We are pleased to share the Romania chapter of The Legal 500: Employee Incentives Country Comparative Guide, authored by our team. This material was originally produced for and published by The Legal 500, providing a comprehensive overview of the legal and tax framework governing employee benefits in our jurisdiction.
This country-specific Q&A provides an overview of Employee Incentives laws and regulations applicable in Romania.
1. What kinds of incentive plans are most commonly offered and to whom?
2. What kinds of share option plan can be offered?
Under Romanian practice, actual share plans can take several forms, but they are built around the same core feature, namely the beneficiaries receive (or become entitled to receive) actual equity interests in the company (at a discounted or zero price), and the right is usually subject to an exercise window, failing which it lapses. These plans are designed to support long-term alignment, retention and growth contribution.
Although several equity-based mechanisms can be used in practice, only arrangements that qualify as a SOP under Romanian tax law can benefit from the preferential tax treatment provided by law.
For a share option plan to qualify as a SOP under Romanian law, it must be initiated at company level, be addressed to employees, directors or managers of the company or of its affiliated companies, grant the right to acquire/receive a determined number of equity interests issued by the company at a discount or for free, and include a minimum one-year period between grant and exercise. If these conditions are met, the benefit represented by the discount shall not be subject to income tax and social security contributions, neither at grant nor at exercise, with taxation typically arising later on, in connection with dividends and the future sale of shares.
MNEs often roll out other stock-derived remuneration mechanism intended to apply at the group level, including to employees of Romanian subsidiaries (for example, restricted shares or restricted stock units), but any preferential tax treatment is available only if the arrangement is structured to meet the Romanian qualifying conditions for SOPs. Otherwise, such awards can still be implemented, but they are typically taxed under the standard payroll rules applicable to employment-related remuneration.
3. What kinds of share acquisition/share purchase plan can be offered?
Under an actual stock plan, share acquisition/share purchase arrangements can be structured as (i) acquisitions through a share capital increase (new shares issued and subscribed by participants, which implies shareholder corporate approvals and, in joint-stock companies, may be streamlined via authorised capital), and (ii) purchases from existing shareholders or via share buyback, through which the company repurchases and then distributes/sells to participants (with share buyback available only to joint-stock companies, subject to statutory limits and a 12-month deadline to dispose of repurchased shares intended for employees).
As mentioned at Question 2, the Romanian legislation expressly provides a preferential tax regime mainly for arrangements that qualify as a SOP under the tax legislation. If the relevant conditions are met, the SOP-derived benefit is generally not taxed as salary neither at grant nor at exercise, with taxation typically occurring on the sale of the shares. Where the relevant conditions are not met, any incentive plan can still be implemented, but the benefit is generally taxed under ordinary payroll rules as employment-related remuneration.
4. What other forms of long-term incentives (including cash plans) can be offered?
Long-term incentives in Romania can have various forms:
i) Equity-linked but cash-settled plans (e.g., virtual/phantom shares, stock-appreciation rights awards) replicate share value growth without transferring legal ownership. In practice, they are used especially in group settings, and do not generally qualify for the preferential tax regime of SOPs, being treated as deferred compensation, and taxed similarly to salary (subject to income tax and social security contributions) when paid out.
ii) Multi-year cash plans (deferred bonuses) involve cash payouts after a specific performance period and are commonly linked to financial or strategic metrics. These amounts are typically treated as employment income when paid and taxed through payroll.
iii) Retention awards are cash amounts payable at one or more future dates provided the participant remains employed, usually supported by good/bad leaver rules and, in some cases, malus/clawback clauses. Taxation generally follows the ordinary payroll rules at payout.
5. Are there any limits on who can participate in an incentive plan and the extent to which they can participate?
In Romania, there is generally no single statutory cap on who may participate in employer incentive plans: employers have wide discretion to set eligibility criteria (e.g., role, seniority, performance), provided these are applied consistently and comply with equal treatment and non-discrimination rules under labour law. Nevertheless, in case of SOPs, in order to benefit from the preferential tax treatment, such plans must be addressed only to employees, directors or managers of the company implementing the relevant SOP or of its affiliated companies.
6. Can awards be made subject to performance criteria, vesting schedules and forfeiture?
Both cash and equity-based awards can be structured with (i) performance conditions, (ii) vesting schedules, and (iii) forfeiture/lapse rules, provided the terms are clearly documented in the plan rules (and, where relevant, aligned with the participant’s employment/management relationship).
For share plans intended to benefit from the Romanian preferential tax treatment, the design is typically built around a tax-qualifying SOP. In that context, vesting is not only permitted but is effectively embedded in the tax concept: to qualify, Romanian tax rules require at least a one-year period between grant and the moment the beneficiary becomes entitled to exercise the right (minimum vesting period).
Performance criteria can be also attached to grant and/or exercise (e.g., individual KPIs, EBITDA, revenue growth, strategic milestones), and the plan may provide that unvested awards (or even vested-but-unexercised rights) are forfeited if the participant leaves before the relevant dates or breaches specified conditions (often implemented via good/bad leaver mechanisms).
7. Can awards be made subject to post-vesting and/or post-employment holding periods. If so, how prevalent are these provisions both generally and by reference to specific sectors?
Post-vesting and/or post-employment holding periods may be included in share-based incentive plans where the award leads to the beneficiary holding equity interests. In such cases, the plan rules can impose restrictions on sale or transfer for a defined period after vesting and/or (less common) after termination. Depending on the mechanism, comparable retention-type constraints may also be implemented for virtual equity arrangements that do not transfer legal ownership, but instead grant a right to cash remuneration linked to the performance of underlying equity interests, provided the payment mechanics allow for delayed settlement and conditionality.
By contrast, ordinary cash bonuses and in-kind benefits are generally not compatible with a holding-period concept because they are typically settled upon grant or delivery. Nevertheless, similar effects can usually be achieved through deferral mechanisms or clearly drafted clawback/repayment provision.
As such, retention-type constraints make incentives less attractive and potentially less efficient, they are not that prevalent in practice, but not completely unencountered.
8. How prevalent malus and clawback provisions are and both generally and by reference to specific sectors?
While the Romanian legal framework does not specifically mandate malus and clawback provisions in employee incentive plans, in practice, share-based plans generally provide that options or shares may be forfeited or redeemed in certain scenarios, such as termination of employment, with different treatment for good versus bad leavers or failure to meet performance conditions. The plan structure should define situations that can lead to loss of options or equity interests acquired, distinguishing between good versus bad leaver scenarios.
Malus and clawback provisions are most prevalent in regulated financial services, particularly banking and other prudentially supervised institutions. They are also more common among Romanian companies listed on a regulated market, given the requirement to have a formal remuneration policy for managers, which in practice often includes clawback-type mechanisms. In most other, non-regulated industries, these clauses are also common.
9. What are the tax and social security consequences for participants in an incentive plan including: (i) on grant; (ii) on vesting; (iii) on exercise; (iv) on the acquisition, holding and/or disposal of any underlying shares or securities; and (v) in connection with any loans offered to participants (either by the company operating the incentive plan, the employer of the participant (if different) or a third party) as part of the incentive plan.
(i) on grant;
For a Romanian tax-qualified SOP, no tax consequences arise for the participants on grant. For non-qualifying incentive plans, grant is usually still non-taxable unless the participant receives an immediately usable economic benefit at grant, in which case it is typically treated as employment income (income tax and social security contributions being thus owed).
(ii) on vesting;
For a tax-qualified SOP, vesting alone does not typically trigger taxation for participants. For non-qualifying equity incentive plans or cash-settled virtual/phantom plans, vesting often triggers a taxable employment benefit, as vesting usually coincides with (or is closely connected to) the point at which the participant becomes unconditionally entitled to value. The amounts are generally subject to income tax and social security contributions.
(iii) on exercise;
For a tax-qualified SOP, exercise does not generally trigger taxation for participants. For non-qualifying equity incentive plans, the spread/value obtained on exercise (represented usually by the difference between the market value and the discounted exercise price), is typically treated as employment income, and taxed accordingly.
(iv) on the acquisition, holding and/or disposal of any underlying shares or securities; and
Once shares are acquired, dividends received are taxed by applying a tax rate of 16% on the gross value of the paid dividends and may also trigger health insurance contribution of 10% applied to a taxable base capped at 6, 12 or 24 minimum gross monthly salaries.
Any gain realised at the moment of the sale/transfer of shares is taxed at the time of disposal by applying a tax rate of 16% on the gain, determined as difference between the sale price and the discounted exercise price. Similarly, 10% health insurance contribution may also apply to a taxable base capped at 6, 12 or 24 minimum gross monthly salaries.
(v) in connection with any loans offered to participants (either by the company operating the incentive plan, the employer of the participant (if different) or a third party) as part of the incentive plan.
Although it is not common practice in Romania to include beneficiary financing in incentive plans, if the plan includes employer (or group/third-party) financing on below-market terms (e.g., interest-free/preferential loans) or non-repayable loans, the advantage might be deemed employment-related income, subject to income tax and social contributions through payroll.
10. What are the tax and social security consequences for companies operating an incentive plan? (i) on grant; (ii) on vesting; (iii) on exercise; (iv) on the acquisition, holding and/or disposal of any underlying shares or securities; (v) in connection with any loans offered to participants (either by the company operating the incentive plan, the employer of the participant (if different) or a third party) as part of the incentive plan.
(i) on grant;
For a Romanian tax-qualified SOP, no tax consequences arise for the company on grant. For non-qualifying arrangements, there are typically no tax consequences triggered unless a measurable, immediately available economic benefit is effectively transferred at that point.
(ii) on vesting;
Under a tax-qualified SOP, vesting alone does not typically trigger tax consequences for the company. For non-qualifying equity incentive plans or cash-settled virtual/phantom plans, vesting often coincides with (or is closely connected to) the point at which the participant becomes unconditionally entitled to value, which may trigger taxation under the regular employment-income regime, with the standard employer payroll compliance.
(iii) on exercise;
For a tax-qualified SOP, exercise does not generally trigger taxation for the company. For non-qualifying equity incentive plans, the spread/value obtained on exercise (represented usually by the difference between the market value and the discounted exercise price) is typically treated as salary income, with the standard employer payroll compliance.
(iv) on the acquisition, holding and/or disposal of any underlying shares or securities;
Once participants hold shares, the company’s primary ongoing obligation is to withhold and remit dividend tax on any dividends it pays (with the withholding rate of 16%). Gains realised by participants on the sale of shares are generally taxed under the investment-income regime, therefore there will be typically no tax consequences for the company.
(v) in connection with any loans offered to participants (either by the company operating the incentive plan, the employer of the participant (if different) or a third party) as part of the incentive plan.
If the company (or another group entity/third party) grants loans to the beneficiaries of the incentive plans on below-market terms, the interest advantage may be treated as an employment-related benefit, subject to taxation according to the Romanian tax legislation. If the loan is written off or non-repayable, the amount is typically treated as salary-type remuneration with standard payroll implications.
Separately, expenses recorded at the company level in connection with implementing a tax-qualified SOP (including costs relating to the granting of equity interests) are generally deductible for Romanian corporate income tax purposes, provided they are properly supported and accounted for.
11. What are the reporting/notification/filing requirements applicable to an incentive plan?
i) Notification requirements. The Romanian law does not require a dedicated regulatory notification or approval of SOPs or similar incentive plans. In practice, compliance is driven mainly by tax/payroll reporting and corporate-law filings.
ii) Reporting requirements. Under a Romanian tax-qualified SOP, the employer must report the plan benefit to the tax authorities, typically valued at exercise as the difference between the exercise price (including zero, if applicable) and the market value of the shares, and must record the related plan expenses and benefits in the company’s books. Upon sale, participants must declare and pay tax (and potentially health insurance contribution) on the realised gain. Incentive plans that do not meet the tax qualifying criteria may trigger additional payroll withholding and reporting obligations, as the benefit is more likely to be treated as employment income. Once shares are acquired under any share plan, dividend distributions generally create further tax reporting obligations both for the company and the participants.
iii) Filing requirements. If implementation of the incentive plan requires share capital increases, issuance of new shares, or share buybacks/distributions, the company must observe the corporate approvals and, where applicable, register changes with the Romanian Trade Registry and maintain statutory corporate records.
12. Do participants in incentive plans have a right to compensation for loss of their awards when their employment terminates? Does the reason for the termination matter?
In Romania, participants do not generally have a statutory right to compensation for the loss of unvested or unexercised awards merely because their employment terminates. The Romanian legislation does not expressly regulate a right to compensation in relation to share-based incentives (including SOP) upon termination of employment, but is typically governed by the plan rules and documentation. Plan documentation commonly includes provisions per which certain termination events can lead to the loss of options or even equity interests already acquired (through good-leaver/bad-leaver mechanics or similar clauses).
The reason for termination can matter materially, but only to the extent the plan differentiates outcomes by termination scenario (e.g., resignation vs. redundancy vs. dismissal for cause), including rules on forfeiture, pro-rating, accelerated vesting, by way of exception, or continued exercisability after termination.
13. Do any data protection requirements apply to the operation of an incentive plan?
There are no special protection regulations that apply to incentive plans (including SOP). The general European General Data Protection Regulation and related national regulations on data protection apply to the processing of all categories of data in such situations, such as the following employee data:
▸Identification data (name and surname, date of birth);
▸Contact data (home/residence address, email, telephone number);
▸Professional data (position held in the company, date of employment, length of service, salary, professional performance, to the extent such are relevant/influence the granting of incentives);
▸Financial data (bank account, details of shares held within the incentive plan).
The employer needs to inform employees about the processing of the above data, for the purpose of granting benefits under the incentive plan, and ensure that such processing purpose is included in all relevant internal policies (e.g., privacy policy, retention policy).
14. Are there any corporate governance guidelines that apply to the operation of incentive plans?
i) General companies (non-regulated). Romanian law does not set out a comprehensive corporate governance framework designated for incentive plans. The Fiscal Code is the only legal anchor which sets the main conditions that must be met for a stock option plan to benefit from favourable tax treatment. In practice, governance is primarily driven by (i) the company’s internal corporate documents and approvals and (ii) general company-law mechanisms for issuing or transferring of shares. The Companies Law only addresses incentive-plan mechanisms indirectly, typically through rules on share issuances/transfers/buyback (where applicable).
ii) Regulated sectors. In regulated sectors, incentive plans are typically subject to additional supervisory and sector-specific remuneration requirements, which entail stronger governance around risk alignment, eligibility, deferral/vesting mechanism, and documentation, together with more formal oversight and, in many cases, enhanced internal controls and disclosure practices.
15. Are there any prospectus or securities law requirements that apply to the operation of incentive plans?
There are no prospectus or securities-law requirements that apply to the operation of incentive plans implemented by companies that do not operate on a regulated market. By contrast, companies active on regulated markets (e.g., financial sector) are subject to more prescriptive capital-markets and sector-specific rules on variable and share-based remuneration for managers. The managers’ remuneration policy must set out the key terms for variable and share-based pay, including performance criteria, any deferral and clawback features, the periods during which share awards may be granted, and post-award lock-up restrictions. In addition, the company must publish a clear remuneration report summarising all remuneration and benefits granted or due to each manager for the prior financial year.
16. Do any specialist regulatory regimes apply to incentive plans?
The Fiscal Code provides the only legal anchor which sets out the main criteria that must be met by a stock option plan to benefit from tax incentives. This represents the main specialist regulatory regime applicable to employee incentive plans in Romania, focusing on the tax treatment of qualifying plans.
As mentioned at Question 15, for companies operating in regulated sectors such as financial services, additional regulatory requirements may apply regarding remuneration policies and variable compensation, including employee share plans, particularly for material risk takers and senior management.
17. Are there any exchange control restrictions that affect the operation of incentive plans?
In Romania, incentive plans are not, as a rule, constrained by exchange control restrictions. However, in case an incentive plan involves high-risk jurisdictions, an assessment should be performed to ensure that no specific restrictions apply.
18. What is the formal process for granting awards under an incentive plan?
Although Romanian legislation does not set out a single formal procedure for share-based incentives (including SOPs), implementation is typically governed by the Fiscal Code, the Companies Law, and applicable labour-law and non-discrimination rules, with additional capital-markets requirements where the company operates on a regulated market. In practice, companies usually (i) prepare the plan and the relevant documents aligned with Romanian tax and legal requirements, (ii) adopt the necessary corporate resolutions approving the plan, and (iii) manage the exercise stage, including the issuance/transfer of shares and the registration of new shareholders with the competent authorities (as applicable).
19. Can an overseas corporation operate an incentive plan?
An overseas corporation can operate an incentive plan for its Romanian employees or for the employees of its Romanian affiliated entities.
20. Can an overseas employee participate in an incentive plan?
An overseas employee can participate in an incentive plan implemented by a Romanian company, as Romanian law does not impose a general prohibition on granting awards to non-residents. On the contrary, even for a tax-qualified SOP, Romanian tax legislation allows the plan to cover not only the employees of the company implementing the plan, but also the employees of its affiliated companies, without distinguishing between resident and non-resident affiliates.
21. How are share options or awards held by an internationally mobile employee taxed?
The taxation of share options/awards held by an internationally mobile employee mainly depends on whether the award is taxed as employment income or as investment income, and the employee’s tax residence status. Other specific circumstances, as well as the applicability of double taxation treaties and/or the European legislation in the field of social security or agreements on social security systems to which Romania is a party, need to be considered as well. Taxation of share options/awards held by an internationally mobile employee needs to be therefore assessed on a case-by-case basis.
22. How are cash-based incentives held by an internationally mobile employee taxed?
Cash-based incentives (e.g., annual bonuses, retention payments, long-term cash plans) are treated in Romania, in principle, as employment income. For an internationally mobile employee, the Romanian tax outcome is driven mainly by the employee’s tax residence status and work location. The same principles apply to cash-based incentives as to the incentive plans presented at Question 21.
23. What trends in incentive plan design have you observed over the last 12 months?
In Romania, companies increasingly favour incentive structures that can benefit from preferential tax treatment. However, the current legal framework remains relatively rigid and fragmented: only certain structures are clearly recognised and predictable from a tax perspective, while modern alternatives (such as RSUs, phantom or virtual equity) may create uncertainty and additional implementation and reporting burdens. From a policy standpoint, the framework would benefit from targeted modernisation (i.e., greater flexibility for equity compensation, clearer rules on valuation and taxing points, and a calibrated extension of tax incentives to contemporary long-term remuneration formats) so that talent retention and investment competitiveness can be supported without increasing controversy or enforcement risk.
24. What are the current developments and proposals for reform that will affect the operation of incentive plans over the next 12 months?
Over the next 12 months, the Romanian incentive-plan landscape will be driven primarily by (i) 2026 tax changes affecting the net economics of equity outcomes, notably the increase of dividend tax for dividends and the higher taxation of capital gains; and (ii) ongoing corporate-law reform discussions/proposals that could influence how easily equity can be granted/transferred in practice (particularly around share-transfer formalities and capital requirements), with potential knock-on effects for equity plan implementation mechanics.
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