Transfer Pricing: mandatory reporting from 1.1.2016

With the publication of Ministry of Finance Decree 442 of January 22, 2016, the conditions and terms related to the transfer pricing reporting requirement between affiliated entities were clarified.

Obligated subjects: Large taxpayers

The Decree first identifies “large” taxpaying entities, companies under Romanian law affiliated with foreign companies, which are obliged to provide the relevant Romanian authorities with documentation attesting to practical intra-group transfer prices. Entities identified as “large taxpayers” are obliged to prepare documentation upon exceeding only one of the following parameters (annual and net of VAT) with respect to intra-group relations:

– 200,000 for interest collected/paid for financial services;

-250,000 euros for transactions referring to services rendered or received;

-350,000 for transactions referring to purchases/disposals of movable or intangible assets;

For individuals identified as large taxpayers, the Decree requires them to prepare the documentation by the filing deadline of the Income Tax Return (March 25) each year.

Following a tax inspection, the company is obliged to hand over the document referring to transfer prices within 10 days of the request.

Obligated subjects: Small taxpayers

For other taxpayers having control/connection relationships with foreign entities, the Decree provides for a less burdensome transfer pricing documentation requirement within the timeframe and only if only one of the following parameters (annual and net of VAT) is exceeded, again with reference to intra-group relationships:

– 50,000 for interest collected/paid for financial services;

-50,000 euros for transactions referring to services rendered or received;

-100,000 euros for transactions referring to purchases/disposals of movable or intangible assets;

For individuals identified as small taxpayers, the Decree requires them to deliver the documentation within the deadline ranging from 30 to 60 calendar days, with the possibility of a one-time extension of 30 days.

Effective date of new obligations

The reporting requirement in the above points, applies starting from intra-group transactions carried out from 1.1.2016.

Recommendations

The manner of drafting documentation evidencing transfer prices will be discussed in more detail later.

Given the very tight deadlines for reporting the particularly complex document, we strongly recommend that our clientele consider shortly the need to begin preparing it.

We remain available for clarification.