Individual investors, known as business angels, will benefit from tax incentives following the acquisition of shares through investments in small and micro-enterprises in Romania.
Law no. 120/2015 regarding the stimulation of individual investors – business angels was published in the Official Gazette, Part I, no. 382 of June 2, 2015 and will come into force on July 17, 2015.
According to the law the individual investors will be exempt from:
•the tax on dividends for a period of three years from the moment of acquisition of shares, for the dividends related to the acquired shares; and
•the tax on gains from the transfer of shares, if the transfer of shares shall take place after a period of at least three years from the acquisition.
The total value of the exemptions mentioned above cannot exceed the value of the investment made by all individual investors – business angels.
In order to benefit from the incentives mentioned above, any individual can become an individual investor- business angel if the following conditions are met:
a)it is a person not related to the company and becomes its shareholder by cash contribution to its share capital, which results the issuance of new social shares with share premium related to the investor’s contribution;
b)he/she invests an amount between €3,000.00 to €200,000.00, the equivalent in Lei, in the company which he/she becomes the shareholder. The amount of investment apply cumulatively, regardless of the number of investors;
c)the investment is performed strictly in order to fulfill the main business activity of the company and the business plan for which the individual investor – business angel shall invest in;
d)on the date of performing the investment he/she does not have any offenses registered in his/her tax records by the tax authorities;
e)he/she cannot hold, as a result of investment, in his/her own name or through intermediaries, more than 49% of the share capital of the company concerned;
f)he/she does not have criminal record and has full capacity for being shareholder.
If a group of individuals become individual investors – business angels, the tax incentives can be granted for a maximum of 49% of the share capital of the company concerned, proportionally to the percentage of shares held.
The law does not apply to investments made in companies carrying out activities in the following areas:
b)Insurance and reinsurance, capital market, financial intermediation, any other activities related to the financial sector;
c)Real estate transactions, rental of real estate assets, real estate brokerage, real estate development;
d)Gambling and betting;
e)Steel production or trading;
f)Coal production or trading;
g)Construction of ships;
h)Production or trading of weapons, ammunition, explosives, tobacco, alcohol, substances under national control, plants, narcotic and psychotropic substances and preparations; and
i)Advisory in any domain.
It is important to mention that a contribution agreement needs to be concluded between the individual investor – business angel, the company’s existing shareholders and the company outlining the status of the individual investor – business angel, the capital increase through the issuance of social shares and share premium, followed by the registration with the Trade Registry together with the application for the registration of the share capital increase and the issuance of new social shares.
The new law is definitely encouraging for investors looking to invest in Romania and for small / micro enterprises that are struggling to secure new funds to grow their operations.
Our team of consultants is ready to further discuss with you how this new law might affect your business or you as an investor.
Please contact Iulia Lascau, at email@example.com