Companies Are Increasingly Concerned by the Tax Treatment Applied to Intra-group Transactions

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This was the theme of an interactive seminar organized recently by the TPS – NNDKP alliance.

Intra-group transactions have become one of the main activities during the fiscal inspections and the best defense strategy for companies is to establish a transfer pricing policy and to continuously monitor these transactions. Aligning the secondary legislation in the field with international regulations brought a series of additional obligations with respect to compiling the annual file, as well as new questions to which no official answers exist yet.

These were the main topics discussed during the workshop “New obligations in intra-group transactions. Current topics on defending your right to fiscal security and efficiency”, organized recently by the Transfer Pricing Services (TPS) – Nestor Nestor Diculescu Kingston Petersen (NNDKP) alliance, which brought together over 150 representatives from companies that are part of multinational and national groups, as well as small and medium taxpayers.

The presence of a large number of companies at a very technical seminar, as well as the high degree of interactivity during the debates, showed that in the business environment – where the groups are the prevailing method of organization – there is now a degree of uncertainty related to the way the authorities deal with transactions between affiliated persons”, declares Adrian Luca, coordinating partner of Transfer Pricing Services. He states that “the new legislation follows the trend of the European and global context, which promotes the economic substance of transactions, transparency and value added tax on profit.

The main changes to the ANAF order that was implemented at the beginning of February (442/2016) refer to the so-called qualifying thresholds, the value of the transactions with affiliated persons, depending on which it is mandatory to annually document the method of complying with the principle of market value for those transactions. The order targets transactions that took place starting with 2016 and the database shows that at this point over 1,000 large taxpayers have the obligation to compile the annual transfer pricing file in order to be able to provide it to the tax inspector whenever needed.

The issue of transfer pricing includes key aspects of economic substance and the reality and economic benefits of intra-group transactions and should not be seen only as an area of statistical research and mathematical calculations. Consequently, companies must pay special attention to issues such as the economic value and commercial benefit added by the intra-group transaction in the analysis of transfer pricing”, states Silviu Bădescu, NNDKP tax partner.

The current norms must also be “read” from the perspective of the continuous legislative changes that will govern this sensitive tax area, in the context of the measures that arise from the implementation of the BEPS package (against the erosion of the taxation basis and the artificial relocation of profits) and from the European directives related to counteracting the phenomenon of tax avoidance at intra-group level.

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