Many European companies choose to expand their operations in Romania, either by establishing subsidiaries or by setting up new local legal entities. In this context, the question often arises regarding the possibility of appointing a European citizen who is not a Romanian tax resident as an executive director of a Romanian company.
This article offers a legal analysis of the available options for such an involvement, depending on the nature of the individual’s presence in Romania and the legal form chosen for collaboration.
The appointment of a non-resident director is legally permitted in Romania for citizens of the EU, EEA, or Switzerland, who do not require a work or residence permit. However, actual involvement in the company’s activities may generate legal and tax obligations, depending on the frequency of presence in Romania and the source of remuneration. Therefore, in the following, we will analyze the available options in this regard.
The exercise of the director’s role can be carried out, first of all, by means of a corporate mandate, granted through the company’s articles of association. This form does not require the conclusion of a separate contract and is, in practice, most often unpaid. It is a simple solution, suitable in cases where the director’s involvement is limited or formal. It does not require regular physical presence in Romania, nor does it trigger local tax or salary obligations, but becomes unsuitable if the director is to be actively and consistently involved in the management of the Romanian entity’s day-to-day operations.
A second option is international secondment, if the director is already employed by a company from another EU member state and is to be temporarily assigned to Romania for specific activities. This form involves maintaining the employment relationship with the European employer, obtaining the portable A1 document to keep social security contributions in the home country, as well as notifying the Romanian authorities before starting the activity. Secondment, however, is a temporary solution, limited to a period of up to 12 months, with the possibility of extension to 18 months. Also, in the case of a physical presence in Romania of more than 183 days within a 12-month period, or if the center of vital interests moves to Romania, the director may become a Romanian tax resident, with all the related obligations: tax registration, global taxation, obtaining a tax identification number.
A third possibility is direct employment in Romania, based on an individual employment contract concluded with the Romanian company. This form requires compliance with all provisions of the Romanian Labor Code, including registration of the contract in the electronic registry of employees, establishment of a work schedule, observance of rules on weekly rest, paid leave, notice periods, and other elements specific to employment relationships. It is a legally valid option that involves additional costs related to taxes and social contributions and may be less flexible if a contractual relationship tailored to the specifics of a management position is desired.
Another option, somewhat more balanced in situations where active, long-term, and effectively responsible involvement of the non-resident director is intended, is the conclusion of a management contract, regulated by Law no. 66/1993. This type of contract provides a clear legal framework, distinct from an employment relationship, and allows for a flexible structuring of obligations, responsibilities, and remuneration according to the company’s economic and organizational realities. The director is directly accountable to the general meeting of shareholders and is not subject to regulations regarding working hours, registration in the electronic employee registry, or statutory leave. At the same time, the management contract entails tax obligations in Romania, including obligations regarding income tax and social contributions, as well as the director’s tax registration in Romania, regardless of their tax residency status. The specific applicability of contributions may vary depending on the type of income and relevant legislation. The tax regime of the management contract must be assessed according to the individual’s tax residency status and in light of applicable double taxation treaties.
The choice of the appropriate form of collaboration between the Romanian company and a non-resident director must be made based on the level of involvement, the company’s development plans in Romania, the frequency of physical presence in the country, and the tax status of the individual involved.