How to open a business in Romania and avoid cultural traps

Romania is not just wonderful Carpathian sceneries, mysterious castles and a meaningful cultural legacy. This is a country with important geopolitical location, a 19-million market, an advanced economy and membership in the European Union.

Business in Romania has its features, which can be an unpleasant surprise for companies and entrepreneurs who have got used to realities in Ukraine. To attract the local audience, you’ll need product, website, marketing content and promo instrument cultural adaptation. Therefore, you should explore the local peculiarities first: specific conditions, laws, traditions and mentality, competition level and habits of the audience.

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We’ve talked to Volodymyr Larin, a founder of consulting company “Larin Trade Consulting“, about what awaits beginners in the Romanian market and which nuances you need to be prepared for, when opening a company in Romania. The Company has been supporting business in the Romanian market for 7 years already: introduces the local legislation and tax policy, provides financial counseling, and helps to develop a human resources policy and marketing strategy.

Volodymyr, tell us please in a few words what your company deals with

We know the specifics of running business in Europe and post-Soviet countries, therefore, we are aware of how difficult the entrepreneurs adapt to the local conditions. After all they differ significantly from usual ones. Our specialists know everything about a company registration in Romania, help to start and develop businesses, solve legal and tax issues, interact with the local personnel.

Is running business in Romania really so specific?

There are a lot of differences from Ukraine. Even in the way how accounting is conducted. Ukrainian business is used to have an accountant, who deals with everything. It doesn’t work like that in Romania. Here, an accountant doesn’t issue invoices, collect your documents on suppliers, and deal with banking accounts, settlements with suppliers and tax payment. That is, you have to prepare all the documents on your own, and s/he delivers statements just. As you can see, these are two completely different worlds even in terms of accounting.

Based on your experience, which niches can be called promising to open a company in Romania?

In fact, any area in Romania is promising. But, shall we say, Romanians spend more for beauty and food. They don’t want to invest in something big, like construction, real estate. However, Romania has a large manufacturing base and the factories and plants that I know somehow work for the foreign market – they export to France, Germany and other countries.

What is the reason for unwillingness to invest in construction or real estate?

There is no need to invest, when European money come here just like that. If there is a land plot, the European funds will build everything for you. I have some acquaintances from Belarus, who have planted vineyards all around at their cost. For that, you should prepare your business project and demonstrate that you are ready to provide a certain number of jobs. Then, you can invest only 15% of your funds, and get the rest from the European funds. This is irrevocably. Just like a present.

That’s interesting. But, let’s get back to our compatriots: what kinds of business are opened in Romania by Ukrainians?

IT specialists were the first wave. Then logistics, transport companies – there was a time, when 5 to 6 companies were opened per week. And virtually the whole beauty sector has moved here together with women. There are also a lot of builders in Romania, who buy land plots and build houses. And, of course, the sale of goods and everything else. So, we can say that all niches already exist.

How about “Nova Poshta” – aren’t they going to enter the Romanian market?

Nova Poshta representatives have already consulted with me. But, here we have too many nuances and a lot of competition from the carriers. Well, there are also carriers in Poland, but the turnover is big at the same time, and people have got used already. The turnover in Romania is not so big; moreover, 2 to 3 buses go to Odesa or Chernivtsy per week. We considered this will not be feasible.

Are there any special conditions for Ukrainians to start a business in Romania?

Romania has created all the conditions to do it without any problems, with the same rights as Romanians have. The only nuance is associated with banks: when foreigners open accounts, additional checks are required; therefore the process takes much more time than in the case of Romanians. You should be ready that an account opening can take about 4 to 6 weeks.

Is any organizational and legal form available to open a company in Romania?

You can easily open an LLC or a joint-stock company. The major challenge, which is already like an actuary joke, is the desire of Ukrainians to register as a Private Entrepreneur. They don’t understand that such a concept exists only in Ukraine.

The private entrepreneurs in Romania are totally different. You can engage a private enterprise only in the specialty specified in your diploma. That is, a cook cannot work as a designer. And, the diploma should be validated by the Ministry of Education.

Moreover, you can employ only a single employee and there are some restrictions on turnover. A private entrepreneur cannot open four stores, as it is in Ukraine. And the taxes payable are almost the same as when you are employed.

If I have an enterprise in Ukraine, can I register it here? What is the process of registering a company in Romania?

Ukrainian and Romanian enterprises are two separate stories. You cannot reregister a Ukrainian legal entity, but you open a new, Romanian one, instead. Even a Ukrainian company’s branch has no right to perform commercial activities; none of the Romanian banks will open an account for you. It should be a new legal entity as well.

As regards opening a company in Romania, everything is rather simple. You collect a package of documents: a passport (for travelling abroad or an internal Ukrainian one) and identification number (a Ukrainian one, hardcopy). A seal with a registration in an internal Ukrainian passport is the most important, as all constituent documents will be linked to it. We submit the documents to the notary, who performs a legalized translation. Then, we go to the lawyer, who prepares the documents themselves: a specimen signature, company charter and declaration, where the taxation system is specified – a general one or 1% of turnover in the case of a simplified one. You get the certificate in 3 to 4 days.

Can the tax system be considered loyal to business?

Well, yes. It’s more loyal than in Ukraine. You feel very comfortable and relaxed here. This regards the relationships with the tax service, audits, protection of workers’ rights and everything else – everything is easier.

I’ll give you some figures. Let’s consider the simplified taxation system: 1% of turnover (not the profit), 8% of turnover more (when you withdraw the dividends). VAT in Romania is 19%, which is the material share and 9% for everything related to food. In the case of a general system, the main tax is 16% of the profit instead of 1% of turnover.

The wage budget is calculated independently, of course. Now, the minimum wage in Romania is 3,000 lei; that is a bit more than €600. Of this amount, you credit €400 to the employee’s card, and the remaining €200 and change is the taxes.

How does running a business in Romania differ from the Ukrainian realities, and what you should be prepared for?

The biggest problem is that Ukrainian entrepreneurs try to work in the Romanian market as if they were in Ukraine. I mean, without any understanding that the environment and conditions are completely different, the customs, mentality and world perception are different.

The Romanian market is very specific, and the usual tools and strategies will not work here. Therefore, as for any other foreign market, localization  of business processes, product, marketing approach and promo content is required.

Time flows differently here, not like in Ukraine. Really, it’s much slower. With the usual pace and energy, you may think: “Huh, I’ll do it in a day”, and finally you it takes you a week.

An expectation and reality imbalance occurs because of this. I have seen a lot of businesses which failed and lost big money because they did try to bend the line in the foreign country. Romanians dwell on everything calmly and monotonously. And, any top manager who was a star in Ukraine fails miserably here in just a couple of months.

Therefore, you should understand and accept: you need another approach to business in Romania, as well as to people, licensing authorities, partners (a lessor, for example). Otherwise, the chances for your business to survive are poor. I’ve been getting used to this for four years. Four whole years! I used to act the same way: ha-ha, just showed my weight around and acted on a whim.

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Give us more details of the Romanians’ mentality.

They have completely different mentality. Sure, Romanians can be different, just the same as everyone else: somebody likes to work, others don’t. There are those that prefer stability and a permanent job, and those that live from one paycheck to the next. But, in general, the Romanian’s life is measured and not quick. For example, it’s useless to make any calls on Friday after 2.00 p.m. Everyone is either at the seaside or in the mountains. It’s also difficult to catch anyone on Monday before 12.00 p.m. They arrive; discuss their weekends, and the work starts from around lunchtime.

As you can see, Romanians are not like Ukrainians. Therefore, if you want to start a business in Romania and have a loyal audience, you should adapt your marketing  and promo content, and not rely on proven tools and existing channels.

Can you give some examples of business failures related to the mentality and cultural peculiarities?

There is a trading company with a stores network (I won’t reveal which one); it has been long in the local market, but it changed, I guess, about 15 managers during this time. Each time the manager showed off, so to speak, and tried to “educate” Romanians. But, this is impossible, because, in contrast to Ukrainians, they are versed in legal terms and know their rights as employees. Thus, when somebody tries to bend a stick or forces them to do what is not specified in their contract, they just start standing up for their rights. And, young lawyers simply rip off 19,000 (lei) from you and restore the employee to work. And you cannot do anything, because an employee is more protected here, than an employer.

Moreover, our people also act the same way already. A Russian speaking staff from the CIS countries works in my office and everyone dresses and leaves at 5.00 p.m. I believe when the war ends and my employee from Odesa returns home, she will implement the same policy at her workplace in Ukraine.

It’s not a matter of habit, but understanding how it’s meant to be. I know an entrepreneur who has recruited staff for a restaurant. When he started forcing them to work beyond the norms agreed, people just cut him off and started quitting. As a result, the business was fined 60,000 and it closed, because the staff was aware of where to go and what to do in such a case.

This means people are not afraid of losing their jobs, as it is in Ukraine, are they?

There is a huge labor shortage in the Romanian market, so people from Bangladesh and different Asian countries are taken here. For you to understand, even finding a seller is a challenge. We serve a couple of retail networks, so I know what I am talking about. For example, a person comes to work, fulfills his/her duties well. And, if there is a paycheck delay of at least a single day, half of the staff can just get up and leave. Just imagine being the same in Ukraine.

I have a client with a setup: we’ll delay the paycheck, that’s OK, they will be tolerated. And he lost his business in almost one day. Therefore, every speck of dust is literally blown away from the employees here, trying to please everyone: awards, days off in case of need to babysit etc.

Can you share how to become “theirs” and develop a successful business in Romania?

To become “theirs” you need time. First of all, for the Romanian business community to accept you. This gap in Romanians is really big – to cooperate with them you need to prove yourself, to do at least any work together. This regards addressing issues as well, even the legal ones – the Romanian will never move towards you, if s/he doesn’t know you. I mean, you cannot just come and win a major tender, they should get used to you. This is a principle followed here. Moreover, Romanians are very thin-skinned.

If you made a deal with Romanians and they have done their work, you should pay immediately. If you don’t do this, they won’t even take money then. And they will do everything so that nobody will work with you. They will create such a vacuum that it will be difficult to build a business further.

And the same with suppliers. If you didn’t pay for the goods to the wholesaler once, didn’t warn, apologize, you can forget about it. You no longer have a supplier.

What would you advise Ukrainians related to starting and developing a business in Romania?

Prior to entering the market, you need to explore how everything works here, whether there are any controversial issues, nuances in a specific area. That’s because it’s useless to enter some niches – they are too narrow and are already occupied by locals. Therefore, it is better to first collect all the information, and consult with the specialists. This is a major nuance: you should know where you are going.

Start with a website  or an app localization, to inspire confidence in potential customers from the first minute. Try to consider all the details when creating an interface, design, text and audio-visual content, functionality. The product should be clear and satisfy the audience needs.

Experience and knowledge obtained in Ukraine can become useless here. The projection of your own vision and usual business processes on the Romanian market’s realities has already “killed” lots of businesses.

We hope that these pieces of advice will be useful for you when developing a business in the Romanian market and will help you to adapt to the local realities with the maximum benefit.

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