Transfer pricing will be, from now on, one of the favorite targets of the fiscal audit. When we say this we are considering both the recent approach of the transfer pricing file – which is mandatory in certain cases, according to the Order 442/2016 – and at public signals from the National Agency for Fiscal Administration (NAFA).
If we take into account the detailed information requested for filing in the form D 394, in particular those relating to persons not registered for VAT purposes or to transactions with non-residents, we conclude that the NAFA will target the tax optimization with micro companies and PFA, the intra-group optimization and the transfer of profits. A special attention should be given to the definition of the affiliation according to which the persons who make the most of their transactions with only one company can be considered as affiliates.
Under these circumstances, most companies will need to restructure their intra-group transactions, taking into account the tax implications, in order to reduce as possible the negative impact.
Even if only the taxpayers who have transactions with affiliates over certain thresholds will have the obligation to prepare the transfer pricing file, beginning with 2017, most companies that have transactions with affiliates or with unique clients / suppliers will need to prepare the file beginning with this year .
To fully understand the new approach of the authorities, we gathered some key information. Let’s take them in turn:
1. Transfer pricing is considered one of the main causes of tax evasion by the NAFA.
2. The latest report of Curtea de Conturi a Romaniei recommends operative measures for accountability of personnel in the transfer pricing area.
3. NAFA wants to buy access services to a database of approximately 120 million companies, located in 200 countries on all continents. Among other things, it wants access to data about the group (group diagram, branches, subsidiaries, permanent establishments etc.), affiliates categories of holdings, direct and indirect percentage of holdings, shareholders and board of directors.
Note Before checking the correctness of the transfer pricing file, the NAFA will examine, first, whether the transactions are real (under Article 11 of the Tax Code), if they are related to the activity and if they are necessary to the business. If these conditions are not met, any substantiating of the price will be useless, because transactions will not be taken into account when calculating taxes and charges in Romania.
Important: The tax adjustments can be substantial, depending on the size of the business.
The provisions of the order 442/2015
1. 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):
2. 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.
3. Taxpayers who do not meet these threshoslds will document the principle of market value, during a tax inspection, according to the general rules provided by the accounting and tax regulations.
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