[ESTABLISHING A BUSINESS ENTITY IN ROMANIA] 401
reflect the market prices, they would adjust the corporate income tax position of the taxpayer. The adjustment will lead to additional corporate income tax liabilities along with late payment interest and penalties (0.03% per day). According to the current rules, large taxpayers carrying out intercompany transactions that exceed certain thresholds are required to prepare the transfer pricing file by the deadline for submitting the corporate income tax annual statement and to make it available to the tax authorities, within 10 days of a written request. Taxpayers not exceeding the abovementioned thresholds, as well as medium-sized and small taxpayers are also required to prepare transfer pricing files, but under less time pressure and only for tax audits. For them, TP files must be submitted within 30 days (the deadline may be extended up to 90 days) upon a written request from the authorities. Masterfiles drafted at the group level are not accepted and will not replace the local transfer pricing documentation. 4.4 Permanent establishment According to the Romanian Fiscal Code, a permanent establishment (PE) represents the “place through which the activity of a non- resident is carried out directly or through a dependent agent”. More specifically, a PE includes a place of management, branch, office, factory, shop, workshop, as well as a mine, oil or gas well, quarry or other place of extraction of natural resources. A permanent establishment includes also a building site or construction or installation project or any related supervisory activity only if it lasts more than six months. Double Tax Treaties may provide for different time rules for the creation of a permanent establishment. Since a PE means a taxable presence of a non- resident in Romania (i.e., with no legal presence), the PE shall register with the tax authorities as a corporate income tax taxpayer prior to engaging
in income-generating activities. Alternatively, the PE could take the form of a branch, which needs to be registered with the Romanian Trade Registry. Repatriation of profits to the non- resident does not fall into the category of dividend payments and it is not subject to Romanian withholding tax. Permanent establishments are required to compute, declare and pay 16% corporate income tax. Depending on the tax avoidance method provided by the applicable double tax treaty, the profits earned in Romania will be either disregarded in the country of the “parent” company or the tax paid in Romania will be credited against the tax liability arising in that other country, according to the payment certificate issued by the Romanian tax authorities. 4.5 Withholding taxes According to the Romanian Fiscal Code, withholding tax is levied on certain revenues earned by non-residents from Romania, as follows: dividends, interest, commission fees, royalties, management/consulting services irrespective of the place of rendering, service fees related to services performed in Romania (excluding international transport services), gambling revenues, etc. The withholding tax rates applicable in Romania are: (i) 10% for distributed dividend (beginning on 1 January 2026, the rate will increase to 16%), (ii) 10% for interest, royalties, commission fees, management and consulting fees (irrespective of the place where the services are actually rendered), service fees related to services performed in Romania, liquidation proceeds; (iii) for gambling revenues, the tax rate is 4% for amounts up to RON 10,000, RON 400 + 20% for revenues between RON 10,000 and RON 66,750, and RON 11,750 + 40% for revenues above RON 66,750; (iv) 50% for revenues paid to a bank account of a state with which Romania has not
ILN Corporate Group – Establishing a Business Entity Series
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