Advance Pricing Agreements increasingly important under new deductibility limitations for intercompany expenses with nonresident affiliated entities

On 15 December 2025, a special regime was introduced in Romania that significantly restricts the deductibility of certain expenses incurred in connection with nonresident affiliated entities.

Starting with fiscal year 2026, Romanian taxpayers with a prior-year turnover below €50m will be required to apply a 1% cap on the tax deductibility of expenses related to intellectual property rights, management and consultancy services.

Taxpayers holding or requesting an Advance Pricing Agreement (APA) for these transactions are exempt from this limitation, making APAs an increasingly important instrument.

On 15 December 2025, a new regime was implemented that applies for Romanian taxpayers with a prior-year turnover below €50m that have transactions with affiliated entities that are not incorporated and do not have their place of effective management in Romania. If expenses for intellectual property rights, management and consultancy services from nonresident affiliated entities exceed 1% of total expenses, the deductible amount is capped at 1% of total expenses. (for details, see EY Romania Tax Alert, Tax changes introduced by the 2nd fiscal-budgetary package, dated 18 December 2025)

Taxpayers that already hold an APA covering such expenses, or those that apply for an APA starting with fiscal year 2027 (or a modified fiscal year beginning in 2027) are exempt from this limitation.

Certain cross-border intercompany expenses are excluded from these rules, such as: (1) expenses incurred for acquiring trademarks, industrial designs, copyrights and similar rights registered in Romania and (2) expenses that are capitalized in the value of tangible or intangible assets. Also, Romanian credit institutions and the Romanian branches of foreign credit institutions are excluded from the scope of the new regime.

APAs and the new tax regime

APAs, which are formal agreements between a taxpayer and one or more tax authorities, provide taxpayers with certainty on transfer pricing methodologies for specified intercompany transactions over a set period of years. Under the new tax regime, taxpayers that hold an APA or apply for one starting with fiscal year 2027 (or modified fiscal year beginning in 2027) are exempt from applying the tax deductibility cap (if the APA request is rejected, this will determine recalculation of the corporate income tax, together with related late payment charges).

Note too that Romania has recently expanded its APA program to include a roll-back option of up to five years under certain conditions. This enhancement allows taxpayers to align past transactions with agreed transfer pricing methodologies, further strengthening the appeal of APAs. (for details, see EY Romania Tax Alert, Legislative changes in transfer pricing: APA extension and MAP optimization, dated 31 July 2025)

In November 2025, the National Agency for Fiscal Administration (ANAF) announced the launch of a series of fiscal inspections that will target more than 500 large taxpayers from various sectors of economic activity, making proactive transfer pricing strategies more important. In this context, the ANAF President reiterated, at the Taxation and Technology Summit held 11-12 November 2025, the agency's commitment to simplifying the APA process and encouraged taxpayers to submit more APA requests, assuring that timely resolution will be a priority. APAs provide certainty and help prevent disputes, offering a clear alternative to traditional audits that could lead to unnecessary costs.

Implications

The new tax deductibility limitation represents a significant shift in Romania's approach to cross-border intercompany transactions. Businesses, especially those with significant cross-border management and/or consultancy services or intellectual property arrangements, should evaluate whether their intercompany arrangements fall within the scope of the new regime and assess the potential impact on their tax position. They should also consider applying for an APA to gain certainty in relation to the applicable transfer pricing policies and qualify for exemption from deductibility limitations. Finally, they should consider exploring the APA roll-back option to address historical transfer pricing exposure.

The EY team is available for further details regarding the above.