Tax transparency becomes a top priority in Romania

• Romania, among the first EU countries to transpose the (EU) Directive 2021/2101 into national law.
• The public will have access to the CbCR annual reports of both EU and non-EU headquartered multinational groups with a consolidated annual turnover of more than €750m in the last two consecutive financial years.
• The annual report will be published no later than 12 months after the balance sheet closing date.

Starting with 1 September 2022, through Order No. 2048, Romania is amongst the first EU countries to transpose the (EU) Directive 2021/2101 on public country-by-country reporting ("CbCR public reporting") into national law.

The element of novelty brought by the CbCR public reporting, in comparison with the current applicable CbCR reporting, is that the information included in the report will no longer be filed with The National Agency for Fiscal Administration (ANAF), but instead, it will be publicly available.

The (EU) Directive 2021/2101 entered into force on 21 December 2021, with the Member States required to transpose the Directive into national law by 22 June 2023. Thus, given that Romania complied with the request in September 2022, the first year for which the CbCR public reporting will be required is 2023. This means that, in most cases, for a financial year ending on 31 December, the deadline for the CbCR public reporting will be 31 December 2024.

Liviu Gheorghiu Partner, Tax

In an effort to curb tax avoidance and enhance tax transparency, the CbCR public reporting requires both EU and non-EU headquartered multinational groups with a consolidated annual turnover of over €750m[1] in the last two consecutive financial years to publicly report their income tax information.

The purpose of the reporting is to bring to the public attention transparent and accessible information about the level of tax paid, where the profit is earned, and where the tax is paid.

The reporting obligations are applicable to:

1. Ultimate parent entities: parent entities of multinational groups that meet the reporting requirements are required to publish the CbCR report.
2. Medium and large Romanian subsidiaries[2] controlled by ultimate parent entities that are not governed by Romanian law and that meet the reporting requirements.
3. Romanian branches, where the entity setting up the branch is part of a group that meets the reporting conditions and whose ultimate parent entity is not subject to the law of an EU Member State.

Both medium and large subsidiaries and branches in Romania will not be required to publish the report if the ultimate parent entity that is not subject to the law of an EU Member State publishes and makes available the public CbCR report as required by Romanian law.

The reporting requirement does not apply to ultimate parent entities, subsidiaries, and branches if they are established, have a fixed place of business, or have a permanent economic activity in the territory of a single Member State and in no other tax jurisdiction.

Content of the public CbC report:

• the name of the ultimate parent, the financial year concerned, the currency used for the presentation of the report and, where applicable, a list of all subsidiary undertakings consolidated in the financial statements of the ultimate parent undertaking, in respect of the relevant financial year, established in the EU or in tax jurisdictions included in Annexes I and II to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes;
• a brief description of the nature of their activities;
• the number of employees on a full-time equivalent basis;
• the sum of the net turnover, other operating income, income from participating interests, excluding dividends received from affiliated undertakings, income from other investments and loans forming part of the fixed assets, other interest receivable and similar income;
• the amount of profit or loss before corporate income tax;
• the amount of corporate income tax accrued during the relevant financial year, which is to be calculated as the current tax expense recognised on taxable profits or losses of the financial year by undertakings and branches in the relevant tax jurisdiction;
• the amount of corporate income tax paid on a cash basis, which is to be calculated as the amount of income tax paid during the relevant financial year by undertakings and branches in the relevant tax jurisdiction;
• the amount of accumulated earnings at the end of the relevant financial year.

Presentation structure of the information in the public CbCR report

The information listed above will be presented based on the reporting instructions in Council Directive 2011/16/EU (DAC4) in Section III of Parts B and C of Annex III, i.e. the format already existing and used for the preparation of the current CbC report.

The information in the CbCR public report will be presented in an electronic reporting format and will be displayed separately for each:

• EU Member State;
• tax jurisdiction which on 1 March of the financial year for which the report is to be drawn up is listed in Annex I to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes;
• tax jurisdiction which on 1 March of the financial year for which the report is to be drawn up and on 1 March of the previous financial year was listed in Annex II to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes.

The information included in the CbCR public report will be presented on an aggregated basis for other tax jurisdictions.

Possibility to temporarily omit publication of certain information

Under Romanian law, one or more types of information in the report may be temporarily omitted for a period of up to 5 years if its publication would seriously prejudice the commercial position of the group, with the exception of information relating to the revised EU list of non-cooperative jurisdictions for tax purposes. Omissions will be indicated in the report together with the reasoning. Within a maximum of 5 years from the date of the initial omission, all omitted information will be published in the report.

Adrian Mutea Senior Manager, Tax

Publication of the report

The annual report will be published no later than 12 months after the balance sheet date for free access on:

• the website of the reporting entity. The report must be accessible on the website for 5 consecutive years;
• the website of The National Trade Register Office (NTRO). In this case, the website of the reporting entity will refer to the website of the NTRO.

Statutory audit requirements

An entity's statutory audit report must state whether for the financial year preceding the audited financial year, the entity was required to publish the report on income tax information and whether the reporting was carried out in accordance with the provisions of Order No. 2048 of 1 September 2022.

Fines

Order No. 2048 of 1 September 2022 does not provide for specific fines for non-compliance.

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Press contacts

Emilia Popa, Head of Marketing and Communication, Mazars Romania

emilia.popa@mazars.ro / +40 741 111 042

Mădălina Lazăr, PR & Corporate Communication Executive, Mazars Romania

madalina.lazar@mazars.ro / +40 763 385 622

About Mazars

Mazars is an internationally integrated partnership, specialising in audit, accountancy, advisory, tax, and legal services*. Operating in over 90 countries and territories around the world, we draw on the expertise of more than 44,000 professionals – 28,000+ in Mazars’ integrated partnership and 16,000+ via the Mazars North America Alliance – to assist clients of all sizes at every stage in their development.

*where permitted under applicable country laws.

www.mazars.com | Mazars on LinkedIn

About Mazars in Romania

In Romania, Mazars has 27 years of experience in audit, tax, financial advisory, outsourcing, and consulting. Our strength lies in the people we work with – the local team has 300 professionals.

www.mazars.ro | Mazars Romania on LinkedIn

[1] RON 3.700.000.000, the equivalent of €747.474.740 according to the Order No. 2048 of 1 september 2022.

[2] According to the EU Directive 2013/34, medium-sized enterprises are enterprises which, at the balance sheet date, do not exceed the limits of at least two of the following three criteria:

• balance sheet total: €20m;
• net turnover: €40m;
• the average number of employees during the financial year: 250.

Large enterprises are enterprises which, at the balance sheet date, exceed the limits of at least two of the three criteria mentioned above.