Italian Hub questions & answers about Romania

There are over 20,000 companies in Romania with Italian participation. How have economic and commercial relations between the two countries changed over the past few years?

Alfredo Durante Mangoni: "Relations between Italy and Romania are currently marked by a notable dynamism. The historic relationship of friendship and closeness – in 2024 we celebrated 145 years of diplomatic relations – was confirmed again and relaunched by the Intergovernmental Summit on 15 February 2024. On that occasion, the Italian Prime Minister, Giorgia Meloni, and the Romanian Prime Minister, Marcel Ciolacu, outlined the shared framework of our ambitions in the Joint Declaration on the Strategic Partnership Development. Together with the Memoranda and Technical Agreements signed, the Economic Forum organised on the sidelines of the Summit then brought together more than 200 of the leading Italian and Romanian companies. This reflects a structured and appreciated Italian economic presence in all sectors. We are the second-largest trading partner and among the main investors, with almost EUR 20bln in trade exchange, as well as human and cultural relations, which are represented by a Romanian community that now exceeds one million people and is among the largest in Europe. Shared linguistic and cultural roots, strong strategic partnerships across all sectors, and close collaboration within the European and Atlantic frameworks are the three pillars that, as highlighted by President Mattarella during his visit to Bucharest on 18-19 June 2024, make Romania an essential partner for Italy –bilaterally, within Europe, and in addressing major international challenges.

This is a beneficial environment for our businesses, but one that has long required a shift of vision regarding the opportunities and challenges presented by the local market. It's a very different market compared to that of the 1990s, with production based on low labour costs gradually giving way to companies capable of investing in personnel training and talent selection, while generating value in innovative sectors. Sistema Italia in Romania – Embassy, ICE Agency, Chamber of Commerce and Confindustria – is ready to support this transformation, offering services and assistance to companies."

Which sectors should potential Italian investors consider when looking to expand their business in Romania?

Alfredo Durante Mangoni: "The study carried out by the Embassy on the impact of Italian investment in Romania in 2013-2023, available on our website, shows a steadily growing presence, but with a gradually slowing rate related to labour costs. This trend is predictable, given the historical structure of a significant share of our entrepreneurship in the country and the fact that about 80 % of bilateral trade involves goods. On this basis, the key sectors for new projects remain energy (also thanks to the significant natural resources in the Black Sea), construction, infrastructure and manufacturing. We also believe that agribusiness, banking and financial services, software development and technology are the sectors with the highest potential for development. In agribusiness, this is due to the country's strategic need to increase its production capacity and reduce imports. In services, it's because of the presence of a talent pool and the willingness of the Romanian institutional system to support a necessary transformation. Brussels' decision to base the European Centre of Competence for Cybersecurity in Industry, Technology and Research in Bucharest – led by an Italian – is among the most visible signs of this evolution. Lastly, significant opportunities are also within reach in the defence industry."

What is the current state of Romania's economic outlook, legislative and regulatory framework, and what should potential foreign investors consider when planning to start doing business in the country?

Sebastian Guțiu: "Romania presents a complex landscape for potential investors, characterised by recent political turbulence, ongoing legislative reforms and evolving economic conditions.

Economically, Romania has demonstrated resilience, and growth is expected to continue, supported by EU-funded investments, wage increases, private consumption and the country's recent Schengen accession. However, fiscal challenges remain, notably a high budget deficit generated mostly by government spending, which has postponed euro adoption plans and prompted S&P to downgrade the country's rating outlook from stable to negative. In January 2025, the EU approved Romania's seven-year fiscal-structural plan, which aims to reduce the excessive budget deficit.

Although lower compared to other countries in the Central and Eastern Europe region, the contribution of foreign direct investments to Romania's GDP growth is significant and is often considered a main driver of economic growth. Reducing red tape, developing infrastructure and speeding up digitalisation, as well as fostering a stable, predictable regulatory climate, are the most frequent requirements investors express when asked about doing business in Romania."

From a legislative point of view, what are the critical issues and what are the advantages?

Sebastian Guțiu: "Romania has made significant strides in aligning its legislation with EU standards. The country has implemented various measures to protect foreign investments. On a macroeconomic level, Romania became an accession candidate to the Organisation for Economic Co-operation and Development (OECD) in 2022. The country, for which OECD accession is a top priority, is currently following the implementation roadmap adopted in this respect.

Reforms and investments are expected to continue, also fuelled by Romania's Recovery and Resilience Plan. With a total value of EUR 28.5bln, the plan has been designed to address the country's specific challenges, support its climate objectives and foster its digital transformation.

However, challenges remain. Bureaucratic procedures, frequent regulatory changes, unpredictable shifts in legislation and taxes, as well as inconsistencies in enforcement, can pose difficulties for businesses unfamiliar with the local landscape.

One of the most frequent concerns raised by investors is that legislative and tax reforms are sometimes introduced without prior consultation with the business environment. An illustrative example of sector-wide fiscal changes announced on short notice is the recent withdrawal of several tax incentives granted to employees working in the IT, construction, agriculture and food industries – measures that were originally introduced to stimulate investment in these sectors."

Are there any incentives or facilities that investors should know about?

Sebastian Guțiu: "Over the years, the country has introduced several tax facilities to stimulate investment. For instance, a corporate income tax exemption is in place for profit reinvested in technological equipment, assets used in production and processing activities, assets representing re-technologisation, computers and peripheral equipment, software and the like – which is applicable if the reinvested profit is registered as a reserve in the company and not distributed to its shareholders. Another tax measure aimed to drive investment is an exemption from building tax and land tax for buildings and land in industrial parks, science and technology parks, as well as those used by business incubators, subject to compliance with state aid legislation.

These are only a few of the practical examples. As with any investment decision, moving into a new market requires a tailored assessment of all relevant legislative and fiscal considerations, available facilities and infrastructure, as well as operational aspects. While doing business in Romania does pose specific challenges, the considerable number of successful Italian businesses operating in our country is proof of the country's opportunities and potential as an investment destination."

Have you advised, or are you currently advising, on transactions involving Italian companies or investors?

Sebastian Guțiu: "We have had a formal client service structure dedicated to our Italian client base in Romania since 2008. Around this structure we have built a strong position as a trusted legal advisor for Italian companies expanding into Romania and the region. Daniele Iàcona, an Italian-qualified lawyer with over 15 years of experience in the Romanian market, has played a key role in the development of our Italian client portfolio, thanks to his expertise and profound understanding of the Italian business culture.

Each year, Schoenherr Romania advises more than 20 new Italian clients across various sectors, consolidating our reputation as the one-stop-shop firm for Italian investors. Given Romania's strategic importance as a destination for Italian investments in the region, our Italian client base is particularly diverse, ranging across key sectors such as energy (where we have advised a sizeable portfolio of Italian companies), manufacturing & industries, agri-food and financial services."

What are the prospects in the coming months?

Sebastian Guțiu: "While there is cautious optimism about the country's economic outlook, prudence is likely to be the watchword for investors in the coming months, with the upcoming presidential elections in Romania and the broader geopolitical context remaining in focus."

Which sectors do you believe will be appealing for foreign investors, including Italian ones, in the near future, and what opportunities do they present?

Sebastian Guțiu: "Some of the key contributors to Romania's GDP in recent years have been sectors such as services, manufacturing and industries, energy, retail and wholesale, real estate and constructions, agriculture and forestry, as well as financial services. Italian investors are already active in most of these areas, as well as in other sectors with high potential such as IT&C, pharmaceuticals & healthcare, and logistics. We expect these sectors to continue to attract attention from foreign investors, including Italian ones.

Zooming in on one of the most active areas, Romania has seen a surge in energy sector investments in recent years, particularly in sustainable technologies. Initially driven by CapEx, grants and EU funds made available through the country's Recovery and Resilience Plan, this investment wave has gained further momentum with the recent launch of a new CfD-based support scheme for renewable energy. Looking ahead, the market is expected to mature, with financing and transactions involving operational assets likely to attract increasing interest from investors, including those from Italy.

For Italian investors particularly, considering the number of companies active in the country in each sector, there is still room for growth in areas such as agribusiness, financial services and IT&C. Hopefully, Italian investors will tap into this potential, also encouraged by local incentives, including Romania's ranking as the fourth-highest in the EU for state aid allocated to agriculture and food."

How is Romania positioned as a hub for innovation and new technologies, and what opportunities does it offer for foreign investors looking to leverage these sectors?

Sebastian Guțiu: "Romania has emerged as a dynamic hub for innovation and technology, offering substantial opportunities for foreign investors. The country's research & development and IT sectors have grown in recent years, driven by a highly skilled workforce, particularly in engineering and IT, and historically low labour costs. In the past decade, these factors have positioned Romania as a strong contender in software development, service centres and IT outsourcing. However, in 2024, the sector has seen fewer new contracts and a series of layoffs against the backdrop of increased labour costs triggered by legislative and tax changes, as well as an unfavourable global environment.

The country aims to continue attracting investments in R&D and innovation activities. To this end, Romania has introduced corporate income tax relief, including an additional 50 % deduction on eligible expenses for R&D activities, an accelerated depreciation method for machinery and equipment used in R&D, and tax deductions on income from salaries and similar compensation for employees working in this sector.

On the other hand, Romania has the lowest level of business digitalisation among EU Member States. While notable progress has been made, the country still lags behind in the digitalisation of public services. On a positive note, this need for digital transformation presents significant growth potential for investors – particularly as a substantial portion of the Recovery and Resilience Plan is dedicated to addressing this gap."

Sebastian Guțiu | Office Managing Partner | Schoenherr Romania
T: +40 21 319 67 90 | E: s.gutiu@schoenherr.eu

Daniele Iàcona | Head of Italian Hub | Senior Attorney at Law
T: +40 733 730 119 | E: d.iacona@schoenherr.eu