Mergers and acquisitions
Mergers, spin-offs, transfers of assets, and exchanges of shares between two Romanian companies should not trigger capital gains tax.
In the case of a relocation of the registered office of a European Company (SE) and a European Cooperative Society (SCE) from Romania to another EU member state, no tax will apply on the difference between the market value of the transferred assets and liabilities and their fiscal value, provided certain conditions are met. There will also be no tax on such movements at the shareholder level. Therefore, a tax basis step-up may be achieved in the case of Romanian shareholders.
If a Romanian company has a PE in another EU member state, and the Romanian company is dissolved as a result of a cross-border reorganisation, the Romanian tax authorities will not have the right to tax the PE.
There are provisions for the recovery of fiscal losses in the case of restructuring operations carried out by Romanian legal entities and those involving Romanian legal entities and residents of other EU member states. Herewith, the right to recover fiscal losses by legal entities that are successors of merger or spin-off operations is regulated. The recovery is correlated with the assets and liabilities transferred according to the merger/spin-off project. Also, some amendments are provided to the Romanian Company Law simplifying and, in some cases, reducing the time-frame for performing the legal steps that have to be followed in case of mergers and spin-offs.
For taxpayers going through a restructuring process, the right to carry forward non-deductible interest expenses and net foreign exchange losses is split between the beneficiary and the assignor in proportion to the assets and liabilities transferred.
The amendments applicable to domestic mergers, total or partial spin-offs, transfer of assets, and exchange of shares have been harmonised with those applicable to similar cross-border transactions. The neutrality of in-kind contributions to a company’s equity has been eliminated, except for cases involving a transfer of a going concern. Transfers carried out during a partial spin-off will not be subject to CIT only if a transfer of a going concern takes place and the transferor maintains at least one line of activity.
EU state aid investigations
There are no investigations launched by the EC on whether Romania granted selective tax advantages to certain companies in the form of state aid.
Base erosion and profit shifting (BEPS)
Romania is actively involved in implementing anti-BEPS measures (i.e. implementation of ATAD I, ATAD II, DAC 6, CbC reporting) and the OECD’s BEPS minimum standards, especially as an associate member of the Inclusive Framework on BEPS.
Moreover, Romania has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Instrument or MLI). As of 31 January 2022, the MLI has been ratified by Romania, and it will enter into force after the instrument of ratification is submitted to the OECD secretary.
Intergovernmental agreements (IGAs)
A Model 1 IGA is treated as 'in effect' by the United States (US) Treasury as of 2 April 2014.
The Model 1 IGA between the US and Romanian governments was signed on 28 May 2015 in order to improve international tax compliance and to implement the Foreign Account Tax Compliance Act (FATCA). The agreement will enhance transparency between the two countries in the field of taxation, promote growing cooperation in combating tax evasion practises, simplify implementation of financial information transmission, and increase legal certainty for financial institutions in Romania.
The agreement between Romania and the United States to improve international tax compliance and implementation of FATCA was ratified by the Romanian Parliament and published in the Official Gazette on 30 October 2015.
Common Reporting Standard (CRS)
The status regarding the implementation of the CRS, as developed by the OECD, is the following:
- On 29 October 2014, the Romanian Minister of Finance signed the Declaration to comply with the provisions of the Multilateral Competent Authority Agreement (MCAA) on Automatic Exchange of Financial Account Information.
- On 1 November 2014, the Convention on Mutual Administrative Assistance in Tax Matters was enforced in Romania.
- In April 2016, the Romania government ratified the MCAA.
These two official documents are part of the process of implementing the CRS issued in February 2014 by the OECD.
Based on the MCAA, Romania implemented the first automatic information exchange by September 2017.
In addition, Romania transposed the provisions of Directive 2011/16/EU as amended and supplemented by Directive 2014/107/EU regarding the mandatory automatic exchange of information in the field of taxation. As such, Romania introduced in the national legislation a requirement for financial institutions to implement reporting and due diligence rules, which are fully consistent with the CRS developed by the OECD.
Under the CRS and FATCA, reporting financial institutions (e.g. depositary institutions [banks, credit co-operative organisations, savings and credit banks for housing, mortgage loans banks], custodial institutions, investment entities, and specified insurance companies) are required to report to the tax authorities the following information:
- Identity of the person (name, address, jurisdiction of residence, number/tax identification number [TIN], date and place of birth, if applicable).
- Identity of the entity that is the account holder (name, address, jurisdiction/jurisdiction of residence, number/TIN of the entity and the person(s) controlling the entity, as well as their date and place of birth, etc.).
- The account number, name, and identification number of the reporting financial institution, and information on the account balance or value.
- For deposit accounts, the total gross amount of interest paid or credited to the account during the calendar year.
- For custody accounts, the total gross amount of interest, dividends, or other earnings generated from assets held in the account, as well as the amount of gross revenue from the sale or redemption of financial assets.
EU Mandatory Disclosure Rules (DAC6)
On 31 January 2020, the Ordinance for implementing Mandatory Disclosure Rules pursuant to Council Directive (EU) 2018/822 (DAC6) was published in the Official Gazette. The Romanian version of the law is closely aligned with the DAC6 Directive’s scope, hallmarks, and reporting requirements. Briefly, DAC6 requires certain intermediaries or taxpayers to report to the tax authorities any cross-border tax planning arrangements that fall within certain 'hallmarks', i.e. characteristics.
The reporting obligation generally applies to any intermediary that designs, markets, organises, makes available for implementation, or manages the implementation of a reportable cross-border arrangement in line with the provisions of the Directive or provides, directly or by means of other persons, aid, assistance, or advice with respect to the above actions concerning a reportable cross-border arrangement.
The DAC6 Directive covers direct taxes (i.e. VAT, customs duties, and excise duties are excluded). The law refers only to cross-border arrangements, the domestic ones being outside the scope of this legislation.
Starting 1 January 2021, intermediaries and, under certain conditions, taxpayers, have the obligation to report each cross-border arrangement within 30 days, which begins with the day following the date on which any of the following moments first occurs: the arrangement is made available for implementation, is ready for implementation, or the first step in the implementation was made.