The Romanian Government passed legislation on 9 June 2017 to implement country-by-country (CbC) reporting requirements in Romania, transposing the provisions of Directive (EU) 2016/881 dated 25 May 2016 into the national legislation.
The new CbC reporting provisions follow the OECD Base Erosion and Profit Shifting (BEPS) Project Action 13 initiative.
As such, Romanian ultimate parent entities controlling a Multinational Enterprise (MNE) group with total consolidated group revenue of more than EUR 750 million will have to file CbC reports with the Romanian tax authorities in line with the new regulations. These provisions will also affect other Romanian companies that are part of an MNE group but are not necessarily parent companies.
The Romanian Government passed on 9 June 2017 Emergency Ordinance no. 42/2017 to align the Romanian Fiscal Procedure Code and local legislation with the provisions of Directive (EU) 2016/881 dated 25 May 2016.
The new legislation is mainly in line with the EU Directive, but some additional clarifications are provided, such as regarding the penalty regime and the specific provisions detailed below.
According to the new provisions, a Romanian tax-resident entity that:
has to file a CbC report with the Romanian tax authorities within 12 months of the last day of the MNE group’s reporting fiscal year.
CbC reports received by the Romanian tax authorities will be communicated to other interested foreign tax authorities by means of automatic exchange of information within 15 months of the last day of the fiscal year. For an MNE group’s first fiscal year, however, commencing on or after 1 January 2016, the CbC report would have to be communicated within 18 months of the last day of the fiscal year.
The Romanian legislation also provides for filing of CbC reporting by a so-called “surrogate parent”, i.e. a Romanian tax-resident entity may be appointed by the MNE group to file a CbC report in Romania on its behalf.
In addition, other Romanian resident entities will be required to file a CbC report if one of the criteria below is met:
The information to be included in a CbC report is as follows:
The template and the content for CbC reports, including the notification template, is to be published by the National Agency for Fiscal Administration Order.
Under the law, failure to provide the CbC report, failure to do so in time or providing incomplete / incorrect data would trigger the following penalties:
The new legislation provides that CbC reports could be exchanged by the Romanian tax authorities with other member states in the Romanian language or in any other official language of the European Union.
Romanian resident entities part of MNE groups have to notify the Romanian tax authorities if they are the ultimate parent, the surrogate parent or other Romanian resident entity required to file the CbC report. Alternatively, the Romanian resident entity has to notify the Romanian tax authority regarding the identity of the MNE member filing the CbC report and its residency.
According to the new law, this notification is due by the last day of the MNE group’s reporting fiscal year, but no later than the deadline for filing a tax return for the respective constituent entity for the preceding fiscal year.
The effective date of the new legislation is 23 June 2017. The legislation will apply to fiscal years beginning on or after 1 January 2016.
The introduction of CbC reporting is an important step in Romanian TP legislation, as it’s the first time that Romanian MNE groups have encountered transfer pricing reporting requirements.
In view of these rules, Romanian parent-entities, but also regular members of large MNE groups and PEs, should:
For a more detailed discussion of the impact that these provisions can play in your specific case, you can contact the following persons: