Romania will join the states working with OECD on measures to combat the tax base erosion and profit shifting

Romania will join the states and jurisdictions working with OECD and G 20 members on developing the standards of BEPS Project (tax base erosion and profit shifting) and on monitoring the implementation of this package that is to be enforced in our country too, taking into account the development particularities.

The Government has approved today, by a Memorandum, Romania’s accession as associate to the BEPS Implementation Forum, which will allow our country’s participation in the measures on combating the tax base erosion and profit shifting, and their implementation on the national soil. The experience of this forum will add value to the implementation of EU recommendations in the context of the draft directive drawn up by the Council on establishing the norms against the tax avoidance practices that directly affect the internal market operation(ATAD).

BEPS Plan:

Given the increase in the mobility of capitals and intangible assets, and new business models (digital economy), in February 2013, the OECD compiled a due-diligence on the issues that generate the tax base erosion and the profit shifting, finalized by the presentation of the report "Addressing Base Erosion and Profit shifting '. This analysis was followed in July 2013 by a plan of 15 actions  entitled "Action Plan on Base Erosion and Profit Shifting" which aims to reform the taxation principles in the field of direct taxes. The BEPS plan includes recommendations for legislative amendments both in national and international provisions in order to counter situations arising out of the use by multinational companies of  legislative inconsistencies from the tax systems of the states in which they expand their activities. Therefore, this plan will generate changes in the OECD Model Convention for the avoidance of double taxation, in the transfer pricing guidelines and the national tax systems. The objective is to arrive at the settlement, at a higher rate, of double non-taxation and to improve mechanisms for resolving double taxation cases. It should be noted that this does not propose changing tax rates, but the way of assigning / allocation of profits (tax base) between jurisdictions.

Another component of the BEPS Action Plan is increase in the exchange of information on two levels: by increasing transparency and information reporting by taxpayers to the tax authorities, and between the tax authorities of various countries. This component of the Plan is compliant with the proposal to amend the Directive on the exchange of information in order to extend the automatic exchange of information to cross-border tax decisions.

An important component of BEPS actions is dedicated to transfer pricing. Five of the 15 measures, refer explicitly or implicitly to transfer pricing. Romania has assumed the guidelines provisions on transfer pricing issued by the OECD for multinational companies and tax administrations by taking them over into national law. However, given that this area is now one of the most targeted by tax authorities in Romania in their checks, participation in implementation of the BEPS package of measures represents alignment with international practices in the field.

BEPS Project Implementation Forum (erosion of the tax base and profit transfer) was presented and approved by the OECD Secretariat, on the meeting of G20 Finance Ministers that was held in Shanghai, on February 27-28, 2016. The first meeting of the countries that joined the BEPS Action Plan will take place in Kyoto, during June 30-July 1, 2016.