The Government of Romania is planning to replace the flat tax on corporate income with a tax on turnover and this could be effective as early as 2018.
The company revenues in Romania are currently taxed at a rate of 16%, but this could be replaced by a progressive tax on company turnover of 1 to 3%. The Government is also planning to delay the reduction of standard rate of value-added tax by 1% until 2019, which is currently taxed at 19%.
The Romanian Government passed Emergency Ordinance no. 42/2017 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.
According to the new provisions, all Romanian tax resident entities that are ultimate parent entity of an MNE Group with annual consolidated group revenue of €750 million and above will need to comply with the CbC requirements for fiscal years starting on or after 1 January 2016.
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. A Romanian group entity will need to notify the tax authorities whether it is the ultimate parent entity or surrogate parent by the last day of the reporting fiscal year. If it is neither an ultimate parent nor a surrogate parent, it will have to inform the tax authorities of the identity of the UPE or SPE along with its tax residency.
The report must cover group revenue aggregated information for each jurisdiction in which the MNE group operates regarding total revenues, profit / loss before income tax, number of employees, income tax paid, income tax accrued, stated capital, undistributed profits, tangible assets other than cash and cash equivalents. Average number of employees in each entity must be reported.
For failing to file a CbC report, the penalty ranges from RON 70,000 to RON 100,000 and for late filing of a CbC report or for incomplete / incorrect data in a CbC report, the penalty ranges from RON 30,000 to RON 50,000.
The president of Romania signed a law ratifying the amending protocol of Double Taxation Agreement (DTA) with Uzbekistan on 8 May 2017.
The Senate of Italy approved the draft law ratifying the Double Taxation Agreement (DTA) with Romania on 4 May 2017. Once in force and effective, the treaty will replace the existing DTA of 1977.
The Romanian Ministry of Finance published a draft law on 24 May 2017 to modify the CbC reporting legislation of the country.
According to the draft law, all Romanian tax resident entities which are ultimate parent of an MNE Group with annual consolidated group revenue of €750 million and above will have to comply with the CbC requirements for fiscal years starting on or after 1 January 2016. A Romanian group entity will need to notify the tax authorities whether it is the ultimate parent entity or surrogate parent by the last day of the reporting fiscal year. If it is neither an ultimate parent nor a surrogate parent, it will have to inform the tax authorities of the identity of the UPE or SPE along with its tax residency.
The Country-by-Country (CbC) report must be submitted by a company resident in Romania that is the parent company of a corporate group. If the ultimate parent entity (UPE) is not resident in Romania, and not obligated to file a CbC report in its country of residence, or although obligated to file CbC report there is no exchange of information instrument in place with Romania or there is a systemic failure of the jurisdiction of tax residence of the UPE, any other entity of the group that is resident in Romania would have to prepare the CbC report.
The CbC report must be submitted within 12 months after the end of MNE’s financial year.
When a Romanian entity fails to report the required information within the time stipulated or fails to report the information in a complete and accurate manner, monetary penalties (of up to RON50,000 – 100,000) may trigger.
On 8 May 2017, Mr. Klaus Iohannis, the Romanian president signed a law ratifying the Double Taxation Agreement (DTA) with China. Once ratified by China and becoming effective, the Agreement will replace the existing DTA of 1991 and effective as of 1 January 1993.
In the new treaty withholding tax rate on dividends and interest decreases from 10% to 3%, withholding tax rate on royalties decreases from 7% to 3%, specific provisions on commissions have been eliminated and an update of the provisions on exchange of information.
On 10 April 2017, the Senate of Romania approved the Double Taxation Agreement (DTA) with China for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.