Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

Romania

Romania is taking steps to commence administrative preparations to ensure that information on rulings will be exchanged in a timely manner. Romania is recommended to implement a review and supervision mechanism (ToR I.4.3) and to continue its efforts to complete the templates for all relevant rulings and to ensure that the exchanges of information on rulings occur as soon as possible (ToR II.5).

Romania can legally issue two types of rulings within the scope of the transparency framework.

In practice, Romania has issued 12 past rulings; and for the year in review, Romania issued five future rulings within the scope of the transparency framework.

As no exchange of information on rulings was conducted, no peer input was received in respect of the exchanges of information on rulings received from Romania.

Introduction

1091.  This peer review covers Romania’s implementation of the BEPS Action 5 transparency framework for the calendar year 2017 (year in review). The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

1092.  Romania can legally issue the following two types of ruling within the scope of the transparency framework: (i) cross-border unilateral advance pricing arrangements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles and (ii) permanent establishment rulings. Rulings are issued by the Directorate for Transfer Pricing and Tax Rulings. This directorate is part of the National Agency for Fiscal Administration (NAFA). These rulings are not published.

1093.  Tax rulings are drafted by the Advanced Individual Tax Rulings Unit, endorsed by three stages of supervision: the Director of Directorate for Transfer Pricing and Tax Rulings, the General Director of Tax Audit Coordination General Directorate and the Vice‑President of the NAFA. The rulings are then formally issued by NAFA’s President.

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

1094.  For Romania, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2015 but before 1 April 2017; or (ii) on or after 1 January 2012 but before 1 January 2015, provided they were still in effect as at 1 January 2015.

1095.  In Romania, taxpayers applying for a ruling submit the appropriate form along with other requested documentation.

1096.  Romania’s tax administration has a database including all the rulings issued according to the issuance date. The rulings were recorded in an electronic database, as well as physically archived at the taxpayers’ file and in the archives of the Advanced Individual Tax Rulings Unit. Access is restricted to staff that has access to the tax rulings module. The date of issuance of each ruling was checked to determine whether it qualified as a past ruling. Once selected as a past ruling, it was then checked against the category of rulings to determine if it is within scope of Action 5 by manually reading the ruling and to identify potential exchange jurisdictions. Romania confirms that in all cases, all potential exchange jurisdictions were able to be identified. It is therefore determined that Romania’s undertakings to identify the potential exchange jurisdictions with respect to past rulings meet the minimum standard.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

1097.  For Romania, future rulings are any tax rulings within scope that are issued on or after 1 April 2017.

1098.  The process for issuing and storing rulings in the database was maintained for future rulings in the same way as for past rulings. Romania is currently checking all the rulings issued since 1 April 2017. In order to identify all potential exchange jurisdictions, Romania’s legislation requires the taxpayer to identify these jurisdictions (including for the immediate parent company and ultimate parent company) and to include this information in its ruling request.

Review and supervision mechanism (ToR I.4.3)

1099.  Romania did not yet have a review and supervision mechanism for past or future rulings under the transparency framework for the year in review. Romania is discussing the implementation of a revision and supervision mechanism for future rulings.

Conclusion on section A

1100.  Romania has met all of the ToR for the information gathering process except for having a review and supervision mechanism for the year in review (ToR I.4.3). Romania is recommended to implement a review and supervision mechanism.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

1101.  Romania has the necessary domestic legal basis to exchange information spontaneously. Romania notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

1102.  Romania is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”), (ii) the Directive 2011/16/EU with all other European Union Member States and (iii) double tax agreements in force with 88 jurisdictions.1

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

1103.  Romania noted that it will exchange past and future rulings as soon as all the potential exchange jurisdictions of the rulings issued are identified.

1104.  With respect to future rulings, Romania did not have a process in place regarding the completion and exchange of templates for the year in review. It is noted that Romania is elaborating a written procedure in line with the transparency framework to educate its tax officers to ensure that spontaneous exchange of information is implemented effectively, including maintaining a platform with the information to be exchanged.

1105.  As there were no exchanges for the year in review, no data on the timeliness of exchanges can be reported.

Conclusion on section B

1106.  Romania has the necessary legal basis to undertake spontaneous exchange of information. However, Romania did not undertake spontaneous exchange of information on tax rulings within scope of the transparency framework during the year in review. Romania is recommended to continue its efforts to complete the templates for all relevant rulings and to ensure that the exchanges of information on rulings occur as soon as possible (ToR II.5).

C. Statistics (ToR IV)

1107.  As no information on rulings was exchanged for the year in review, no statistical data can be reported.

D. Matters related to intellectual property regimes (ToR I.4.1.3)

1108.  Romania does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015) were imposed.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
Romania does not have a review and supervision mechanism in place to ensure that all relevant information on the identification of rulings and potential exchange jurisdictions is captured adequately.	Romania is recommended to have in place a review and supervision mechanism to ensure that all relevant information is captured adequately.
In the year in review, Romania did not have in place a process for completion of templates and exchange of information on rulings.	Romania is recommended to continue its efforts to complete the templates for all relevant rulings and to ensure that the exchanges of information on rulings occur as soon as possible

References

OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Note

← 1.  Parties to the Convention are available here: Romania also has bilateral agreements in force with Albania, Algeria, Armenia, Australia, Austria, Azerbaijan, Bangladesh, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, China (People’s Republic of), Croatia, Cyprus, Czech Republic, Denmark, Ecuador, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Jordan, Kazakhstan, Korea (Democratic People’s Rep.), Korea (Rep.), Kuwait, Latvia, Lebanon, Lithuania, Luxembourg, Macedonia (FYR), Malaysia, Malta, Mexico, Moldova, Montenegro, Morocco, Namibia, Netherlands, Nigeria, Norway, Pakistan, Philippines, Poland, Portugal, Qatar, Russia, San Marino, Saudi Arabia, Serbia, Montenegro, Singapore, Slovenia, Slovak Republic, South Africa, Spain, Sri  Lanka, Sudan, Sweden, Switzerland, Syrian Arab Republic, Tajikistan, Thailand, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Viet Nam and Zambia.