Taxing authority and tax law
Tax authority: Ministry of Finance, National Agency for Fiscal Administration (ANAF)
Tax law:
- Law 571/2003 regarding the Fiscal Code as subsequently completed and amended
- Government Decision 44/2004 for the approval of the Norms for the application of Law 571/2003 regarding the Fiscal Code, as subsequently completed and amended
Relevant regulations and rulings
ANAF Order 222/2008 on the content of the transfer pricing documentation file and rulings; Decision 529/2007, approving the procedure for the issuance of advance individual rulings and advance pricing agreements; Government Ordinance 92/2003 regarding the Fiscal Procedure Code, as subsequently completed and amended.
OECD guidelines treatment
The Romanian Fiscal Code and the related Norms provide that the tax authority should also take into consideration the OECD guidelines when analyzing the prices applied in related-party transactions. In addition, the legislation on transfer pricing documentation requirements also refers to the EU Code of Conduct on transfer pricing documentation (C176/1 of 28 July 2006).
Priorities/pricing methods
The transfer pricing methods provided by the OECD guidelines are accepted by the tax authority. The traditional methods (CUP, resale price and cost plus) are generally preferred to the transactional profit methods (TNMM and profit split).
More specifically, when it is possible to apply, CUP is the preferred traditional method for assessing the market value of related-party transactions.
Transfer pricing penalties
Failure to provide the authorities with transfer pricing documentation upon request and within the required term is sanctioned with a fine of up to RON14,000 (approximately €3,200).
Additionally, failure to present the transfer pricing documentation file or presentation of an incomplete file could trigger an estimation of the transfer prices by the tax authority. Such estimation would be performed by simply using the arithmetic average of prices for any three transactions identified as similar by the authority. The resulting adjustments would trigger a profits-tax liability of 16% (the standard profits tax rate) and late payment interest and penalties according to the provisions of the legislation. Starting 1 October 2010, the late payment interest is 0.04% (note that the late payment interest was 0.1% per day of delay prior to 1 July 2010 and 0.05% after 1 July 2010). In addition, late payment penalties of 5% (for outstanding tax liabilities paid in a period of 30 to 90 days from the due date) or 15% (for outstanding tax liabilities not paid for more than 90 days) may also be imposed starting 1 July 2010.
Penalty relief
No specific penalty relief provisions are currently in place under the Romanian transfer pricing legislation.
Documentation requirements
Even though the documentation requirements were introduced in the Romanian regulations from 2006, the specific content of the transfer pricing documentation file was formally detailed by the tax authority only in February 2008.
Such requirements provide that Romanian entities having transactions with related parties should make available upon the request of the tax authority, and within a required term, a file comprising the transfer pricing documentation for such transactions. Taxpayers that entered into APAs for related-party transactions are not required to prepare and submit a transfer pricing documentation file for the periods and transactions covered by such APAs.
The transfer pricing documentation file should comprise information regarding the taxpayer, the group and the related-party transactions (including an analysis of functions performed and risks assumed by the related parties), as well as information on the transfer pricing methods used for determining the value of related-party transactions and a set of relevant statistical comparables.
Documentation deadlines
The term for the provision of the transfer pricing documentation file is set by the tax authority depending on the complexity of transactions, and it can be for a period of up to three months from the date of tax authority’s request (such term may be extended only once for a period equal to the initial period). The transfer pricing documentation may be requested by the tax authority during any tax audit (e.g., audits for VAT reimbursement requests), and there is no specific requirement to have the transfer pricing documentation submitted to the Romanian tax authority together with annual tax returns.
Separately, taxpayers that have an APA must submit annually to ANAF a report regarding observance of the APA terms and conditions. This report deadline is similar to that of the submission of annual financial statements, i.e., normally the end of May. Noncompliance leads to cancellation of the APA.
Statute of limitations on transfer pricing assessments
No specific statute of limitations rules are provided for transfer pricing assessments; however, general rules for statute of limitations are applicable, i.e., the Romanian tax authority may normally review tax-related matters retroactively for five years (or 10 years in the case of fiscal evasion or fraud).
Return disclosures/related-party disclosures
Generally, information on the related-party transactions undertaken by a Romanian entity is disclosed only upon the specific request of the Romanian tax authority. Also, for statutory accounting reporting purposes, Romanian companies are required to disclose the transactions undertaken with related parties.
- Separately from the above, the Romanian legislation provides for the following general disclosure requirements:
- Disclosure of transactions performed by Romanian entities with non-resident companies for which the Romanian company has an obligation to withhold taxes
- Disclosure or registration of contracts concluded by Romanian entities with non-resident companies and individuals performing in Romanian construction works, assembly, supervisory activities, advisory and technical assistance activities and any other similar activities which may trigger Romanian permanent establishment exposure
- Disclosure of long-term financing contracted by a Romanian entity with non-resident companies or individuals
Audit risk/transfer pricing scrutiny
The risk of transfer pricing scrutiny by the tax authority during a tax audit is characterized as medium to high.
APA opportunity
Comprehensive APA procedures and requirements have been in effect in Romania since June 2007. An APA may be unilateral (involving only one tax administration) or bilateral or multilateral (involving two or more tax administrations).
By means of an APA, the ANAF will approve the specific transfer pricing method utilized by a multinational entity prior to the actual transaction. APAs are binding on the tax authority as long as their terms and conditions are observed by taxpayers.
The term for issuing an APA is 12 months for unilateral agreements and 18 months for bilateral or multilateral APAs. The fees payable to ANAF for issuance or amendment of an APA are:
- EUR 20,000/EUR 15,000 — in case of large taxpayers or for agreements on transactions with a consolidated value exceeding EUR 4m
- EUR 10,000/EUR 6,000 — in all other cases
As a general rule, APAs are issued for a period up to five years; however, this term may be extended in certain cases.
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