Deloitte Romania: Romania imposes new tax reporting obligations for multinationals. What do targeted companies need to know?

On September 1, 2022, Romania published Order no. 2048, which implements EU Country-by-Country Reporting Directive (EU) 2021/2101. It brings significant changes for companies operating in Romania, as it obliges certain multinationals to provide detailed information about their activities, profits earned and taxes paid in each country in which they operate.

The Country-by-Country Reporting Directive is part of the EU’s wider drive to promote transparency and accountability in fiscal matters. It obliges multinational companies with a consolidated turnover of at least €750 million to report certain financial and tax information covering each jurisdiction in which they operate.

According to Order no. 2048, the reporting obligation will apply to multinationals that are resident in Romania and have a consolidated turnover of 750 million euros or more for the financial year starting on January 1, 2023. The information to be reported includes, among others, the nature of the activities carried out in each jurisdiction, the number of employees, revenues recorded, profits recorded and taxes declared and paid. The implementation of the directive in Romania is expected to strengthen the ability of tax authorities to identify attempts at tax evasion and profit transfer by multinational companies. By requiring them to report this information, tax authorities will be able to better understand how multinational companies operate and how they allocate their profits between different jurisdictions.

It is important that affected multinational groups prepare for these reporting obligations, as failure to comply with the new requirements can lead to penalties and damage to the companies’ reputation. Multinationals will need to ensure they have systems and processes in place to collect the necessary information and report it accurately and in a timely manner.
There are also some challenges in the way of implementing this reporting, related to the ability of the Romanian tax authorities to manage and administer the information obtained through this approach, but also to coordinate with tax institutions from other jurisdictions. Also, in order to apply this directive, the Romanian tax authorities need specific tools to detect and investigate cases of tax evasion, and this requires significant investments in training, technology and other types of resources.

Also, the implementation of the directive will require coordination between the Romanian tax authorities and the tax authorities of other countries where multinational groups operate. This can be challenging, particularly in cases where there are differences in reporting requirements or where tax treaties between countries are unclear or inconsistent.

Therefore, the implementation in Romania of the EU Directive on country-by-country reporting, or “Public CBC”, as it is called by the business environment, is an important step towards increasing transparency and responsibility in matters of a fiscal nature. This will help tax authorities identify tax evasion and profit shifting and ultimately ensure that the tax system is fair and efficient for all.