Despite the current political turmoil the new Romanian Government has already passed legislation aimed at improving the investment climate.  In the Official Gazette no. 563 of August 9, 2012 was published Government Resolution no. 797/2012 (“Resolution”) setting up a State aid scheme to support investments promoting regional development using new technologies and which created new jobs.

This Scheme aims to fund salary costs of staff qualified in areas of research and development, innovation, energy, information, telecommunications and in high tech manufacturing and is for companies which create at least 200 new jobs.

Companies that intend to make an initial investment in Romania in one of the areas of activity specified/mentioned in the Resolution, and which will create at least 200 jobs and which has an ITC component in the investment plan of a minimum of twenty per cent would qualify for aid of up to twenty eight million EURO.   For the investments and the jobs created in the development region of Bucharest – Ilfov, a company would benefit from a maximum amount of twenty two point five million EURO.  The ITC component is defined as tangibles investments, such as equipment or components of equipment specific to information and communication technology as well as intangible investments arising on the transfer of technology through the acquisition of patents, licenses, know-how or unpatented technical knowledge, either as part of or separate from the equipment.

The validity of the Scheme and for which financing agreements may be issued, is for two years (2012 – 2013) and the payment will be made between 2013-2018, up to the limits of the annual budget allocated to the scheme.  The maximum budget is four hundred and forty million RON, although there is the possibility for this to be supplemented.

In order to benefit companies have to cumulatively fulfil the following requirements:

a)    be registered according to Law no 31/1990 on commercial companies, republished with subsequent amendments;

b)    represents a new investment in Romania.  The Investment must be made in the areas provided for in Annex no. 1 to the Government Resolution no. 797/2012 (e.g. manufacturing, software publishing activities, telecommunications, research and development, etc.);

c)    do not have registered debts to the local or general consolidated budget;

d)    are not classified as “enterprises in difficulty”, under the provisions of Chapter 2, Section 2.1 of the European Commission Communication – Community Guidelines on State aid for rescuing and restructuring enterprises in difficulty, published in the Official Journal of the European Union, series C, no. 244 of 1 October 2004;

e)    are not subject to enforcement proceedings, bankruptcy, legal reorganization, dissolution, operational closure, liquidation, and

f)     have not requested other types of State aid for the same eligible costs.

The Ministry of Finance is obliged to publish on its Web site the amount annually allocated to the Scheme, the date by which requests for financing agreements can be registered, the date on which the registered applications for financing agreements are being suspended and, also details of the amounts which have been allocated.

Payment will be made after representatives of the Ministry of Finance verify the accuracy and the compliance of statements and the documents supplied by the company in relation to the expenses incurred by the company.  The aid is calculated based on the salary costs recorded over a period of two consecutive years following the creation of the jobs. If a company employs workers made redundant by an associated company, then the salary costs of these employees will not be considered as eligible expenses/costs.

The companies are required to maintain the newly created jobs for at least five years from the date of the first payment of the aid. The aid is to be paid to companies who have received a financing agreement and after the partial/total payment of the eligible costs for which the financing agreement was given.

Aid payments are to be based on a payment request accompanied by, inter alia a letter of guarantee which provides that if the company which receives the aid does not fulfill its obligations under this scheme and the financing agreement, then they will repay the appropriate amount of the aid paid.  It will be the responsibility of the Ministry of Public Finances annually to verify the maintenance of the investment during the period of 5 years.

This new provision by the Government is a further step to encourage investment in the ITC field and is an extension of the financial benefits which the Romanian Government has given in the past to such companies.  As to its effectiveness only upon implementation will this become clearer.

Nicholas Hammond / Andra Carabineru

August 2012