We provide assistance with technical argumentation for Mazars clients during the inspections carried out by the tax authorities in Romania. Also, we provide assistance for clients in preparing the transfer pricing policies and we prepare the documentation necessary in order to obtain the Advance Pricing Agreement.
We have access to the international databases usually used to document the transfer pricing. We work in close cooperation with our colleagues from the other Mazars offices and we can provide you with solutions which have proven to be efficient for clients in various scopes of activity, as well as observations regarding the specificity of the approaches used by tax authorities in Romania. Our professionals combine the technical abilities in the fiscal area with the economic and business management in order to help the clients assimilate the mechanisms for establishing the transfer pricing.
We are focusing on identifying the potential risks which a company may encounter in case of an inspection regarding the transfer pricing and we try, together with our clients, to identify the best solutions to limit the risks, in order to comply with the legal provisions.
Legislation regarding the transfer pricing in Romania
Transfer pricing represents the prices established between persons/companies affiliated for the sale of goods, provision of services, transfer of intellectual property, grant of loans or any other types of transaction with an impact over the taxable profit. The transfer pricing must be established at market level.
The establishment and documentation of the transfer pricing represents one of the most important matters of taxation which the Romanian and multinational groups must currently face. In Romania, the number of tax inspections which have aimed also the verification of the compliance with the legislation regarding the transfer pricing increased significantly in the last 3-4 years. Considering that the legislation is in force since 2008, the authorities consider that the transfer pricing file is no longer a new element and the controls for this purpose are a constant element of all fiscal inspections for those taxpayers which are carrying out transactions with affiliated persons. The subject of taxation of the multinational groups is one of topical importance in the Romanian public area, reason for which the tax authorities are trying, more and more often, to verify the compliance of the Romanian companies, which are part of these groups, with the legislation in force.
In case of a control, the risk lies in the possible adjustment of the pricing used in the relation with affiliated companies, adjustment by which either the income is increased, or the expenses made by the company in Romania are deducted, in order to increase the taxable profit.
In Romania, all companies which are carrying out transactions with affiliated persons, with a value exceeding the materiality thresholds stipulated in the Order no. 442/2016, have the obligation to document the market character of the pricing used in transactions with affiliated companies. The companies classified as large taxpayers must have the file already drawn up when they submit the corporate tax return for that year. The other taxpayer categories must submit the file to the authorities within 30 – 60 days from the request date, with a possibility to extend the due date with another 30 days.
The documentation is made by the transfer pricing file, which must include a series of descriptive information provided by the Order no. 442/2016, as well as the analysis of the used prices. The analysis is made based on the methods provided in the Fiscal Code and the OECD Transfer Pricing Guidelines. Although the Romanian legislation is drafted based on the OECD model, there are a series of particularities and the practical approach of the tax inspectors may be, in some cases, different compared to the OECD principles.
The transactions which are generally verified for choice by the tax authorities are:
- Transactions related to the main activity object of the company;
- Intra-group services;
- Royalties paid for intellectual property rights;
The main categories of services which we can provide are: