The price for which physical goods, intangible properties are transferred or services are provided at the intra-group level represents a current problem facing most companies and multi-nationals operating in Romania, especially considering the increasing number of inspections conducted by tax authorities, requesting documentations relating to transfer pricing.
The transfer pricing issue has been extensively debated in the meeting concerning “ Legal Requirements in the Field of Transfer Prices – Challenge or Opportunity? ”, organized by Muşat & Asociaţii in partnership with AmCham, and attended by officials of the National Agency for Fiscal Administration (ANAF), but also by representatives of the Romanian business environment, including leading delegates from pharmaceuticals, energy, financial services, FMCG and IT companies.
“In practice, tax authorities may request the file of transfer prices during all types of tax inspections: general tax inspection, VAT reimbursement inspections, partial tax inspections. As a rule, they focus on the tax-payers who incurred fiscal losses and concluded transactions with group companies. Nevertheless, there is still a non-unitary interpretation by the tax authorities as regards the determination of prices at which transactions are concluded among affiliates. However, we appreciate their open-mindedness in understanding the complexity of the difficulties occurring in practice and their concern for identifying solutions to simplify the control methodology. This is all the more important as the European Union shows particular interest in respect of the relationships existing among the companies from the same group and the manner in which the control authorities in various Member States analyze the aspects of such transactions, in order to determine the correct market price”, said Ionuţ Bohâlţeanu, Partner Muşat & Asociaţii – Tax Advisory.
The discussions also pointed to key elements that need to be taken into account by a business operator when performing a transaction with an affiliated undertaking, and highlighted the type of services usually monitored by the control authorities.
“ANAF often checks the management and consultancy services supplied by the companies within the group (in particular foreign corporations), activities in the field of IT, research-development or engineering provided by affiliates (especially when the Romanian subsidiary fulfills specific functions within the group and was set up for this particular purpose), but also sales of goods and products in Romania to affiliated entities”, emphasized Bogdan Voinescu, Tax Partner Muşat & Asociaţii – Tax Advisory.
The obligation to prepare the transfer price file shall apply to transactions of merchandise, raw materials, fixed or intangible assets, financing within the group, but also consultancy, management, IT or legal assistance services. ANAF shall determine the market price for transactions among affiliates using one of the measures set forth in the legislation: the method of price comparison, the cost-plus method, the sale price method, the net margin method or the profit sharing method.