Why transfer pricing is significant for multinationals
For multinationals, transfer pricing is one of the most politically sensitive areas of tax compliance domains. As the Romanian Tax Authority (ANAF) subjects more firms to audit and tightens policy to align with OECD and EU standards, intra-group transactions are coming under greater scrutiny. Transfer pricing compliance is not documentation alone – it is making sure related-party transactions comply with the arm’s length principle to avoid double taxation and substantial financial penalties.
Romanian transfer pricing legislation
The Romanian transfer pricing legislation is primarily provided by the Fiscal Code and aligned with the OECD Transfer Pricing Guidelines. Business enterprises engaged in operations with related parties should prepare and keep transfer pricing documents to substantiate their policy for establishing prices. The obligation to prepare these documents is subject to turnover and intra-group transactions thresholds, and large taxpayers are subject to stricter requirements.
ANAF has taken an active role more and more to conduct transfer pricing audits, particularly in industries such as energy, IT, retail, and automotive. These audits typically entail close scrutiny of intercompany loans, royalties, management fees, and the transfer of intellectual property rights.
Documentation requirements for Romanian companies
Romanian law distinguishes between companies based on their size and tax profile. Large taxpayers must prepare an annual transfer pricing file and present it to ANAF within a short deadline when requested. Medium and small taxpayers may also be required to submit documentation, depending on the value of their transactions with related parties.
The transfer pricing file must include a comprehensive description of the group structure, the nature of controlled transactions, functional and risk analysis, and a benchmarking study that compares the applied prices with those used by independent companies. Failure to present adequate documentation may result in ANAF adjusting taxable profits and imposing fines.
Common challenges in Romanian transfer pricing audits
Multinational companies often encounter difficulties in demonstrating compliance, as ANAF applies increasingly sophisticated audit techniques. Common issues include:
- Insufficient benchmarking data for Romanian or regional comparables
- Disputes over the characterisation of management or support services
- Challenges in proving the economic substance of intercompany loans
- Reassessment of royalties or license fees paid to parent companies
One of the most contentious areas is the deduction of intra-group service charges. ANAF frequently requests detailed evidence proving that the services were actually rendered and provided measurable benefits to the Romanian subsidiary.
Avoiding double taxation and disputes
A significant risk in transfer pricing is double taxation, where both Romania and another jurisdiction adjust the same intra-group transaction. To mitigate this risk, Romania has incorporated mechanisms under double tax treaties and EU directives. Companies can request Mutual Agreement Procedures (MAPs) or initiate arbitration under the EU Arbitration Convention.
However, these procedures can be lengthy, which makes proactive compliance essential. Maintaining clear documentation and aligning transfer pricing policies with both Romanian and international standards is the most effective way to reduce the likelihood of disputes.
Strategies for multinationals to strengthen compliance
To stay ahead of ANAF’s increasing scrutiny, multinational companies should adopt a proactive approach:
- Conduct annual reviews of transfer pricing files to ensure accuracy and alignment with evolving regulations.
- Use local comparables in benchmarking studies wherever possible, as Romanian authorities give them more weight.
- Document substance over form, by keeping evidence of services provided, board approvals, and internal correspondence that supports intercompany transactions.
- Consider advance pricing agreements (APAs), which can provide certainty on complex transactions and reduce audit risks.
Conclusion: preparing for stricter enforcement
Transfer pricing compliance in Romania has moved from being a formal requirement to becoming a strategic priority for multinationals. ANAF’s audits are becoming more thorough, and penalties for non-compliance can reach up to 3% of the total value of related-party transactions. Beyond financial consequences, disputes can affect investor confidence and disrupt cross-border operations.
Multinationals operating in Romania should therefore treat transfer pricing as a core element of tax risk management, ensuring that documentation, substance, and strategy are aligned. By investing in robust compliance processes and anticipating regulatory developments, companies can protect themselves against disputes and maintain smoother relationships with both Romanian and foreign tax authorities.