Romania

  1. In your jurisdiction, what are the legal bases for eliminating double taxation further to a transfer pricing reassessment (European Arbitration Convention, mutual agreement procedures provided for by tax treaties)? In addition to the procedures set forth by such tax treaties, is there any other (formal or informal) domestic procedure in your jurisdiction?
  2. In addition – as the case may be – to the European Arbitration Convention, did your jurisdiction sign tax treaties with other States including an arbitration procedure? If yes, can you give the list of such States?
  3. In your experience, in your jurisdiction, how long does it take generally to eliminate the double taxation under the European Arbitration Convention and/or mutual agreement procedures set forth by tax treaties (and/or the domestic procedure if it exists)?
  4. In your jurisdiction, what are the starting point and time limit to initiate a procedure to eliminate double taxation resulting from a transfer pricing reassessment?
  5. If a reassessment is issued by your tax authorities, which State must receive the application for the international procedure to eliminate double taxation 1 The terms "international procedure to eliminate double taxation" mean the European Arbitration Convention or a mutual agreement procedure set forth by a tax treaty.  (your State? the other State concerned? both States?)
  6. What are the formal conditions to initiate an international procedure to eliminate double taxation? Is there a list of documents to provide? To which department of the tax authorities (name, address) must the request be sent?
  7. In which cases would the competent authority of your jurisdiction refuse to engage/participate to the international procedure to eliminate double taxation?
  8. Is tax collection suspended during the procedure?
  9. Assuming the procedure results in an agreement on a way to cancel double taxation, how is generally such agreement implemented in your jurisdiction?
  10. In your jurisdiction, is it possible to engage concomitantly an international procedure to eliminate double taxation and litigation in front of courts? If yes, is it necessary at some stage to abandon the litigation in order to conclude/finalize the international procedure?

In the framework of cross-border transactions, the domestic legislation foresees two options for eliminating double taxation further to a transfer pricing reassessment:

  • Mutual Agreement Procedures (hereinafter “MAP”) as provided by double tax treaties (hereinafter “DTTs”) concluded by Romania with other countries; and,
  • MAP under the European Arbitration Convention (hereinafter “EAC”) for European Union Member States.

There are no other formal or informal domestic procedures for eliminating double taxation except for domestic transactions where the law provides for a procedure for correlative adjustments.

2. In addition – as the case may be – to the European Arbitration Convention, did your jurisdiction sign tax treaties with other States including an arbitration procedure? If yes, can you give the list of such States?

Romania has neither tax treaty that includes a mandatory arbitration clause nor that includes a non-mandatory arbitration clause.

3. In your experience, in your jurisdiction, how long does it take generally to eliminate the double taxation under the European Arbitration Convention and/or mutual agreement procedures set forth by tax treaties (and/or the domestic procedure if it exists)?

So far, more than two years.

However, as far as we know, few cases were initiated, either under DTTs or the EAC.

4. In your jurisdiction, what are the starting point and time limit to initiate a procedure to eliminate double taxation resulting from a transfer pricing reassessment?

In Romania, the procedure can be initiated in general within three years from the date of receiving the reassessment decision issued by the tax authorities, which will or may lead to double taxation. Under MAP the provisions of the relevant DTT should be checked as it may provide for a different timeframe.

The moment of initiating the procedure would depend on each case circumstances. If it seems there are good chances to be successful during the administrative challenge phase, the initiation of the procedure could be postponed until the result of the challenge is known.
Otherwise, the procedure can be initiated immediately after the receipt of the reassessment decision issued by the tax authority.

5. If a reassessment is issued by your tax authorities, which State must receive the application for the international procedure to eliminate double taxation 1 The terms "international procedure to eliminate double taxation" mean the European Arbitration Convention or a mutual agreement procedure set forth by a tax treaty.  (your State? the other State concerned? both States?)

Best practice is to notify both states.

6. What are the formal conditions to initiate an international procedure to eliminate double taxation? Is there a list of documents to provide? To which department of the tax authorities (name, address) must the request be sent?

The authority to which a MAP request must be addressed is the Romanian National Agency for Fiscal Administration (17 Apolodor St, Bucharest 050741).

The procedure and the list of documents to provide are in line with the provisions of the Convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (90/436/EEC) and the Revised Code of Conduct for the effective implementation of the Convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (2009/C 322/01).

The Romanian law provides for the same procedure in both situations and makes reference to the same list of documents. The list of documents has not been published yet. The Romanian Tax Authorities are supposed to issue a guideline in this respect.

7. In which cases would the competent authority of your jurisdiction refuse to engage/participate to the international procedure to eliminate double taxation?

Dispute resolution under the EAC would not be initiated and/or may be suspended if one of the enterprises involved is subject to a “serious penalty” for the transactions giving rise to the profit adjustment.

The declaration of Romania on the definition of “serious penalty” (Official Journal L 174, 03/07/2008 P. 0001 – 0005) is:
“The term “serious penalty” includes the commission of any criminal act provided by the tax evasion law or the accountancy law or the company law or the tax legislation. It also includes administrative penalties assessed in respect to:

  • refusal to submit the tax returns or the informative statements at the request of the tax authorities;
  • refusal to supply documents and records requested by the tax inspectors;
  • failing to file the periodical financial documents and accounting reports or submitting such documents or reports which include incorrect data;
  • actions included in the tax record, according to the legislation in force.”

Additionally, if the taxpayer engages in court litigation and a negative final court decision is issued, there might be the case that the competent authority will refuse to engage/participate to the international procedure to eliminate double taxation.

8. Is tax collection suspended during the procedure?

Tax collection is not suspended during the procedure.

9. Assuming the procedure results in an agreement on a way to cancel double taxation, how is generally such agreement implemented in your jurisdiction?

The law does not describe the implementation of the agreement to cancel double taxation.
In any circumstance, no interest will be paid to the taxpayer.

10. In your jurisdiction, is it possible to engage concomitantly an international procedure to eliminate double taxation and litigation in front of courts? If yes, is it necessary at some stage to abandon the litigation in order to conclude/finalize the international procedure?

Yes, but the international procedure will be suspended until a court decision is issued. Please also refer to our comment made under question 7 above.

Authors

Picture of Roxana Popel
Roxana Popel
Head of Tax, Romania
Andrei Tercu
Andrei Tercu
Senior Tax Manager