The transfer pricing file must be presented in 2017 by certain companies – as we will detail further – until the deadline for the declaration of profit tax, March 25 or deadline for companies that apply a different fiscal year from calendar year). Given the complexity of drawing up the transfer pricing file, the taxpayers concerned must prepare thoroughly the project so as to meet the legal terms.
The file must be prepared according to Order 442/2016. We draw attention to the fact that in case the tax authorities require the TP file during an audit, they consider that the documentation must be updated for the entire audited period (for example 3 years) according to the structure of the order 442. From our point of view, this approach is a excessive interpretation of the legislation, being basically a retroactive application of the order. For audited companies, the effort is significant and the requirements are difficult to meet during the period granted by the tax authorities, usually 30-60 days. As far as we know the Order 442 is to be amended regarding its retroactive application.
New obligations in 2017 that have to be prepared this year
Next year, the transfer pricing file must be prepared for the transactions carried out in 2016, until the deadline for the annual profit declaration.
Large taxpayers must prepare, annually, the transfer pricing file until the deadline for submission of the annual tax statements, until March 25, if they have total cumulated transactions with affiliates over these thresholds (values are without VAT and the exchange rate is the one communicated by the NBR in the last day of the fiscal year):
Large taxpayers who have transactions below the thresholds mentioned above, small and medium taxpayers present the file only by request, in a tax inspection, if their transactions exceed the following thresholds:
The deadline for submission is between 30 and 60 days from the date of the request and it can be extended once.
Taxpayers who do not meet these thresholds will document the principle of market value, during a tax inspection, according to the general rules provided by the accounting and tax regulations.
Note All taxpayers who are required to prepare the transfer pricing file could be obliged to update the documentation according to order 442.
Romania and the international trends
Transfer pricing is one of the main targets of tax authorities around the world. The international taxation changes gradually and it will influence not only the relationship with the authorities, but the business model of the companies. Both the OECD and the European Commission take measures to get ensured that the taxes are paid in the states where the profits are made. Basically, their intention is to determine that groups of companies not to shift their profits for tax purposes towards jurisdictions with low or no-activity, but where taxes are lower or equal to zero.
In this context, Romania has recently taken several measures in order to change national legislation. The results will be seen more clearly in 2017 and in future years as the reforms will be implemented. In early November, the ministry of Finance published a bill regarding Romania s accession as a member of the Plan BEPS (Base Erosion and Profit Shifting).
Other changes with great impact are expected
In perspective, keep in mind that the coming years will bring other changes with great impact for large groups of companies. As Romania joins the plan BEPS:
Also at European level are in the pipeline and will apply in the coming years:
Anti Avoidance Tax Directive (ATAD) that regulate: the deductibility of interest, taxation output of transfer of assets, general anti-abuse rule, controlled foreign company earnings calculation, an inconsistent treatment of hybrid components.
Romania has to introduce the new provisions into national legislation until 31 December 2018. We note, however, that some provisions are already applied such as the deductibility of interest and anti-abuse rule (Article 11 of the tax code).
The package on the common consolidated corporate tax base (CCCTB)
CCCTB will be mandatory for large groups of companies in the EU. It will introduce unique rules for calculating the tax base in the EU for profit tax, instead of the 28 systems applied in each Member State and is to be implemented in two stages: common base, subsequent consolidation.
Country by Country Reporting (CCR)
Groups of companies must submit detailed reports on activity in each state they have branches, subsidiaries etc
Taxation will change in the next years with impact on the business model. Companies that will inform and prepare in advance will overcome smoothly the inertia specific large organizations and will have the time and tools to adapt to the new paradigm. So get prepared!
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