Government Ordinance no. 16/2023 for amending and supplementing the Tax Procedure Code

On 31 January 2023, Government Ordinance no. 16/2023 was published in Official Gazette no. 86 in order to amend and supplement Law no. 207/2015 on the Tax Procedure Code. Among the most important amendments on the Tax Procedure Code are:

-       transposition of the provisions of the Council Directive (EU) 2021/514 of 22 March 2021 amending Directive 2011/16/EU on administrative cooperation in the field of taxation (‚DAC7 Directive’);

-       introducing of amendments related to the amicable settlement, as well as the reporting obligations of financial institutions.

I. Transposition of the provisions of the DAC7 Directive into the Tax Procedure Code

Who has the obligation to report?

The provisions of the DAC7 Directive transposed into the Tax Procedure Code mainly aim at introducing reporting obligations for digital platform operators, thus expanding the scope of administrative cooperation in the field of taxation between Member States.

Platform operators have the obligation to report to the competent tax authority certain information on the reportable sellers using those respective platforms and which perform relevant activities.

What are the relevant activities?

The term relevant activities means an activity carried out by reportable sellers for consideration, consisting of:

-       the rental of immovable property, including both residential and commercial property, as well as any other immovable property and parking spaces;

-       a personal service;

-       the sale of goods;

-       the rental of any means of transport.

What information is reportable?

Each platform operator must report information about itself to the competent authority in Romania, as well as in relation to reportable sellers that have carried out relevant activities, such as:

-       name/ legal name;

-       primary address;

-       any TIN issued to that seller (including each issuing Member State)/ place of birth in the absence of TIN,

-       VAT number;

-       date of birth/ business registration number;

-       the existence of any permanent establishment through which relevant activities are carried out in Romania or any other Member State;

-       information regarding the financial account in which the consideration is credited;

-       each Member State in which the reportable seller is resident;

-       the consideration paid or credited and the number of the relevant activities;

-       any fees, commissions, or other fees charged by the platform operator;

-       the address of the properties listed and the number of days when the property was rented.

What is the timing and the method of reporting?

The reporting deadline is 31 January of the year following the calendar year in which the seller is identified as a reportable seller. The first information shall be communicated for reportable periods as from 1 January 2023, having the reporting deadline on 31 January 2024.

Where a seller does not provide the required information after two reminders following the initial request by the reporting platform operator, but not prior to the expiration of 60 days, the reporting platform operator shall close the account of the seller and prevent the seller from re-registering on the platform or shall withhold the payment of the consideration to the seller as long as the seller does not provide the requested information.

Tax due diligence and reporting procedure

A platform operator may choose to register with the competent authority of only one Member State.

A reportable third-party platform operator must register with the competent authority in Romania, or in other Member State, in order to comply with the reporting procedures.

Where a platform operator does not comply with the obligation to register or where its registration has been revoked, the competent authority in Romania together with all competent authorities of Member States shall coordinate their actions aimed at enforcing compliance, including the prevention of the platform operator from being able to operate within the Union as a last resort.

Where a reporting platform operator does not comply with the registration obligation, the competent authority in Romania requests the electronic communications/ networks providers to stop the access to the platform operator's website or application until the respective operator registers in Romania or another Member State.

Penalties for non-compliance

In addition to the restrictions on the commercial activity described above, new contraventions and non-compliance penalties are introduced, both for reportable platform operators, reportable sellers and electronic communications / networks providers, set between RON 20.0000 – RON 100.000.

The provisions of the DAC7 Directive transposed into the Tax Procedure Code also aim at introducing amendments in relation to the automatic exchange of information.

Automatic exchange of information upon request or mandatory Joint audits

The provisions regarding the exchange of information upon request are amended, as follows:

-       new definitions are introduced regarding joint audit and disclosure of data security;

-       it is established the requirement of the existence of a foreseeable relevance in case of information exchange upon request.

The provisions regarding the mandatory automatic exchange of information are amended as follows:

-       the information regarding royalties is introduced in the category of information that is transmitted through the automatic exchange between the competent authorities.

Are established the conditions for the mandatory exchange of information on anticipated tax rulings with cross-border application and prior agreements on transfer pricing and of the mandatory automatic exchange of information reported by the platform operators are established.

Provisions relating to joint audits are introduced, as follows:

-       it is stipulated that the requesting authority may ask the requested authority to carry out a joint audit in a coordinated mood, which was agreed upon beforehand. To the extent that the Romanian authority receives the request, it must respond within 60 days of the receiving date.

Are introduced amendments regarding the conditions applicable to administrative cooperation, as follows:

-       the scope of the information communicated between Romania and other Member States within the framework of administrative cooperation is broadened, being established that this information can be used for the evaluation, administration and application of Romanian legislation related to VAT and other indirect taxes.

II. Other amendments made to the Fiscal Procedure Code:

Amicable procedure

The Amicable Procedure based on agreements or conventions for the avoidance/elimination of double taxation has been amended, as follows

Thus, to the extent that this possibility is provided for in the convention/agreement for the avoidance of double taxation, a Romanian taxpayer can present his case to any authority in the contracting states if he considers that the measures taken by one or both states result in a taxation that it is not in accordance with the convention/agreement for the avoidance of double taxation.

If the convention/agreement for the avoidance of double taxation does not provide this possibility, then the taxpayer can address this to the Romanian authorities (i.e. the National Agency for Tax Administration) in order to initiate the amicable procedure. If the National Agency for Tax Administration considers that the complaint cannot be admitted or is unjustified, then it will notify the authority of the other contracting state in this regard or implement a bilateral consultation process.

It is mentioned the possibility for the National Agency for Tax Administration to carry out the amicable procedure also in the situation where the competent authority from the other contracting state requests this aspect.

Reporting obligations of financial institutions

The National Agency for Tax Administration may perform checks and controls regarding compliance by the reporting financial institutions with the reporting and tax due diligence procedures set out in annexes 1 and 2 and with the compliance procedures set out in annex I, no.1 to the FATCA Agreement, as well as their monitoring should undocumented accounts be reported.

Furthermore, a deadline of 45 days has been introduced within which the reporting financial institutions must provide to the National Agency for Tax Administration, within the retention period, the required information and documents.

In addition, amendments were also introduced to the regime of contraventions and sanctions regarding non-reporting, late reporting, or incorrect/ incomplete reporting by reporting financial institutions of relevant information.

For more details, please refer to Government Ordinance no. 16, which was published in the Official Gazette no. 86 of 31 January 2023.

The EY Team is available for further details on the above.