[ESTABLISHING A BUSINESS ENTITY IN ROMANIA] 400
to summon an extraordinary general meeting to discuss issues proposed by them. If the articles of association provide for a percentage lower than 5%, then the articles of association shall apply. 4. Foreign Investment, Anti-Avoidance rules, Residency and Material Visa Restrictions 4.1 Foreign Investment Certain corporate operations within a company may fall under the scope of FDI legislation as regulated by GEO 46/2022, for the implementation of EU Regulation 2019/452(GEO 46/2022), such as: • Direct or indirect changes in ownership control when control is acquired by an entity or individual qualifying as a foreign/EU investor, even if the change occurs outside Romania. • Internal reorganizations within a corporate group, such as mergers, spin- offs, or other restructuring processes, if they result in a change of control and the restructured entity qualifies as a foreign/EU investor. • Establishment of a new company by a foreign/EU investor; • Expansion of the capacity of an existing company through a foreign/EU investment; • Diversification or fundamental change of the company activity, changes triggering the application of FDI legislation; ➢ If the corporate operation exceeds €2 million and qualifies under GEO 46/2022, as a foreign direct investment, EU investment made by a foreign investor or EU investor with the purpose of establishing or maintaining lasting and direct links between itself and the
undertaking for which the funds are intended, with the purpose of carrying out an economic activity in Romania, in sectors relevant from a national security perspective such as banking or financial activity, industrial security, agriculture, environment, food supply security, energy, or transportation infrastructure trigger the obligation to obtain prior FDI clearance, while even lower-value transactions may be subject to review if they pose potential risks to security or public order. 4.2 Anti-Avoidance rules Under the current provisions, “the excess debt cost” is defined as the difference between the debt costs incurred and the interest revenues and other assimilated revenues incurred by the limited liability company/branch. The excess debt costs are deductible within a threshold of EUR 1,000,000/year. The excess debt costs above this EUR 1,000,000 threshold may benefit from an extra deduction limited to 30% of the accounting profit adjusted downwards with the non-taxable revenues and upwards with the corporate income tax expenses, the excess debt costs and deductible tax depreciation. If the base computed as described above is zero or negative, the excess debt costs are non-deductible in the current period, but they can be carried forward for an unlimited period of time and they can be deducted in the next periods applying the same mechanism as described. 4.3 Transactions between related parties According to Romanian transfer pricing (TP) legislation, which mainly follows the OECD TP Guidelines, transactions carried out with related parties (including also Romanian related parties) shall reflect the arm’s length principle. Otherwise, if the tax authorities were to consider that intercompany transactions do not
ILN Corporate Group – Establishing a Business Entity Series
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