Page 53 - Central and Eastern European Transfer Pricing Review

Romania | 53

What trends are being observed What level of interaction do tax seek to classify certain fees as royalties
currently? authorities have with customs and therefore exclude them from
Currently, the strategy of the Romanian authorities? the business profts article.
tax authorities is to focus on loss-making The exchange of information with the
companies and on companies operating customs authorities on transfer pricing Are year-end transfer pricing
in certain economic sectors (such as the adjustments is increasing. Customs adjustments permitted?
oil and gas sector, which has come under base adjustments are also made in Yes. There is nothing in the Romanian
a lot of scrutiny in the last year). accordance with the General Agreement legislation to prohibit year-end
for Trade and Tariffs (GATT). adjustments, which may be subject to
other tax consequences depending on
Special considerations Are management fees deductible? the nature of the underlying transaction.
Are secret comparables used by General corporate conditions must be
tax authorities? cumulatively met: the service is actually Other unique attributes?
As a matter of principle, Romanian tax rendered; the taxpayer can provide If a transfer pricing documentation
authorities use public information and supporting documents attesting that the fle does not included all the sections
databases. Additional information may service was provided (that is, written required by the legislation, there is a
be found via exchange of information agreement, timesheets, reports, etc.); risk that the fle may be considered as
with other states. and the service is rendered for the incomplete, which gives the right to the
beneft of the taxpayer s business. tax authorities to make adjustments.
Is there a preference, or requirement, Transfer pricing adjustments may be
by the tax authorities for local In the absence of such supporting made by the tax authorities based
comparables in a benchmarking set? documents, tax inspectors may deny on three independent transactions
the deductibility of these service
Yes. For Romanian transfer pricing fees. Management services are often (qualifying as similar with the one that is
purposes, in order to determine the scrutinized by tax inspectors trying to being analyzed). The simple average will
arms length character of prices charged question their deductibility. be used.
between a Romanian entity and its
related parties, a local market benchmark Also, management fees should be In practice, the Romanian tax authorities
study has to be carried out frst. It is only priced at the market-price level. do not accept loss-making companies to
in the case of insuffciently available be included in benchmark studies.
information regarding local comparables Are management fees subject to
that Romanian tax authorities will accept withholding? Other recent
a pan-European search. Nevertheless, Yes, if there is no protection of a double
the search for comparables on the local tax treaty. According to Romanian developments
market has to be documented and legislation, a 16 percent withholding Although the obligation to document
justifed as not possible. In practice, we tax applies on payments made to domestic intra-group transactions for
noticed that the Romanian tax authorities foreign service suppliers, and there Romanian transfer pricing purposes was
are asking for Romanian comparables, is only an override if the relevant clearly stated in the Fiscal Code as of
and other benchmarks (on the EU market treaty has a business profts article May-June 2010, there is still a risk that
or on extended markets) are usually and the fees are within that article. the previous text of the relevant provision
rejected by the Romanian tax authorities. Starting 1 February 2013, a 50 percent of the Fiscal Code could be interpreted in
withholding tax is applied for income a way that the documentation obligation
Do tax authorities have requirements derived rendering services in or outside was also applicable in prior periods.
or preferences regarding databases Romania, including management
for comparables? services, if this income is paid in a state Tax treaty/double tax
No. However, the Amadeus database with which Romania has not concluded resolution
is most commonly accepted by the a treaty for the exchange of information.
Romanian tax authorities. Note that the Romanian authorities often What is the extent of the double
tax treaty network?
Extensive.

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