On 2 February 2016, an Order implementing a number of significant changes regarding local transfer pricing documentation, the content of the transfer pricing file and the procedure for the adjustment or estimation of the transfer prices by the Romanian tax authorities entered into force in Romania. The Order applies to transactions that occurred starting from 1 January 2016.
In brief, there are two main areas where the new Order introduces significant changes:
1. TP Documentation requirements and content
Under the Order, transfer pricing documentation requirements will differ based on the taxpayer’s category (large, medium-sized or small), materiality thresholds (annual value of inter-company transactions) and the type of transaction (financial transactions, supply of services, purchases).
Large taxpayers with a total annual value of inter-company transactions over the following amounts will have to prepare annual transfer pricing files:
- EUR 200,000 for interest received/paid for financial services;
- EUR 250,000 for supply/receipt of services;
- EUR 350,000 for purchases/sales of tangible or intangible assets.
Annual transfer pricing files must be prepared by the deadline of the annual corporate income tax returns (currently 25 March of each year for tax payers choosing a fiscal year ending on 31 December). Companies must be prepared to submit transfer pricing files at the request of tax inspectors within ten calendar days from the date of the request, but not earlier than 10 days after the preparation deadline.
Small and medium-sized taxpayers having a total annual value of inter-company transactions of less than the following amounts only have to prepare a transfer pricing file at the request of the tax authorities in the case of a tax audit:
- EUR 50.000 for interest received/paid for financial services;
- EUR 50.000 for supply/receipt of services;
- EUR 100.000 for purchases/sales of tangible or intangible assets.
For these companies, the deadline is between 30 and 60 calendar days from the date of the request, with a possibility to extend the initial period once, for maximum 30 calendar days.
Companies that received an advance pricing agreement for certain transactions do not need to prepare transfer pricing files for those transactions/periods.
2. Procedure for the adjustment or estimation of transfer prices by tax authorities
According to the Order, transfer prices can be adjusted for tax payers who fail to substantiate the arm’s length principle of the transactions carried out. However, tax authorities will estimate transfer prices only if the transfer pricing documentation is missing or incomplete.