A recent survey by Ernst & Young showed more than half of participating 101 foreign companies planned to set up or expand operations in Romania, primarily in supply chains and logistics, ranking it fourth in Europe by intention to invest. For many years one of Europe’s poorest countries, Romania has quietly closed in on its peers to become eastern Europe’s second-largest economy after Poland. One of the drivers has been foreign direct investment by foreign companies.

So, what elements have helped Romania in its drive to become a top nearshoring location?

In recent years, the Romanian government has rolled out a series of substantial programmes of infrastructure improvements, for instance with regards to the Constanta Port, the largest seaport in the Black Sea area.

The Romanian standard VAT rate is 19%. It has been reduced twice during the 2010 – 2021 period, from 24% to 20% in 2016 and then to 19% in 2017, remaining constant over the last 5 years.

A reduced rate of 9% applies to food, water supply and sewerage, water for irrigation in agriculture, fertilizers and pesticides used in agriculture, seeds and other agricultural products for sowing or planting, medicines for human and veterinary use, medical equipment for disabled persons, etc.

An extra-reduced rate of 5% applies to accommodation, restaurant and catering services, newspapers, magazines, admission fees to castles, museums, zoos and botanical gardens, theatres, fairs, exhibitions and cultural events, transport of persons for tourism purposes etc.

Amongst fiscal incentives in Romania, the Fiscal Code includes, for example, a 16% corporate tax relief for profit reinvested in new technological equipment used for business purposes and a personal income tax exemption for salary income for employees in IT or those part of teams that carry out research & development and innovation projects.