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REGARDING TRANSFER PRICING IN ROMANIA

Transfer pricing in Romania – all you need to know in 2021 [eBook]

Transfer pricing in Romania – all you need to know in 2021 [eBook]

The transfer pricing topic has become a top priority on the agenda of Tax Authorities worldwide, and Romania is not an exception.

If you are responsible for the transfer pricing of a Romanian company or even an external tax consultant / lawyer wishing to find out more on transfer pricing Romania regulations, we prepared the following pitstop guides to answer all your questions.

For comprehensive guidance regarding the transfer pricing Romania regulations, view our eBook below:

 

For comprehensive guidance on the most common transfer pricing issues that you may encounter when dealing with transfer pricing in Romania, check out our free guide / eBook below:

 

Can existing global transfer pricing documentation be utilized at the level of the Romanian entity?

Yes, parts of the existing transfer pricing documentation can be utilized, as Romania largely follows OECD standards. Although not a member of OECD, Romania has adopted parts of the OECD Transfer Pricing Guidelines into local legislation.

Moreover, as Romania is part of the European Union, all transfer pricing related directives will also apply here.

Be careful though, Romanian transfer pricing regulations have many particularities so it is rather recommended to present to the Romanian Tax Authorities a transfer pricing file prepared / reviewed by a person with intimate knowledge of the Romanian regulations or face with potential transfer pricing adjustments.

Can existing benchmarking studies be utilized at the level of the Romanian entity?

Most probably not. 

The Romanian Tax Authorities place great importance on the criteria used in the benchmarking strategy (e.g. independence thresholds, search territory), some of which may not be included in the existing benchmarking studies.

To find out more on how to prepare a benchmarking study compliant with Romanian Tax Authorities expectations, consider reading the .

What should be the content of the transfer pricing file in Romania?

If you’re familiar with the three-tiered BEPS Action 13 documentation requirements, the local file’s contents mostly match the transfer pricing Romania expectations: information on the group and on the entity, the functional analysis and the economic analysis of the transactions.

Please note that all transfer pricing documentation must be presented to the Romanian Tax Authorities in Romanian language only.

To find out more, consider reading the full detailed requirements extracted from the Romanian transfer pricing regulations with regard to the content that the transfer pricing file should contain.

When will a newly incorporated entity need to prepare the transfer pricing file in Romania?

The obligation to prepare the transfer pricing file is triggered when exceeding certain annual materiality thresholds in terms of intercompany transactions or at the request of the Romanian Tax Authorities.

For a newly incorporated entity (which is not a large taxpayer by local rules) / medium sized company, the thresholds are as follows:

  • EUR 50,000 – services received or offered to group companies;
  • EUR 50,000 – interest received or paid to group companies;
  • EUR 100,000 – acquisitions from / sales of goods to group companies.

To find out more on what are the scenarios when you will need to prepare a transfer pricing file for the Romanian Tax Authorities, consider reading the .

What is the impact if the transfer pricing file is not prepared in Romania? Can transfer pricing adjustments be performed?

Yes, and considering the aggressive tax audit environment in Romania, transfer pricing adjustments are very common if the transfer pricing regulations have not been followed.

Fines will apply (between EUR 2,900 – EUR 5,000) if the entity did not prepare a transfer pricing file. If the transfer prices are deemed non-compliant, adjustments, additional income tax and penalties may be due. Even more important, double-taxation will arise as a result resulting in same amount being taxed both in Romania and in the foreign jurisdiction.

 

To find out more on what are the exact penalties and penalty rates in case the Romanian Tax Authorities will perform transfer pricing adjustments, consider reading the .

What are the common reasons that trigger a transfer pricing audit in Romania?

Posting accounting losses in the last 5 years, delays in the submission of tax returns or profit margins below the average margins reported by other companies with the same NACE code are very common reasons that will bring the tax audit team to your door.

To find out more on what you may do to avoid triggering the initiation of a transfer pricing audit in Romania, consider reading an article we have compiled based on our extensive local practice: 11 situations that can trigger a transfer pricing Romania audit.

What are the relevant transfer pricing regulations in Romania – the basis of all answers above?

The following list covers the transfer pricing legislation in Romania on:

Please note the links above redirect to the official documents in Romanian language published by the Romanian Tax Authority.

What are the common transfer pricing issues that one should consider when doing business in Romania?

After incorporation of an entity in Romania, many operational and strategic actions, such as the intra-group sales / purchase of assets, loans, remuneration of the administrator may bring about issues in practice, especially in the context of a tax audit.

As the complexity of this subject grew tenfold in the last years, we have gathered in a thorough manual some considerations with regard to how to tackle these common issues. Please click the button below to access our manual.

 

What can be seen looking into the future of transfer pricing in Romania?

From 2011 onward, the transfer pricing audits occurrence has increased significantly, as the Romanian Tax Authorities’ experience and performance in this field has gotten better and better.

In addition, during the past couple of years the Romanian Tax Authorities did their best efforts to align themselves with latest trends e.g. remote transfer pricing risk assessments, information sharing between EU states, CbCR documentation analyses.

As a direct consequence we are seeing more often that the duration of the tax audits gets shorter over time will at the same time the aggressiveness of the Romanian Tax Authorities is increasing year by year.

Therefore, not preparing for a transfer pricing investigation is a poor strategy that may result in significant tax liabilities for the local subsidiary operating in Romania.

Preparation in advance can bring a strategic advantage and it would allow the identification and mitigation of the main risk areas – before the tax authorities show up at the doorstep.

In case your questions haven’t been answered by any of our materials above, please feel free to jump in a free 1 hour discovery call with us or see more on how else we could help you.

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VIOREL
SBORA

PARTNER

Viorel specializes in Transfer Pricing & DAC6 compliance projects. Viorel is a Certified Tax Advisor and has earned his ADIT Diploma in the transfer pricing area. Previously he has managed the BDO Romania transfer pricing team.

Viorel drafted the first practical manual for the management of groups of companies on compliance with the provisions of the new EU directive on administrative cooperation DAC6.

Viorel is actively involved in the working groups that contribute to amending the transfer pricing and DAC6 legislation in Romania.

MIHAELA
CRĂCIUN

SENIOR CONSULTANT

Mihaela has over three years of experience in delivering transfer pricing and DAC6 projects. She is studying to obtain her master degree in Accounting, Controlling and Expertise from University of Economic Studies and to obtain the qualification of chartered accountant.

ȘTEFANIA
MANOLACHE

CONSULTANT

Stefania joined the ATIPIC Solutions transfer pricing team as a consultant, specialized in particular on providing assistance during transfer pricing audits. Stefania graduated the Faculty of Law and a Master's degree in Tax Law organized by the University of Bucharest.

KNOWLEDGE & EXPERIENCE

CAN MAKE THE DIFFERENCE

Our rich experience and knowledge in international projects from various industries allow us to bring real value to our clients in helping to minimize transfer pricing and DAC6 risks and to improve the burdensome compliance process. 

Among our personal combined experiences in various specialty areas we can emphasize:

  • preparation of the transfer pricing documentation files for two of the ten largest companies in Romania;
  • defending our transfer pricing files with a success rate greated than 97%;
  • preparation of 250 transfer pricing files and over 350 benchmarking studies in the Amadeus and Orbis databases;
  • drafting one of the first practical manuals on succesfully complying with DAC6 legislation.

Book a private discussion with Viorel, Mihaela or Ștefania

MEDIA APPEARANCES

We are a reputable source of transfer pricing and DAC6 information across all channels .…

profit
”Although the legislative text specifically mentions that strict transfer pricing adjustments can not be made based on the simplistic information presented in the CbCR country reports, we expect a significant increase in the aggressiveness of the tax authorities towards the subsidiaries of the multinational groups that register in Romania losses, or fluctuating results. All these inspection or risk analysis actions will now be launched due the extensive use of country-specific CbCR reporting information” ... Read more
zf
”Transfer pricing legislation is a highly interpretable one, often more important than how the law is read by a transfer pricing consultant is how well does a consultant know how tax inspectors interpret the law”... Read more
hotnews
”With the outbreak of the Panama Papers, LuxLeaks and Paradise Papers scandals and the rush to implement all these new legislative changes, it is becoming clearer the movement to the next level of fiscal transparency, namely requiring multinational groups to make public these reports each country CbCR. However, it should not be overlooked that these measures can generate fierce disputes between governments of countries with low tax rates and those with high tax rates.” ... Read more

TESTIMONIALS

Because this is, after all, the best measure for your success ...

"In search of a consultant to help us prepare the transfer pricing file, ATIPIC Solutions team was recommended to us. As we have been told, this team manages to ease the process simply by requiring and providing information in a very clear and structured way. We will certainly recommend their services further. "

Ana Mihaela Ionescu

Chief Financial Officer, Butan Gas Romania
"ATIPIC Solutions has shown us at the tender stage that we will be able to rely on their promptness and especially that they are flexible enough and creative enough to find solutions to the price problems we face."

MAGDALENA BORDEI

CFO, Ascendum Machinery

What transfer pricing solutions can you expect from us?

PLANNING AND TRANSFORMATION

ATIPIC Solutions have extensive experience in the areas of transfer pricing software, including SAP add-ons, implementation and adjustment.

We can help you align your transfer pricing according to your business model, transform supply chain, structure your business in a tax efficient way and attribute appropriate profit to a permanent establishment, according to transfer pricing Romania rules.

COMPLIANCE

ATIPIC Solutions transfer pricing professionals apply in-depth knowledge and experience to help you prepare / localize / update transfer pricing documentation for all types of controlled transactions.

ATIPIC Solutions can also help you adapt existing benchmark studies or prepare locally compliant benchmarking studies for prices, profitability margins, interest rates, royalty rates.

POSITION DEFENSE AND DISPUTE RESOLUTION

During transfer pricing Romania audits, ATIPIC Solutions can offer support, develop defense strategies and argumentation, as well as coordinate with the tax authorities on your behalf.

As a consequence of a closed tax audit, you may ask us to draft appeals and resolve disputes in the Ministry of Finance system and court. If the case, ATIPIC Solutions can assist with APAs or mutual agreement procedures.

Transfer pricing regulations in Romania [eBook]

In case you wish to learn more on the transfer pricing Romania topic, with a focus on the legislative environment and highlights on the local practice, you can access the transfer pricing Romania rules eBook below.

Common issues a business may face when doing transfer pricing in Romania [eBook]

Our eBook summarizes many common issues tackled within the local transfer pricing practice, in the area of tax audits, documentation requirements and entity management.

Transfer Pricing Shared Service Center

You want to outsource completely the transfer pricing function across all the EU countries? We can then take over this internal process and simply work as one of your employees would in a Leased Shared Service Center innovative concept.

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