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TRANSFER PRICING Romanian Legislation Requirements

Affiliated persons

A person is affiliated to another person if their relationship is defined by at least one of the following cases:

  • a natural person is affiliated to another natural person if these persons are husband/wife or relatives up to the third degree;
  • a natural person is affiliated to a legal person if the natural person owns, directly or indirectly, including the affiliated persons participations, at least 25% of the value/number of the shares or the voting rights of a legal person or, if actually controls the legal person;
  • a legal person is affiliated to another legal person if at least that person owns, directly or indirectly, including the affiliated persons participations, at least 25% of the value/number of the shares or the voting rights of the other legal person or, if it actually controls that legal person;
  • a legal person is affiliated to another legal person if one person owns, directly or indirectly, including the affiliated persons participation, at least 25% of the value/number of the shares or the voting rights of the other legal person or, if it actually controls that legal person.

Transfer price

Between the affiliated parties, the price for the transfer of tangible or intangible goods or provision of services represents a transfer price.

Market price

The amount that would be paid by an independent customer to an independent vendor at the same moment and in the same place, for the same good or service or for a similar good or service, under conditions of fair competition.

Arm’s length principle

When the conditions established or imposed in the commercial or financial relationship between two affiliated persons differ from those which would have existed between independent persons, any profits which in the absence of these conditions would have been performed by one of the persons, but have not been performed by this because of these conditions, can be included in the profits of that person and taxed accordingly

Transfer pricing adjustments.

Transactions between affiliated persons are performed according to the principle of market value (arm’s length principle).

In a transaction or a series of transactions between affiliated persons, tax authorities can adjust (if transactions are not at arm’s length), or estimate (if the taxpayer fail to provide transfer pricing documentation) the amount of income or expense based on the level of central tendency of the market.

The provisions of the guidelines on transfer pricing issued by the OECD for multinational companies and tax administrations, and their subsequent amendments/modifications and additions, are used.

Transfer pricing documentation file.

For the purpose of documenting the compliance to the arm’s length principle, the taxpayer who undertake related party transactions is bound to prepare the transfer pricing documentation file. On the request of the competent fiscal body the taxpayer has the obligation to present the transfer pricing documentation file.

Main headlines of transfer pricing documentation

GROUP DESCRIPTION

LOCAL COMPANY DESCRIPTION

FUNCTIONAL ANALYSIS AND VALUE CHAIN CONTRIBUTION

ECONOMIC AND BENCHMARKING ANALYSIS

Created By
IRIMIA ALIN
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