Romanian transfer pricing
According to recent data, Romanian tax authorities have prioritized transfer pricing (TP) oversight. Many enterprises recognize the importance of maintaining TP documentation but delay action until tax inspectors intervene.
During 2017, Romanian tax authorities performed approximately 41,000 audits, generating over RON 8 billion in additional tax obligations. Transfer pricing adjustments alone contributed RON 1 billion to the increased tax base, with over RON 60 million in additional corporate income tax liabilities stemming from TP modifications. Tax authorities also reduced available losses by RON 316.4 million.
Industries facing heightened examination include construction, building materials, agricultural products, energy trading, transport, and timber processing.
WHO SHOULD PREPARE A TP DOCUMENTATION FILE?
Companies engaged in intragroup transactions—involving entities with minimum 25% direct or indirect ownership—must prepare TP documentation. By documenting transfer prices, organizations demonstrate that applied pricing reflects arm’s length standards, helping tax inspectors assess the appropriateness of rates used.
Large taxpayers conducting significant related-party transactions must prepare annual TP files before corporate tax return deadlines. Tax authorities may request documentation within 10 days. Other taxpayers must supply TP files during audits within 30-60 days (extendable once by 30 days). In practice, completing comprehensive TP documentation requires two to four months.
Proactive file preparation mitigates risks including taxable base adjustments and penalties.
Multinational Enterprise Groups operating in Romania face new compliance obligations beginning 2017. If a Romanian subsidiary or branch belongs to an MNE group with consolidated revenue exceeding EUR 750 million, the entity may need to:
- Notify Romanian authorities regarding company status and reporting entity information
- Submit Country-by-Country reports detailing aggregated jurisdictional data on revenues, profits, taxes, capital, earnings, employees, and assets
THOUGHTS
Romania’s 2018-2020 governance program supports expanded TP oversight, emphasizing the Transfer Pricing Directorate’s focus on chronically unprofitable enterprises and related-party loan arrangements.
Companies should audit operations to determine documentation requirements and begin preparation promptly, ensuring readiness before tax authority requests arrive.