The Romanian tax environment is seeing continuous changes including tax reforms, legislation updates and significant amendments to the practice of the Tax Authorities.
When analysing the last 4-5 years of the Romanian tax environment, we see an increased interest of the Tax Authorities with regard to the transfer pricing area, which has resulted in an exponential growth of the number of transfer pricing audits during these years.
Given this focus of the Tax Authorities, documentation of transfer prices has become a very important matter of taxation that must be faced by the Romanian and multinational enterprise groups.
The following provides a summary of the most important changes that occurred in the local transfer pricing legislation during recent years, along with some details about current developments.
Relevant Transfer Pricing Requirements and Rulings
Romania is not a member of the OECD, but the provisions of the local tax legislation (the Romanian fiscal code and the related norms) clearly specify that the Tax Authority should also consider the OECD Guidelines when analysing the transfer prices.
During 2016, the National Agency of Fiscal Administration (ANAF) issued Order 442/2016, on the content of the transfer pricing documentation file applicable for administrative procedures, which had a great impact by introducing some new provisions and requirements for tax contributors.
The most important amendments introduced by Order 442/2016 are the following:
- Large taxpayers are required to prepare TP documentation annually (only applicable from 2016 onwards)*).
- Materiality thresholds for transaction types carried out with related parties for large contributors**): EUR 200,000 in the case of interest for financial services; EUR 250,000 for services; EUR 350,000 for acquisitions/sales of tangible or intangible assets.
- Materiality thresholds for transaction types carried out with related parties for other types of contributors**): EUR 50,000 in the case of interest for financial services; EUR 50,000 for services; EUR 100,000 for acquisitions/sales of tangible or intangible assets.
*) The annual TP documentation should be prepared within the legal deadline for submission of the annual corporate income tax return.
**) Obtained by cumulating the value of all transactions of that specific type undertaken during the year with all related parties, excluding VAT.
During 2017, the National Agency of Fiscal Administration (ANAF) issued Order 3049/2017, approving the template and content of the country-by-country report, as subsequently completed and amended.
Recent Developments
In January 2020, the Government Ordinance 5/2020 was published in the Official Gazette, which transposed to local legislation the requirements of Directive 822/2018, also known as DAC 6.
Thus, from 1 July 2020, we can discuss the obligation to report cross-border tax arrangements, both for taxpayers and intermediaries involved in the transaction (e.g. notaries, accountants, tax consultants etc.). Companies that will not comply with the provisions that will be transposed into the fiscal procedure code risk receiving fines of up to RON 100,000 (approximately EUR 22,000). The content of this Government Ordinance also includes specific hallmarks concerning transfer pricing.
According to the latest public declarations of ANAF’s representatives, the agency is currently involved in a collaboration with the International Monetary Fund (IMF), so as to identify solutions to reform the fiscal inspection process and also to implement BEPS Actions 5, 13 and 14.
