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Transfer prices

In Order Number 222/8 February 2008 regarding the content of transfer prices file, the National Fiscal Administration Agency transposed the general principles developed by the OECD and EU into Romanian legislation. Thus the Order completes the existing Romanian legislation dealing with transfer pricing.

The transfer prices file must contain information about the group and about the taxpayer. The information about the group should indicate its structure, history and financial data. It should include a description of its activity, of its transfer prices methodology and a general presentation of the transactions between related parties within the EU. It should also provide a general description of the functions and risks assumed by the related parties, and a presentation of the transfer prices agreements concluded by the taxpayer or by the other companies of the group in advance, with the exception of those issued by the National Fiscal Administration Agency.

The information about the taxpayer must contain a detailed presentation of the transactions with related parties (the means of transmission of invoicing and the value of the transactions). It must present a comparison of the respective goods or services, the contractual terms and the economic circumstances of the transactions. It should describe the calculation method for the transfer prices and the criteria for their selection and, generally, any other conditions deemed relevant for the taxpayer.

The methodology for calculating transfer prices permits price variation within a so-called margin of comparison, which is essentially the difference between the maximum and the minimum price or profit corresponding to comparable transactions concluded between non-related entities.

The file must be submitted in one sample, in (Romanian certified) translations. Any information available in electronic format must be presented in a form to be agreed between the taxpayer and the competent fiscal authority.

The fiscal authority of the territorial and central structures of the National Fiscal Administration Agency is the authority qualified to verify the transfer prices and to perform any fiscal inspections of the buyer. The presentation of the file must be made upon the written request of the competent authority, in the event of a general or partial fiscal inspection.

The term for presenting the file, determined on the basis of the number of related parties and the number, complexity and duration of the undertaken transactions, must be within a maximum of three months from the issuance of the request, with the possibility of extension for a period equal to that initially granted by the authority.

Special fiscal provisions detail the methods of determination for transfer prices, the conditions of choice, and allow taxpayers to obtain prior approval of future transactions between related parties, in exchange for a fee ranging from between €10,000 ($15,748) and €20,000.

The existence of prior approval issued by the Fiscal Administration Agency exempts the taxpayer from any obligation to prepare and submit the transfer prices file for the transactions and the periods specifically covered in the approval.

Refusal to present the transfer prices file or the presentation of an incomplete file is considered by the regulations as an undertaking of transactions with related parties without justification of the transfer prices. It may be punished by a fine ranging from between L2,500 and L5,000 (between about $1,050 and $2,100). The fiscal authorities will estimate the final price for taxation purposes as an average of the value of three similar transactions, in accordance with the evidence of the competent fiscal authority.

Dragos Parvu

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