“Due to the existing political instability and to unpredictable legislative measures we can say that investors are somewhat reluctant to enter the Romanian market,” says Zamfirescu Racoti and Partners Partner Anca Danilescu, “but we have still had a lot of M&A activity lately, and the real estate market has also been reinvigorated.”
Danilescu says that her firm’s activity in these areas runs counter to many of its competitors. “We realized that sometimes our own practice contradicts the trends of the market. Lately we had a lot of M&A activities, and the real estate market was also very vivid in recent years — Romania became an attractive market for investment funds, and we assisted many clients lately in land acquisition or developing residential areas — and of course many of our clients are focusing on the data protection regulation because of the approaching deadline.”
Still, Danilescu says, the market is somewhat overshadowed by the country's political situation. “This is not exactly new in Romania; this was the case in the last year as well. Investors are somewhat afraid of the changing market, thus many of them are on a stand-by position. Our firm also had some negative experiences due to this uncertainty. Some months ago a client wanted to enter the Romania market with a new business in the transportation sector, but then he decided to wait a little bit longer with his business plans; wait and see how the legal picture would look in the future.”
Nonetheless, not everything is on stand-by, and Danilescu reports that the Romania government recently issued important amendments to the country’s labor law, fiscal code, and tax law — all areas that directly or indirectly affect investors.
“Recently we have had many projects concerning employment, due to certain legislative measures that have been adopted,” Danilescu says. “A new piece of law entered into force according to which, going forward, some contributions will burden the employees and not the employer, and this will affect in principle the gross salary of the employees. Our clients are interested in finding ways to mitigate these changes, because they don’t want to have additional costs, but they also don’t want to decrease salaries.”
She reports that changes have been made to the fiscal code as well. “Some of the changes have been well-received well by the investors — others not so much,” she says. “On the one hand, we are talking about a change in the income tax that started at the beginning of this year, which was initiated to encourage investments. On the other hand, there is the long-discussed fiscal form — the 600 Form — which is meant to determine whether individuals who generated certain types of revenues in the previous year (e.g., from investment, rental, and freelance activities) should pay pension fund and health fund contributions in the current year. In my view this is much ado about nothing, because while there is actually more administrative stuff, the changes won’t significantly influence the nature of previously imposed fiscal measures.” She adds that there were some recent changes in the capital market regulations as well, requiring clients to adapt their by-laws and their internal regulations in compliance.
Danilescu says that she is optimistic about the outlook going forward. “We are expecting some listings to take place this year. Also, I can tell you right now that this year we have already had more international transactions than last year, as it is more frequent that international clients are selling or acquiring businesses with subsidiaries in Romania on an international level.”