Romania

A company is considered tax resident in Romania if:

• it was set-up under Romanian law
• it has its head office situated in Romania and it was set-up under EU law, or
• it has its ‘place of effective management’ (POEM) in Romania.

POEM represents the place where a foreign legal entity carries out operations corresponding to economic, real, and substantial purposes and where at least one of the following conditions is met:

• The economic-strategic decisions necessary for the management of the activity of the foreign legal entity as a whole are taken in Romania by the executive directors/members of the board of directors.
• At least 50% of the executive directors/members of the board of directors of the foreign legal entity are resident.

Permanent establishment (PE)

A PE is generally defined as being the place through which the activity of a non-resident company is conducted, fully or partially, directly or through a dependent agent.

Once a PE is created, Romania has the right to tax the profits of the non-resident parent company derived from the activities performed through the PE.

In defining the PE concept, reference can be made to Article 5 - ‘Permanent establishment’ of the OECD Model Tax Convention, which has been transferred from the Methodological Norms to the Fiscal Code.

The Romanian legislation explicitly states the conditions that trigger a PE:

• Fixed base PE is created through a place of business with a certain degree of permanency through which business is conducted in Romania (with some exceptions).
• Agency PE is created through agents with a dependent status that operate in Romania on behalf of the foreign company.

The registration, reporting, and tax payment requirements for a PE are similar to those for a Romanian company.

Consolidation of PE revenues and expenses belonging to the same foreign legal entity is possible. For further information, please see the Group taxation section.