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Three important dates for the tax legislation in Romania

Date: 07/20/2017
Source: PKF Finconta

On 7 June 2017, Romania, along with other 67 states, signed the Multilateral Convention for the implementation of measures to avoid double taxation, to prevent the erosion of the tax base and the transfer of profits.

The most important aspects of this approach are:
  • The 91 double taxation conventions to which Romania is part of have been designated as tax treaties covered by the Convention but are to be included in a process of updating and amending as a result of the Convention’s embracing.
  • Romania is one of the few Member States of the European Union that has adopted Articles 12 and 13 of the Convention on the Permanent Headquarters, which demonstrates the interest of the Romanian authorities in taxing the profits of multinationals where the added value is produced.

By adopting the Law 124 on 9 June 2017, Romania becomes a member of the BEPS (Base Erosion and Profit Shifting) plan, thus proposing to be part of an international approach to limiting and counteracting the use by multinationals of legislative inconsistencies between states, the aim being to choose tax profits in more favorable jurisdictions.

On 13 June 2017 was published the Government Emergency Ordinance no. 42/2017 which includes amendments to the Fiscal Procedure Code, more precisely introduces the Country by Country Report (CbC Report) as mandatory for multinational enterprise groups. This Ordinance transposes the provisions of EU Directive 2016/881 from 25th of May 2016, into national law.
Under the provisions of GEO 42/2017, a group of multinational enterprises with a consolidated group income of over € 750 million must submit an annual CbC report. The report will contain the following information:

a. For each country in which the group operates, information regarding the income, earnings before tax, income tax paid, income tax, capital declared, accumulated earnings, number of employees and tangible assets other than cash and cash equivalents.
b. A description of each entity of the group, with reference to the fiscal jurisdiction or if this is different, the jurisdiction in which the entity is established, and the nature of the principal activity pursued.

"The implementation of these normative acts will have a major effect on the tax legislation in Romania. The actions of the BEPS plan also make recommendations for changing the current transfer pricing legislation and will lead to greater transparency between tax authorities of signatory states and between taxpayers and local tax authorities", says Florentina Şuşnea, Managing Partner, PKF Finconta.

The most important effects of these normative acts will be the following:
  • Reviewing work on harmful tax practices, focusing on improving transparency and on mandatory spontaneous exchange regarding the decisions on preferential regimes.
  • The results obtained in matter of Transfer Pricing must be in line with the value creation for intangible assets, including those that are difficult to be measured.
  • The development of binding disclosure rules for aggressive tax planning systems is being made taking into account the administrative costs of tax and business administrations and on the experience gained in countries that have such rules.
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About us:
For more than 22 years, PKF Finconta is one of the 10 leading professional services companies in Romania. Since 2006, we are a member of PKF International Limited. PKF International is a leading international business advisory organization. The company grew consistently over the years, forming a Group of four companies: PKF Finconta, PKF Finconta Consultanta, PKF Finconta HR and Finconta Consulting SPRL, members of national professional organizations CECCAR, CAFR, CCFR and UNPIR. We provide a wide range of business advisory and related specialist services. We have seven core areas of expertise and within these areas we tailor our services for your business and your needs: audit, corporate finance, tax, bookkeeping and accounting advisory services, transfer pricing, payroll and personnel administration and insolvency.

Contact
Alina Făniță, CEO
PKF Finconta
Email: alina.fanita@pkffinconta.ro
Phone: +40 21.317.3196
Mobile: +40 768.184.870
Web: www.pkffinconta.ro

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