Business

Transfer Pricing in Romania: factors to be considered by a medium-sized company

It comes a time when the success and growth of a medium-sized company is reliant on its ability to extend their presence to external markets, being the natural choice when discussing expansions. In this context, a medium-sized company should put at the top of their priority list to review the transfer pricing rules of the intended new jurisdiction, in this case Romania.

It comes a time when the success and growth of a medium-sized company is reliant on its ability to extend their presence to external markets, being the natural choice when discussing expansions. In this context, a medium-sized company should put at the top of their priority list to review the transfer pricing rules of the intended new jurisdiction, in this case Romania.

In this following article, ATIPIC Solutions will revise the Romanian transfer pricing regulations, which are essential for establishing a correct and reliable transfer pricing policy that will be both scalable for future operations, as well as safe from future scrutiny of the tax authorities.

Moreover, the relevant factors to weight in when deciding how to align and adapt a transfer pricing strategy for a medium-sized external company in Romania will be described.

  1. Factors related to jurisdiction

The general transfer pricing Romania guidelines are aligned to the transfer pricing guidelines set forth by the Organization for Economic Co-operation and Development (OECD), as most countries have. But as many other jurisdictions, Romania heavily customized these guidelines, therefore companies should consider, in the drawing up of their strategy, factors such as:

  • Documentation exemptions:the transfer pricing Romania regulations mention exemptions from the obligation to prepare the transfer pricing file if the cumulated amount of intra-group transactions do exceed a certain amount;
  • Risk generating events: although not directly specified in the Romaniantransfer pricing regulations, factors such as recurrent losses for more than 5 years, mergers and acquisitions or late submission of financial reports may trigger a tax audit and as such, the transfer pricing documentation may be requested and analyzed;
  • Tax audit occurrence:the Romanian tax authority is known for being very active in the transfer pricing area of expertise, especially after the adoption of the method of prior assessment of tax risk factors of the company.
  1. Factors related to company operations

Besides the jurisdictions in which these take place, the company operations themselves have an important role in the drawing up of a transfer pricing strategy for a medium-sized company:

  • Value of the intra-group transactions: as mentioned above, certain thresholds which may trigger the obligation to periodically prepare the transfer pricing documentation in Romania;
  • Value of the administrative services received: especially if discussing of transactions with received services of administrative or management nature, the value of these services may also attract the attention of the transfer pricing Romaniaauthorities and therefore, should be correctly planned for;
  • Industry of operations: certain industries are prioritized by the local tax authorities in terms of initiation of tax audits, such as companies in the IT, e-commerce, construction and Oil & Gas industries.

Therefore, when a mid-sized company is establishing a transfer pricing strategy in it’s Romanian affairs it should take into account both factors related to jurisdiction, as well as own operational details (e.g. value of transactions, external management costs, industry). If planned right, alongside an experienced external consultant, putting into place of such a strategy should be an easy task.

Heather Breese
Heather Breese is a qualified writer who fell in love with creativity and became a specialist creator and writer, focused on readers and market need.

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