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Global transfer pricing guide

Transfer pricing - Romania

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Introduction to transfer pricing in Romania
Transfer pricing rules
  • According to the domestic legislation in force (i.e., art. 11 of Law no. 227/2015 regarding the Tax Code – 'the Romanian Tax Code'), transactions between related parties must observe the arm’s length principle. In lack of observing this legal provision, the Romanian Tax Authorities ('RTA') are entitled to adjust / assess the revenues or the expenses in relation with the affiliated entities of the involved Romanian taxpayers, to reflect the market value of the transactions.
  • Such an adjustment / assessment would be made exclusively for tax purposes (i.e., no accounting adjustment would be made). The RTA would not reclassify a transaction and would not reconsider the income and expenses from transactions with the related parties if the transactions reflect the market price, i.e., if the price is set as if the parties would be independent.
  • The RTA proved to be reluctant in accepting operating losses. Not all companies performing intra-group transaction are audited on transfer pricing matters; however, losses act as a red flag for the Romanian tax authorities and thus, companies recording losses are more likely to be subject to transfer pricing audits.
  • As per the local transfer pricing rules, the Romanian taxpayers have the obligation to prepare the local transfer pricing file in certain conditions and depending on the category of taxpayers. However, the local transfer pricing file contains information also listed in the Masterfile, in line with the OECD Guidelines.
  • Starting with 2017, Romanian entities part of a Group of companies having consolidated revenues higher than EUR 750 mil. have the obligation to submit country-by-country notification regarding the ultimate parent entity in charge with the submission of the report ('CbCR') for the entire Group. Where no agreement for exchange of information is in place between the jurisdiction of the ultimate parent and Romania, allowing the exchange of information related to CbCR, the Romanian company has the obligation to submit the CbCR in Romania.
OECD guidance
  • Although Romania is not a member of the OECD, the Romanian Tax Code and the related Norms provide that, in the application of transfer pricing rules, the RTA will also consider the OECD Guidelines, as latest updated on January 2022, incorporating the results of the OECD BEPS 2015 Final Reports (issued as a result of the OECD Action Plan on Base Erosion and Profits Shifting). In addition, the legislation also refers to the EU Code of Conduct on transfer pricing documentation.
  • In June 2017, the Romanian Parliament approved the participation of Romania to the implementation of BEPS project. Therefore, the OECD BEPS 2015 Final Reports, issued as a result of the OECD Action Plan on Base Erosion and Profits Shifting as well as the updated version of the OECD TPG 2022, should be taken into consideration. In June 2017, Romania became a signatory party of the OECD Multilateral Instrument for the implementation of the treaty related measures agreed through the BEPS final reports.
  • On 25 January 2022, the OECD Council decided to open accession discussions with Romania as well as five other countries, considering the criteria of like-mindedness, significant player, mutual benefit, and global considerations, while also recognizing the progress made by these countries toward fulfilling the criteria outlined in the Framework for Consideration of Prospective Members. The Council requested the General Secretary to set out the terms, conditions and process for accession to the OECD in draft Roadmaps for Accession for consideration and adoption by the Council.
Transfer pricing methods
  • Domestic regulations set through the Romanian Tax Code and related Norms are generally in line with OECD Guidelines with respect to the methods used for determining transfer prices.
  • The transfer pricing methods recognized by the OECD, as well as by the Romanian Tax Code are the following:
    • Comparable uncontrolled price method ('CUP');
    • Cost plus method ('CP');
    • Resale price method ('RPM');
    • Profit split method;
    • Transactional net margin method ('TNMM').
  • The most appropriate transfer pricing method should be selected on a transaction-by-transaction basis. In practice, however, the RTA sometimes consider the overall profitability testing approach, instead of transaction-by-transaction basis.
  • With respect of the most appropriate method to be used by the taxpayer, there is no hierarchy in place, as the Romanian legislation currently refers to the 2022 OECD Guidelines. The past practice of the tax authorities, however, was to use the CUP method, while nowadays they 'favor' the TNMM, testing the overall profitability obtained by the taxpayer.
  • When a taxpayer obtained a profitability rate related to the activity conducted with related parties below market level, the taxpayer should consider the possibility of performing a voluntary adjustment, to bring the profitability for intra-group transaction within the range for comparable independent companies. If true-up adjustments are performed by the taxpayers, it is acceptable only for the first quartile of the comparability range to be touched. Such true-up adjustments made by the taxpayer for tax purposes could be accompanied by a commercial transaction (adjustment also from an accounting perspective, implying that the taxpayer could issue an invoice for the additional amounts towards relevant related parties, or not (i.e., the TP adjustments may be declared as deemed taxable income in the rectifying annual corporate income tax returns, where no accounting impact is considered by the company).
  • However, computing the year-end adjustments by the taxpayers’ own will would also mean an act of voluntary tax compliance, proving that the respective taxpayer acted in good faith when assessing the level of taxes due. Voluntary adjustment of the reporting would also help limiting the non-reporting penalties, that would be imposed by the RTA in case of differences assessed by the mean of a tax decision, further to a tax audit.
  • The general statute of limitations for tax liabilities in Romania is of 5 years (extended in practice up to 7 years for certain taxes e.g., corporate income tax).
  • Submission of rectifying tax returns for a given tax year leads to extending the statute of limitation period with respect to the tax liability corrected, meaning a new statute of limitation period starts with the date of the rectifying return submitted by the taxpayer. Also, such corrections represent at the same time a red flag at the level of the RTA, when performing their risk assessment analysis in view of deciding whether to conduct a tax audit or not.
Transfer pricing documentation
Preparation of transfer pricing documentation
  • Large taxpayers, performing transactions with related parties with a total annual value, computed by summarizing the value of the transactions performed with all related parties, excluding VAT, higher or equal to any of the thresholds presented below, have the obligation to prepare the transfer pricing file on an annual basis. Lack of carefully prepared documentation will generally be seen as (at least) “careless” behavior and potential adjustment will result in penalties being also assessed.
  • The thresholds for the aforementioned taxpayers, by type of transaction, are as follows:
    • EUR 200,000 for interest received/paid for financial services;
    • EUR 250,000 for transactions representing services rendered/received;
    • EUR 350,000 for transactions representing purchase/sale of tangible or intangible goods.
  • The deadline for preparing the transfer pricing file is the legal deadline established for submitting the annual corporate income tax returns, for each tax year (currently 25 of June of the year following the reporting one). This provision is applicable for the transactions performed with related parties starting with the tax year 2016.
  • The deadline in place for presenting the transfer pricing file, applicable for large taxpayers not observing the above presented transaction thresholds, is of maximum 10 calendar days upon the request by the tax authorities, but not earlier than 10 days from the expiry of the deadline established for the preparation as per the above (i.e., 25 June of the following year). The request could be made during a tax audit. However, the transfer pricing file may be requested in circumstances other than a tax audit, more specifically based on the provisions of the Romanian Tax Procedural Code referring to the general obligation of the taxpayers to provide information and present documents.
  • Large taxpayers, that do not fulfil the aforementioned thresholds, as well as medium-size and small taxpayers, performing transactions with related parties with a total annual value, computed by summarizing the value of the transactions performed with all related parties, excluding VAT, higher or equal to any of the thresholds set out below, have the obligation to prepare and present the transfer pricing file only upon request of the tax authorities.
  • The thresholds for medium-size and small taxpayers, by type of transaction, are as follows:
    • EUR 50,000 for interest received/paid for financial services;
    • EUR 50,000 for transactions representing services rendered/received;
    • EUR 100,000 for transactions representing purchase/sale of tangible or intangible goods.
  • The other taxpayers, not falling in any of the previously presented categories (i.e., performing transactions with related parties with a total annual value, computed by summarizing the value of the transactions performed with all related parties, excluding VAT, less than any of the thresholds above indicated) shall document the compliance with the arm’s length principle, during a tax audit, according to the general rules provided by the financial, accounting and tax regulations in place.
  • The deadline for the presentation of the transfer pricing file spans between 30 and 60 calendar days (usually 30 days), with the possibility of a single extension, upon the written request of the taxpayer (which may be accepted or not by the RTA), with a period similar with the one initially agreed by the RTA. Usually, the tax audit is suspended by the expiry of the deadline set for presenting the transfer pricing file.
  • The documentation shall be submitted in Romanian language. Contracts with related parties or other justifying documents must be attached and official translations for documents in foreign languages shall be provided to the tax inspectors.
  • With respect to CbCR local requirements, the Romanian entities, members of Group companies with total revenues higher than EUR 750 mil. (“constituent entities”), must notify the RTA regarding the identity of the ultimate parent or of the surrogate parent in charge with submitting the CbCR in its residency country. According to the local law, the CbCR notification is due by the last day for fiscal reporting of the MNE Group’s, but no later than the deadline for filing a tax return for the respective constituent entity for the preceding fiscal year (i.e., the Romanian corporate income tax refers to 25th June, where the fiscal year of the company/Group is not different than the calendar one).
  • Such CbCR will be exchanged by means of automatic exchange of information, with the tax authorities in the countries in which the Group has subsidiaries.
  • If there is no agreement signed between the jurisdiction of the parent company and Romania, providing for exchange of information related to CbCR, the Romanian company will have the obligation to submit the CbCR in Romania as well. The deadline for the CbCR submission is on 12 months from the end of the tax year concerned.
  • CbCR and CbC notification should be filled in by considering the specific format, using the software program made available by the RTA, and are further submitted online with the RTA, by using the electronic signature available at the level of the taxpayer.
Master and local file
  • The existence of a Master File prepared at Group level is useful, but not enough. Indeed, when preparing the local transfer pricing documentation, the information presented in the Master File with respect to Group description is very useful, since according to the local TP regulations, the local transfer pricing file contains all the information also listed in the Master File (based on OECD Guidelines).
  • However, in what concerns the comparability analyses, for example, the search strategy must be tailored to the Romanian local regulations.
Some risk factors for challenge
  • Starting with 2019, the tax administration’s procedures are performed based on the class / subclass of fiscal risk under which the taxpayers are classified, resulted from the risk analysis carried out by the RTA. According to this, companies could be classified as either low, medium or high fiscal risk taxpayer. The fiscal risk is established based on the several criteria, not very transparent at the level of the taxpayer, but some of them being highlighted in various occasions by the RTA:
    • fiscal registration;
    • manner of filing the tax returns
    • existence of rectifying tax returns;
    • compliance level;
    • level of fulfillment of the payment obligations to the state budget and to other creditors (i.e., clients, business partners), etc.
  • Based on our experience in preparing the transfer pricing files, as well as from the discussions with the RTA and while assisting clients during tax audits, the following transfer pricing risk factors must be considered:
    • permanent operating losses: the RTA proved to be very reluctant in accepting operating losses. Not all companies performing intra-group transaction are audited on transfer pricing matters; however, losses are a red flag for the Romanian tax authorities and thus are more likely to be subject to transfer pricing audits. Also, there are many cases when the tax authorities rejected as comparable companies the ones that recorded losses which have been selected as comparable companies in case of an external search of the transfer pricing documentation.
    • intra-group charges: the RTA are very keen to adjust the intra-group services received by a Romanian Company (especially when a Romanian subsidiary receives charges from more than one group entity – e.g., Group holding, division holding, regional holding); RTA usually request additional information with respect to the cost base, looking to be provided with proofs from the management accounting system in relation with related party invoices for such services.
  • Failing to prepare the transfer pricing file within the legally set deadlines is sanctioned with a fine ranging between RON 12,000 (approx. EUR 2,500) and RON 14,000 (approx. EUR 3,000) for large and medium size taxpayers, respectively between RON 2,000 (approx. EUR 400) and RON 3,500 (approx. EUR 700) for small size taxpayers or individuals. In addition, not presenting the TP file or presenting a documentation which is not considered complete, triggers the estimation of the transfer prices performed by the RTA. The estimation of the transfer prices is made by using the median value of the comparability range, as built by the tax authorities.
  • The fine for late submission or transmission of incorrect or incomplete information of the CbCR is ranging between RON 30,000 and RON 50,000 (approx. EUR 6,250 to EUR 10,500). The fine for not submitting the CbCR is ranging between RON 70,000 and RON 100,000 (approx. EUR 14,500 to EUR 20,800).
Economic analysis and how to demonstrate an arm’s length result
  • Order no. 442/2016 requires the comparability analysis to start with local comparable companies. If not, enough comparable companies are identified, the search could be extended to European, pan European and worldwide companies. In practice, for a European / Pan – European search to be accepted, the Romanian tax authorities wants to see in the transfer pricing files the print screen of the searches in the databases, showing a limited number of results for searches conducted only on Romanian companies.
  • Pan - European benchmarking studies are accepted by the Romanian tax authorities under the following conditions:
    • proof that not enough Romanian comparable are available as per the research performed within the database - documented by the way of print screens from the database, with the results of the search strategy for Romania only;
    • the homogeneity of the markets included in the Pan - European search must be proved as well – as Romania is part of Central / East Europe, usually (but not necessarily a rule) homogeneity is achieved if the search is linked to countries included in this market;
    • the comparable companies must have a similar functional profile with the one of the tested parties in the transaction.
Advance Pricing Agreements (APAs), dispute avoidance and resolution
  • NAFA President Order no. 3735/2015 approves the procedure for the issuance and amendment of advance pricing agreements, as well as the content of the request file to be prepared and submitted for the issuance or amendment of the advance pricing agreement (“APA”). An APA is an agreement between the taxpayer and the tax administration, on the manner in which certain intercompany transactions will be taxed in the future. Hence, an APA often prevents the need for a dispute over the transactions included in the APA, thus APA being considered a method of dispute avoidance APA’s are also used in financing and “thin capitalization” cases, where they are known as ATCA’s (these are more numerous).
  • If the taxpayer obtained an APA issued by National Authority for Fiscal Administration (“NAFA”), the submission of the transfer pricing documentation is no longer necessary for the period covered by the APA.
  • APAs are valid up to 5 years, with possibility of extension in case of long-term contracts and where there are no changes in company’s business model (functional analysis).
  • For taxpayers with consolidated value of transactions higher than EUR 4,000,000, the fee is of EUR 20,000 for the initial APA and of EUR 15,000 for amending the initial APA.
  • For taxpayers with consolidated value of transactions lower than EUR 4,000,000, the fee is of EUR 10,000 for the initial APA and of EUR 6,000 for amending the initial APA.
  • As per the official statistics, a total number of 14 APAs (i.e., 13 EU and 1 non-EU) were in force at the end of FY2020, out of which none of them are bilateral or multilateral APAs. However, an average time to negotiate a bilateral or a multilateral APA takes up to 26 months.
  • If a tax dispute appears, the following options are available, as per local regulations, to relief the double taxation:
    • to seek domestic legal remedies: i.e., to submit complaints against the tax decision issued by the Romanian tax authorities (the deadline for submission is 45 days since the tax decision is communicated to the taxpayer); if the complaints are not solved favorable for the taxpayer by the RTA, the Romanian company may submit an action in court, within 6 months.
    • to seek double tax relief under the provisions of the double tax treaty between Romania and other countries; the timeline for a applying under a mutual agreement procedure (“MAP”) is, in general, of 3 years since the taxpayer has become aware of the assessment made by the tax authorities not in accordance with the provisions of the double tax conventions. The MAP could claim either a corresponding adjustment of the same value with the primary adjustment, in other countries, or the decrease / cancellation of the primary adjustment made in Romania.
    • the taxpayer could go in parallel with both legal domestic remedies and the mutual agreement procedure, but, depending on the judicial system in place in each of the countries involved, at the certain moment only one procedure may need to be maintained. In Romania, for example, the RTA cannot implement any decision arising from the MAP, if at the time of the agreement between the countries there is already a final and irrevocable court decision with respect to the matter concerned.
  • The MAP could be submitted either in Romania, or in other countries. The MAP could be submitted either as bilateral procedure, or as a multilateral procedure.
Related developments
Digital services tax
  • The RTA published at the beginning of 2022 some new tax provisions, in preparation of DAC 7 implementation in Romania (due by 2023). According to these new provisions, taxpayers providing electronic interfaces facilitating online commercial transactions are required to periodically provide information, based on affidavit, with respect to the transactions carried out through such platforms. The type of the information, the periodicity, as well as the relevant return to be filed in this respect are not yet available, nor is there a draft legislation in place regulating such aspects.
  • Based on our market knowledge, the tax authorities intensified their audits in tourism area, already targeting rentals for tourism purposes, sold via digital platforms. The market voices also say that the reporting will be an annual one, with the first reporting deadline in 2024.
  • On 3rd of July 2022, Law no. 190 was published in the Official Gazette, implementing an addition revenue tax for providers of audiovisual media services on-demand. According to these newly introduced provisions, resident and non-resident suppliers of audiovisual media services on-demand will have to pay a tax of 4% from the revenues derived from rendering of media services on demand (subscriptions). Non-resident suppliers will include in their tax base only the revenues derived from Romania. Exemption applies for suppliers registering annual revenues lower than EUR 65,000 or having an audience level below 1% compared to the total number of subscribers in Romania.
  • While there is no procedure in place yet, the first reporting and payment deadline was the 25th of August 2022 for the revenues derived in July 2022. The legal deadline for this tax being he 25th day of the month following the one during which the revenues were derived.
Tax authorities and taxpayer behaviour
  • Romanian Tax Authorities prefer a transaction-by-transaction approach, rather than an overall profitability examination. Therefore, for each transaction with related party, the most appropriate method must be identified to prove that the transfer prices were computed in accordance with the arm’s length principle.
  • According to the Order no. 442 / 2016, as previously mentioned, if the threshold for the transactions with interests / goods / services are exceeded in a year, then all the transactions with related parties from the respective category (e.g., transaction with goods) must be documented, irrespective of whether some of them have an immaterial value, which is much lower compared with the documentation costs. Kindly note that this seems to be a tendency in the market, as per our experience with other clients, however, during a tax audit, the tax inspectors might also be interested in immaterial intra-group transactions.
  • Regarding the split of the profit and loss account and the computation of the profit level indicator from controlled transaction when the Romanian entity is the tested party, care should be taken when the Romanian Company performs both transactions with related parties, as well as with third parties. In this case, the profit and loss account must be segregated to extract only the revenues and expenses in relation to controlled transactions. Please note that, in this case, the RTA would be interested to receive also additional explanations on the way the expenses were allocated between controlled and independent transactions, as well as between several controlled transactions. Furthermore, traceability of the information and figures included in the computation of the profit level indicators examined for each separate activity with the financial accounting information must be ensured. The use of allocation keys, if the case, must also be well detailed.
  • On the other hand, if we refer to intra-group charges received by a Romanian entity, from a transfer pricing perspective, the computation and proof of the cost base of the services, as well as the test of the arm’s length feature of the mark-up on costs are aspects that are highly likely to be addressed by the RTA when requesting justifying documents to prove the reality of the services rendered on the benefit of the activity of the Romanian entity.
  • For taxpayers, to have a well-documented transfer pricing file, it is recommendable for the taxpayers to consider the followings main elements as part of the Romanian local file:
    • description of the commercial conditions as per the intra-group agreements, updated with the actual conduct of the parties, if the reality supplements or replaces the provisions of the agreements; in this case, the RTA may test the actual conduct of the parties in related party transactions, and reassess the functions, risks and assets allocation between the parties, if the case, with impact on pricing methodology (e.g., challenge of the TP method, recognition – derecognition of a particular transaction etc.)
    • functional analysis of the Romanian entity performed based on interviews with taxpayer’s representatives and based on the description from the files prepared at the Group level; interviews with the representatives of the taxpayer further substantiate the functional analysis included in the local file. In addition, for having in place a local file prepared in compliance with the TP domestic requirements, a separate functional analysis for each intercompany transaction is recommended to be included.
    • the comparability analysis must observe the local rules in respect of affiliation threshold (i.e., 25% ownership, affiliation by control), as well as the requirements to perform benchmarking studies for Romanian independent comparable companies first, and to gradually extend the search, if not enough Romanian companies are found.
  • Since 2020, the companies have suffered a major economic impact following the emergence of Covid-19, namely the establishment of the emergency and quarantine, which added a new layer of complexity and increased the risk level of the existing challenges.

  • In this context, for the documentation of transfer pricing, there were some specific problems such as: making a comparability analysis as correct as possible both for 2020 and for the next years that considers the effects of the economic crisis caused by Covid-19, technological losses and cost allocation specific to the pandemic period, allocation of revenues resulting from the application of government assistance programs and existing or negotiated APAs.

  • As a solution for all the above, on 18th December 2020, following the consultations among the 137 member countries on the implementation of the Base erosion and profit shifting (BEPS), OECD published “OECD Guidance on the Impact of Covid 19”. This Guide came as a complement to the OECD Transfer Pricing Guide, to support the application of the market value principle and the OECD Guidelines.

  • Regarding the comparability analysis, OECD established that companies could use any type of publicly available information regarding the effect of Covid-19 on its business, on the industry in which the company belongs, and on the transaction made by the company with its affiliated companies if this information reveals compliance with the arm’s length principle. As there is a matter of carrying out a comparability analysis, the information that is certain and can be used relates to similar market conditions in which comparable uncontrolled transactions took place as the controlled transactions during the same time. In this sense, approaches in practice in terms of increasing the degree of comparability in the analysis can be modified as follows:

    • by increasing or improving the search criteria;

    • by using data of several years of analysis;

    • by including companies that have registered losses in the comparability analysis;

    • by using the available data from the period of the pandemic period.

  • The recommendations of the OECD Guide on the impact of Covid-19 regarding the technological losses and the allocation of specific costs, was for companies to have supporting documentation containing all the information relevant for review, as well as intra-group contracts in place for commercial relations with affiliated companies. If there were changes in the conditions in place for for intra-group transactions, they will be considered contrary to the observance of the arm’s length principle.

  • During the pandemic year, certain companies benefited from government assistance to manage the negative impact of Covid-19 on their business activities as well as on their employees. However, regardless of how these government assistance programs were granted (directly to a member of the Group or to various independent companies in the field in which the Group of companies operates), considering the applicable criteria, there is a risk of implications on transfer prices.

  • Concluding the above, the aspects to which we must direct our attention to, in terms of documentation or possible controls on the transfer prices that will follow for the years 2020 and 2021, are:

    • addressing the problems generated by Covid-19;

    • costs or losses generated by Covid-19 that would attract classification in the category of high fiscal risk and transfer pricing controls;

    • increasing need for advice and assistance on business restructurings, while maintaining the recommendation to apply advance pricing agreements to achieve tax certainty on complex or high-volume transactions.

  • Companies are encouraged to maintain their transparency and communicate with the RTA, especially when we refer to APA, because they require compliance with the clauses stipulated, regardless of the economic circumstances existing in the market.

  • It is recommended to document, and possibly address, any violation of critical assumptions or reasons why the terms of APA might require changes.

For further information on transfer pricing in Romania please contact:


Ionela Florescu
T + 40 745 014 550


Viorel Merlan
+ 40 21 32 02 328