On Thursday, 4 November 2021, NAFA published the list of large taxpayers that will be managed by the General Directorate for Administration of Large Taxpayers starting with 1 January 2022. The list includes 3,364 companies. The official classification was realized based on the analysis of the financial data for the year 2020, an atypical year for many industries, therefore, the list features some significant changes compared to the lists of previous years.
The criteria for selecting the companies to be included in the list of large taxpayers, were:
If until presently, with some exceptions, it was good news for companies to be included in the category of large taxpayers, being well known in business that NAFA handles relationships with such taxpayers with more careful consideration, this year, in the context of mandatory implementation of SAF-T, this does not come at all as good news for many companies in Romania, as they have an extremely short time to implement this reporting.
Essentially, the companies that are now listed as large taxpayers will have two major obligations that must be taken into account in 2022, specifically:
1.SAF-T reporting;
2.preparation of the transfer pricing file for transactions with affiliates.
The requirement to provide the Standard Audit File for Tax (known in practice as SAF-T) was introduced by Ordinance 11/2021 which was published in the Official Gazette on 31 August 2021, followed by the NAFA Order to standardize the nature of information which the taxpayers must declare in the SAF-T file, the reporting model, as well as the date from which this reporting becomes mandatory for each of the categories of taxpayers (large, medium and small).
Although it was under discussion since the beginning of this year, the Order regulating this new declaration was published only on 9 November followed by the final structure of the declaration on 10 November, however, the Taxpayer’s Guide for preparation and submission of Informative Return D406 – Standard Audit File for Tax (SAF-T) which is mentioned in the Order and should bring the necessary technical clarifications for the implementation of the declaration) is not published in the final version.
According to Order 1783/2021 approving the SAF-T reporting model (declaration D406), this reporting will become mandatory as of 1 January 2022 for all companies that are included in the category of large taxpayers until 31 December 2021. Those who were included in the list of large taxpayers starting with 1 January 2022 are required to submit the declaration starting with 1 July 2022. Exempted from the SAF-T reporting are the financial-banking institutions and insurance / reinsurance companies, classified on 31 December 2021 in the category of large taxpayers and who are required the obligation to submit the Informative Declaration D406 as of 1 January 2023.
Therefore, according to the NAFA Order, SAF-T or D406 reporting is to be submitted according to the categories of taxpayers, as follows:
The guide on the SAF-T declaration, the structure of the declaration and instructions for completing it were published on the NAFA website throughout this year, the first set in April 2021, however, given the level of complexity of the declaration and the level of detail of financial accounting information to be reported, these guides and files could not be considered the final version. NAFA repeatedly exceeded the intermediate terms communicated to the business environment regarding the implementation of the project. One of these terms was actually the one to publish the list of large taxpayers – the list that should have been published in the first half of July this year.
A revised version of the instructions was published in August and a set of questions and answers from NAFA were published at the beginning of October this year, however even NAFA mentioned in the posted documents that a new scheme for the file will be published (modification of mandatory / optional elements, modification of validations, etc.), which would involve making changes to the technical solution implemented by companies or under implementation.
At the same time with the publication in the Official Gazette announcing the approval of SAF-T reporting also the instructions were published on the NAFA website, which should be considered as the final version. However, given that they were published as late as 10 November 2021 and considering that the reporting deadline is 28 February 2022, we are still struggling with a very short completion time. At the same time, we are anticipating future validation problems as NAFA has not organized discussions with the business environment on this topic recently. Another issue is that the set of questions drafted by the taxpayers and NAFA’s answers are inconsistent, having different answers to the same question in the sections of the same material published in October 2021.
In relation to the SAF-T reporting, large taxpayers will be required to complete over 260 mandatory information fields from accounting, transactions with suppliers, clients, accounting notes, stocks, assets, invoices, payments and fiscal information within Declaration 406.
SAF-T is an electronic format, XML type file, which will contain data taken from the General Ledger, from the modules of Suppliers, Customers, Products, Stocks, Assets, etc.
According to the Order published by NAFA, the deadlines for submitting the SAF-T report (D-406) will be:
Taxpayers must submit the Informative Declaration D406 monthly or quarterly, in correlated with the applicable tax period for Value Added Tax (VAT). Taxpayers who are not registered for VAT purposes will submit the SAF-T file quarterly.
In the taxpayer finds certain errors in the declaration initially submitted, rectifying declarations can be submitted.
In accordance with the provisions of the Fiscal Procedure Code, the following sanctions will be applied for this declaration:
According to the NAFA Order and taking into consideration the complexity of this reporting, taxpayers will benefit from a grace period of 6 months for the first reporting, respectively 5 months for the second reporting, 4 months for the third reporting, 3 months for the fourth reporting, 2 months for the fifth reporting, from the date of when the submission obligation becomes effective for the respective taxpayer. Those who have the obligation to submit the declaration quarterly will benefit from a grace period for the first declaration to be submitted.
This grace period will be applicable to all taxpayers, from the moment they are required to submit the declaration. Essentially, until 31 July 2022, no sanctions would be applied for not submitting the declaration on time or for submitting incorrect or incomplete declarations by taxpayers who have the obligation to submit the declaration starting with January 2022, while those who have the obligation to submit the declaration starting with 1 July 2022 (i.e., those who were just registered on the list of large taxpayers) to benefit from a grace period until 31 January 2023. For the grace period is still required the submission of the declaration but will not be applicable the sanctions provided by the Fiscal Procedure Code for failure to submit the declaration or for the submission of incorrect / incomplete declarations.
Albeit the fines are not significant in case of failure to submit the informative declaration, the taxpayers must consider that these declarations are taken into account when calculating the fiscal risk of a company and NAFA determines which entities will be verified. Consequently, companies that are classified as large taxpayers must continue or, as appropriate, begin as soon as possible to adapt the software used to generate the new statement or find alternative solutions to facilitate the generation of SAF-T reporting.
A further requirement incumbent on large taxpayers is the annual preparation of the transfer pricing file.
The preparation of the transfer pricing file is mandatory annually, until the date of submission of the annual income tax return, in the case of large taxpayers who have transactions with affiliates with a total annual value, calculated by summing the value of transactions with all affiliates, excluding VAT, greater than or equal to any of the following thresholds:
The transfer pricing file can be requested from large taxpayers both during and outside of tax inspections. According to the conditions in force, large taxpayers who have transactions above the thresholds mentioned above, must submit the file within 10 calendar days of its request by the authorities, but not earlier than 10 days from the expiry of the deadline for preparation.
In other words, large taxpayers who carry out transactions with affiliates that within the duration of a year exceed the thresholds mentioned above, must always expect to be asked for the transfer pricing file, having 10 calendar days to make it available to the tax authorities at the time of request. The other large taxpayers who carry out transactions with affiliates below the mentioned thresholds will be required to present the transfer pricing file only during tax inspections, for preparation, having a term of between 30 and 60 days during which time the file can be prepared – this term can be extended by up to 30 days.
Should a taxpayer fail to comply with the requirement to prepare the transfer pricing file under the conditions and within the terms provided by law, is sanctioned with a fine between 12,000 and 14,000 lei.
In relation to the companies that have been classified as a large taxpayer this month, given that the classification is made starting with 1 January 2022, essentially commencing with transactions related to 2022, there is the issue of preparing the annual transfer pricing file – should these transactions with affiliates exceed the thresholds mentioned by law. Therefore, companies must start in advance the groundwork for this file, so that it can be completed by the deadline for submission of the annual income tax return.
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