Starting with 2017, Multinational Enterprise Groups (MNE) present in Romania face new compliance requirements (i.e. notification and/or reporting obligations) in the field of transfer pricing, subject to certain criteria. It is recommendable that during the upcoming period these companies take actual steps towards ensuring compliance with these obligations.
These new requirements were introduced in Romania in June 2017 when Emergency Ordinance 42/2017 was approved, transposing the provisions of Directive (EU) 2016/881 which regulates the obligation to prepare and submit the country by country report (CbC). The new piece of legislation entered into force on June, 2017 and it applies to a Group's fiscal reporting years, beginning on or after 1 January 2016.
Thus, (i) if a company in Romania is a subsidiary, a branch or a permanent establishment of a foreign entity and (ii) the relevant Group a member of which that company is has registered consolidated group revenue in the fiscal year prior to the Reporting fiscal year higher than EUR 750 million, then said Romanian entity may be liable to comply with the following obligations:
Obligation to notify the Romanian tax authorities (including information regarding the capacity of the Romanian company, as well as information regarding the reporting entity: its residence for tax purposes, the fiscal year of the Group).
The deadline for submitting the notification is the last day of the MNE group’s fiscal reporting year, but no later than the deadline for filing a tax return for the respective constituent entity for the preceding fiscal year (i.e. according to the current fiscal provisions, the deadline for submitting the notification for the fiscal year 2016 should have been 25 March 2017).
However, considering that:
- the legislation that regulates the obligation to submit the notification was published after 25 March 2017, more specifically on June 2017 and
- the legislation that regulates the content of the notification and of the CbC report entered into force starting with 14 November 2017 following the publication of Order 3049/2017, which simply restated the deadlines provided in the Emergency Ordinance 42/2017,
it is still unclear which is the deadline for submitting the notification regarding the fiscal year 2016, for which the term was exceeded due to the late transposition of the legal provisions in the Romanian legislation.
While no transitional measures or further clarifications exist, we recommend companies should file the notification for the fiscal year 2016 by 31 December 2017, and the one related to 2017 by 31 March 2018 (for cases when the tax year is the calendar year).
We also recommend to monitor the publication of the electronic form of the notification on ANAF's website in the following days.
Obligation to prepare and submit the CbC report (report including aggregated information for each jurisdiction in which the MNE group operates regarding: total revenues, gross profit/loss, income tax paid/accrued, stated capital, accumulated earnings, number of employees and tangible assets, and also details regarding the tax jurisdiction and the nature of the main business activities for each constituent entity of the MNE group).
The deadline for submitting the CbC report is within 12 months of the last day of the MNE group’s fiscal reporting year (thus, the first deadline for submission of the CbC Report for the fiscal year 2016 is 31 December 2017 – if the group’s fiscal reporting year is the same as the calendar year).
Consequently, in order to establish the specific obligations of a Romanian entity which is part of the MNE Group, it is necessary to establish the position of said entity within the MNE Group (i.e. ultimate parent controlling the MNE Group/surrogate parent/designated constituent entity/ constituent entity) and also that the conditions for the automatic exchange of CbC report information between Romanian and the country of tax residence of the reporting entity are met (established by Order no. 42/2017).
The failure to provide the CbC report, failure to provide the CbC report in time or providing incomplete/incorrect data would trigger fines of up to RON 100,000.