In other words, the tax authorities will target group companies that register operating losses that could be linked to their intra-group transactions. Taxpayers that carry out transactions with related parties may be identified and their financial indicators may be analyzed by the authorities. The purpose of this procedure is to determine which transactions may have been carried out at prices that were not “arm’s length” with the goal of transferring the relevant tax base to other jurisdictions.
All these activities are aimed at enforcing Romanian transfer pricing legislation, which is drafted based on the principles of the Organization for Economic Co-operation and Development (OECD). According to these principles, each state must impose the appropriate tax base according to the activity carried out in that state, while transactions between related parties should be conducted under circumstances comparable to those of transactions between independent parties.
Under Romanian legislation, transfer pricing rules apply to all transactions carried out between related parties, such as transactions involving goods, services, intellectual property or loans. The term “related party” is defined in the Fiscal Code and it is not only the direct or indirect ownership of shares or equity (of minimum 25%) which will cause two companies to be related parties, but also the so-called notion of “economic control.”
Even though ANAF’s strategy does not make direct references to the economic sectors that would be targeted by transfer pricing audits, the document provides information on the risk analysis that would be used to select taxpayers for tax inspection. Thus, the intention of the authorities is to improve the risk analysis (by using special procedures, tools, qualified personnel, training, access to third party information, etc.) as well as the process of selecting companies for a tax audit. The plan is to perform the selection process based on electronic (automatic) fiscal risk sheets. The taxpayers selected based on the risk analysis will automatically enter into the monthly and/or yearly tax audit plan.