Branch vs Subsidiary in Romania: Which Structure Should Foreign Investors Choose in 2026
A foreign company that wishes to operate in Romania without acquiring an existing Romanian business has three options: a subsidiary, which is a Romanian company in its own right; a branch, which is the parent itself operating through a registered Romanian establishment; and a representative office, which may promote and liaise but may not trade. They differ on the point that matters most, which is who carries the liability, and on a second point that matters almost as much, which is whether the Romanian profit can be taxed at one per cent of revenue or must be taxed at sixteen per cent of profit.
This note sets out the position as it stands in 2026, after Law No. 239/2025 and the fiscal measures adopted for the current year, and identifies the narrow circumstances in which a branch is the better answer.
The three structures at a glance
A subsidiary is a Romanian company in its own right. The parent is liable only for the capital it subscribes, and the subsidiary may qualify for the one per cent microenterprise regime. A branch is the parent itself: every obligation the branch assumes is an obligation of the parent, wherever the parent's assets are, and the branch is taxed at sixteen per cent of the profit attributable to Romania with no access to the one per cent regime. The great majority of foreign investors incorporate a subsidiary. A branch is the better answer in three narrow cases: regulated activity passported from another Member State, deliberate consolidation of the Romanian result at parent level, and activity that is a direct extension of the parent's own business at modest scale.
1. The subsidiary
A Romanian subsidiary is an SRL, societate cu răspundere limitată, whose shares are held by a foreign parent. It is a Romanian legal person with its own balance sheet, its own tax file and its own standing before the Romanian courts.
The consequence that matters is liability. A claim against the subsidiary, whether contractual, fiscal or employment related, is enforceable against the subsidiary's assets and not against the parent's. Romanian law does allow the separation to be disregarded in cases of fraud, of commingling of assets or of manifest undercapitalisation, but the threshold is high and the courts apply it sparingly. For any activity carrying real operational or regulatory exposure, this is the decisive consideration.
Since 18 December 2025 the minimum share capital of a new SRL is RON 500, approximately EUR 100. Where net turnover in a financial year exceeds RON 400,000, the capital must be raised to at least RON 5,000, and the increase must be effected by the end of the financial year following the one in which the threshold was exceeded. That deadline is frequently confused with 25 September 2026, which is the date for CAEN Rev. 3 reclassification and an unrelated obligation. The mechanics of the increase are set out in our note on the RON 5,000 share capital requirement.
A subsidiary may elect the microenterprise regime and be taxed at one per cent of revenue rather than sixteen per cent of profit. From 1 January 2026 the threshold is EUR 100,000 of revenue in the preceding year, reduced from EUR 250,000, and one per cent is now the only rate. The company must have at least one full time employee, and a newly incorporated company has ninety days from registration in which to engage one. Where the same shareholder holds more than twenty per cent in other companies, the revenue of those companies is aggregated when the threshold is tested. The regime is closed to banking, insurance and capital markets, to gambling, and to oil and gas extraction. The former cap of twenty per cent on consultancy and management income was repealed with effect from 1 January 2025, which opened the regime to advisory businesses previously excluded.
The subsidiary must hold a Romanian registered office, though not premises from which it trades, and must open a bank account within sixty business days of registration. The procedure, the documents and the timetable are set out in our guide to incorporating a Romanian company.
2. The branch
A branch, sucursală, is the registered Romanian establishment of a foreign company. It has no legal personality of its own.
Every contract the branch concludes is concluded by the parent. Every judgment against the branch is enforceable against the parent, subject only to the ordinary mechanisms for cross border recognition. This is not a theoretical exposure: a labour claim, a supply dispute or a tax reassessment arising in Romania reaches the parent's balance sheet directly.
A branch may carry on only those activities that fall within the parent's own authorised objects. Where the parent's constitutional documents are confined to, say, the trade in industrial equipment, the branch cannot lawfully invoice advisory services. This is ordinarily discovered either at the registration stage or, more expensively, when the invoicing is reclassified.
For tax purposes the branch is a permanent establishment. It is taxed at sixteen per cent on the profit attributable to its Romanian activity, determined on arm's length principles as between the branch and the head office, and it has no access to the one per cent regime, which is reserved to Romanian tax resident legal persons. Amounts transferred from the branch to the head office are not dividends and attract no withholding tax, which is the branch's principal advantage on repatriation, although that advantage is largely neutralised where the parent qualifies under the Parent Subsidiary Directive.
Registration requires the parent's constitutional documents, a certificate of good standing, an extract from the parent's own register and the resolution authorising the branch, each apostilled and accompanied by a certified Romanian translation. The filing itself is made by the instructing lawyer under an împuternicire avocațială, which requires no notarisation and no apostille; the apostille requirement attaches to the parent's corporate documents, not to the mandate. Where a party other than a lawyer is to represent the parent, a notarised and apostilled power of attorney is required in addition.
3. The representative office
A representative office, reprezentanță, is a non trading presence authorised by the Ministry of Economy rather than by the Trade Register. It may conduct market research, promote the parent's products, maintain a Romanian address and prepare contracts for the parent to sign. It may not invoice, contract in its own name or hold stock for sale. Activity beyond that scope risks reclassification as a permanent establishment, with the tax consequences following retrospectively.
It is subject to a fixed annual tax of RON 18,000, approximately EUR 3,600, payable whether or not anything is done, together with payroll contributions on any local staff. Authorisation takes thirty to forty five days and is renewed annually. It answers one question only, which is how a group maintains a Romanian commercial presence during a period in which it does not intend to trade.
| Subsidiary (SRL) | Branch | Representative office | |
|---|---|---|---|
| Standing and liability | |||
| Legal personality | Separate Romanian person | None, the parent itself | None, the parent itself |
| Parent liability | Limited to capital subscribed | Unlimited, worldwide | No trading, no contractual exposure |
| Permitted activity | Any lawful activity | Confined to the parent's objects | Promotion and liaison only |
| May invoice | Yes | Yes | No |
| Capital and tax | |||
| Minimum capital | RON 500, approx. EUR 100 | None | None |
| Tax on business result | 1% of revenue or 16% of profit | 16% of attributable profit | Fixed RON 18,000 per year |
| Microenterprise regime | Available, subject to conditions | Not available | Not available |
| Repatriation of profit | Dividend, 16% withholding, nil under the EU directive | Free transfer to head office | Not applicable |
| Registration and exit | |||
| Registering authority | Trade Register | Trade Register | Ministry of Economy |
| Time to register | Four to seven working days | Two to three weeks | Thirty to forty five days |
| Foreign documents to apostille | Only for a corporate shareholder | Full parent set | Full parent set |
| Exit | Sale of shares, merger or dissolution | Deregistration | Expiry or cancellation |
5. Tax and repatriation
Both a subsidiary and a branch are taxed at sixteen per cent on profit. The difference lies in what the subsidiary may elect instead. A company invoicing EUR 90,000 in advisory services, with a sixty per cent margin, pays EUR 900 under the microenterprise regime against approximately EUR 8,600 under the profit regime, and the same figures apply to a branch with no election available to it. The gap narrows as margins fall and disappears altogether once revenue exceeds EUR 100,000, at which point the two structures are taxed identically and the decision turns on liability, on repatriation and on the eventual exit rather than on tax. Our tax calculator runs the comparison on actual figures.
On repatriation, dividends paid by a Romanian subsidiary have been subject to sixteen per cent withholding since 1 January 2026, raised from ten per cent. That charge falls away entirely where the parent is established in a Member State and has held at least ten per cent of the capital for an uninterrupted year, and is reduced to five or ten per cent under most of Romania's double tax treaties. A branch transfers its result to the head office without withholding. The branch therefore holds an advantage on repatriation only where the parent is outside the European Union and no favourable treaty applies.
Both structures register for VAT once turnover exceeds RON 395,000. Both are within the Romanian transfer pricing rules when transacting with connected parties, and a branch's dealings with its own head office are treated as transactions requiring arm's length pricing and documentation in the same way. For a taxpayer other than a large taxpayer the documentation file is triggered at comparatively modest thresholds, and the point is reached sooner than most groups anticipate.
Where the Romanian activity will generate local revenue, employ staff, contract with Romanian counterparties or carry any meaningful liability, and in every case where the business may later be sold or brought into a joint venture. It is also the only structure through which the one per cent regime is available.
Where a regulated activity is passported into Romania from another Member State; where the group needs the Romanian result consolidated at parent level; or where the Romanian activity is a direct extension of the parent's own business, at modest scale and modest risk.
Where the group wants a Romanian presence for research and liaison, intends no trading for the foreseeable period, and can absorb a fixed annual charge of approximately EUR 3,600 against no revenue.
What is the difference between a branch and a subsidiary in Romania?
A subsidiary is a Romanian company whose shares are held by the foreign parent, and the parent's liability is limited to the capital it subscribes. A branch has no legal personality: it is the foreign company itself, registered to operate in Romania, and the parent answers for everything the branch does. A subsidiary may be taxed at one per cent of revenue under the microenterprise regime; a branch is taxed at sixteen per cent of profit and has no access to that regime.
Is a branch cheaper or faster to establish?
Neither, in practice. A branch requires the parent's constitutional documents, a certificate of good standing and a corporate resolution, each apostilled and translated, which is a longer exercise than incorporating a subsidiary for an individual shareholder. Registration ordinarily takes two to three weeks against four to seven working days for a subsidiary. The annual compliance burden is comparable, since both file statutory accounts, both are within the electronic invoicing system and both file the standard audit file where required.
Can a branch use the one per cent microenterprise regime?
No. The regime is confined to Romanian tax resident legal persons. A branch is a permanent establishment of a foreign company and is taxed at sixteen per cent on the profit attributable to its Romanian activity, whatever its turnover.
Can an individual open a branch in Romania?
No. A branch is by definition the establishment of a foreign legal person. An individual who wishes to trade in Romania incorporates an SRL, which may have a single shareholder, or registers as a PFA where the activity and the person's status allow it.
Can a branch be converted into a subsidiary later?
There is no conversion as such. A new SRL is incorporated, the branch's contracts, assets and employees are transferred to it, and the branch is then deregistered. The transfer is not automatic and carries tax and employment formalities of its own. The exercise ordinarily takes two to four months, which is a reason to give the initial choice proper attention.
Must a foreign director travel to Romania?
Not to incorporate. The constitutional documents are signed abroad and the instructing lawyer attests to identity, to content and to the date of signature before filing, so no notarial act is required. The bank is the single stage that may call for attendance, and only where the director is a national of a state outside the European Union who does not hold a Romanian residence permit.
We advise corporate groups established outside Romania on entering the Romanian market and on the ongoing administration of their Romanian entities. Most groups that approach us having already decided to establish a branch reconsider that decision once the liability position has been explained. Similarly, most groups that initially approach us undecided ultimately choose to incorporate a subsidiary. The circumstances in which a branch is genuinely the more appropriate structure are relatively limited and generally arise in the situations described above..
Our company formation service sets out the scope of the engagement and the fee for incorporating a Romanian subsidiary. Enquiries on branch registration and on group structuring may be directed to the firm through our contact page.
