among others, financing schemes for:
- the modernising of agricultural holdings
- raising the added value of agricultural and forestry products
- supporting agricultural and semi-subsistence farms

For details, access the website of the the Payment Agency for Rural Development and Fishing: http://www.apdrp.ro


Other important European Funds available are:

The LIFE -  2007 - 2013 programme aims to reduce the impact of goods and services on the environment. Projects may cover an extremely broad area ranging from the demonstration of innovative clean technologies in various types of industry and other economic sectors, to the development and optimisation of methods for monitoring and managing environmental impact.

The Competitiveness and Innovation Framework Programme (CIP) aims to encourage competitiveness in European enterprises. With small and medium-sized enterprises as its main target, the programme supports innovation activities (including eco-innovation), provides better access to fi nance and delivers business support services in the regions. It encourages a better take-up and use of information and communications technologies (ICT) and helps to develop the information society. It also promotes the increased use of renewable energies and energy effi ciency.

The Seventh Framework Programme for research and technological development (FP7) is the European Union´s main instrument for funding research over the period 2007 to 2013. Support is given to the whole range of research activities carried out in transnational cooperation, from collaborative projects and networks to the coordination of research programmes. The Programme focuses on nine thematic areas: health, food, agriculture and biotechnology; information and communication technologies; nano-sciences, nanotechnologies, materials and new production technologies; energy; environment and climate change; transport and aeronautics; socioeconomic sciences and the humanities; space and security.


PwC can offer comprehensive advisory services related to investment incentives, tax relief, EU grants, and other forms of state aid and non-reimbursable funds. This advice and support is available to both new multinational investors and to established Romanian companies. Thanks to our many years of experience and the broad network of contacts at our disposal, we can offer you far-reaching analyses and knowledge of existing fi nancing opportunities as well as important support with the application preparation and project implementation.