Q: Has Romania implemented EU Directive 881/2016 on the mandatory automatic exchange of information on taxation?
A: Yes. Romania recently implemented the EU Directive in its tax legislation.
Who has these reporting obligations?
Ultimate Parent Entities which are part of groups of multinational entities having their tax residency in Romania or other reporting entities that meet the conditions provided in the law are required to submit an annual Country-by-Country Report, if their consolidated income is higher than EUR 750 million in the year prior to the reporting tax year.
What does the report contain?
The report should contain financial information such as: the aggregate revenues, profit / loss before tax, profit tax paid, declared capital, undistributed profit, number of employees and fixed assets. Also, the Country-by-Country Report must include information on each entity of the group regarding its tax residence and its main line of business. However, no actual format of the report has been provided so far.
When will the new reporting rules be applied in Romania?
The first reporting tax year is 2016, if the reporting entity is the Ultimate Parent Entity. If another group company (a constituent entity) is assigned / required to make a report, the first tax year to which the Country-by-Country Report should refer to is 2017.
What is the deadline for preparing the Country-by-Country Report?
The Country-by-Country Report should be submitted within 12 months from the last day of the group's reporting fiscal year.
How will this help?
The Romanian tax authorities will automatically transmit the report to other Member States in which the group entities are tax resident or in which they have tax liabilities for carrying over business activities via a permanent establishment. Romania will also receive reports from other countries. In this way, the tax authorities will be able to combat aggressive tax planning (eg double deductions, double non-taxation).
How will this impact Romanian companies?
We expect that this reporting obligation will not impact many Romanian companies, given that Romania is not a preferred holding destination and given the large turnover threshold of EUR 750 million.