On June 27 2008 Government Ordinance 85/2008 concerning incentives granted to investors by the Romanian authorities came into force, being published in the Romanian Official Gazette and replacing Law 332/2001, which previously governed investments with a large effect on the national economy.
The Ordinance introduces several positive changes with respect to investment such as: (i) a more adequate definition of the terms investor and investment; (ii) the fields of activity for which incentives are granted to investors; (iii) the incentives granted by the state authorities to investors; and (iv) the authorities responsible and the procedure for granting incentives to investors.
According to Law 322/2001, an investment was defined as a minimum contribution amounting to $1 million made to any field of activity having a positive effect on Romanian economic infrastructure. The investor was not defined by this law.
The Ordinance introduces a new definition with respect to the investment, removing the minimum $1 million threshold and focusing on the fields of activity in which the capital is invested. According to the Ordinance an investment means a capital contribution made for one of the following purposes: (i) the purchase of tangible and intangible assets with respect to the incorporation of a new company, enlargement of an existing company, extending the production of a company by adding new products, fundamentally altering the production of a company as well as the acquisition of fixed assets of a inactive company or a company that may become inactive without the acquisition; (ii) the financing of research, development and innovation projects; (iii) the creation of new work places and/or the professional training of existing employees; and (iv) initiation of projects related to the harnessing of green energy, environmental protection and lasting development.
An investor is defined by the Ordinance as any legal person who makes an investment in Romania. In addition, the Ordinance introduces several compliance conditions that must be fulfilled by investors to receive incentives. Legal persons that owe outstanding debts to the state budget, have requested the payment of the due amounts for external or internal credits guaranteed by the state to the Ministry of Economy and Finance, received loans guaranteed by the state, have entered insolvency procedures or wind-up procedures, or are the subject of a decision for the recovery of a state aid, shall not receive incentives from the state authorities.
Fields of activity
According to the Ordinance, to benefit from incentives investments must be in one of the following fields of activity: (i) agro-industrial processing activities; (ii) high-level manufacturing industry; (iii) production and supply of electrical and thermo energy, production of equipment for the increase in the efficiency of energy and the level of usage of green energy resources; (iv) protection and improvement of the environment; (v) water distribution, sanitation and waste management; (vi) information technology and communication; (vii) research, development (including new products) and innovation activities; and (viii) employment services.
Moreover, the investments must contribute to the accomplishment of several objectives including: regional development and cohesion, environment protection and recovery, increase of energy efficiency and the production of green energy, employment and training of the available work force, as well as improving the process of research, development and innovation.
With respect to the incentives which may be granted by the state authorities, investors may receive:
- unreturnable amounts for the acquisition of tangible and intangible assets;
- financial contributions from the state budget for newly created work places; or
- interest facilities for contracting credits.
In accordance with the provisions of the Ordinance the investors may receive incentives subject to the approval of the competent state authority. The investor must submit to the competent authority a request for incentives and an investment plan as well as any related documents.
The authority must analyse the documentation filed by the investor. If it considers that the conditions for receiving incentives are fulfilled, it must issue its approval within maximum 30 working days from the filing date.
The Ordinance provides that the Romanian Investment Agency acts as an intermediary between the competent state authorities and the investors and must be informed by the latter each time an approval for granting incentives is issued. The Romanian Investment Agency may also offer assistance to investors with respect to obtaining the incentives granted by the state authorities.