Annual transfer pricing file preparation – mandatory or optional?
Brief history of transfer pricing legislation
The market value principle was introduced into Romanian tax legislation in 1994 and is applicable to all transactions with related parties, including those carried out between a foreign legal entity and its permanent headquarters in Romania. Starting from 2010, transactions between Romanian legal entities also fall within the scope of the transfer pricing rules, specifying that previously only transactions between Romanian entities with non-resident affiliated persons could be verified by the tax authority. Regarding the documentation of transfer prices, in 2008 ANAF issued Order 222 / 2008 regarding the file of transfer prices. It is currently replaced by Order 442 / 2016 on the ammount of transactions, deadlines for drawing up, content and conditions for requesting the transfer pricing file and the transfer pricing adjustment / estimation procedure.
The country profile of Romania in terms of transfer prices can be consulted here.
Order 442 / 2016 and its annexes can be consulted here.
Why is it advisable to prepare the transfer pricing file annually?
The annual preparation of the transfer pricing file is recommended in order to be able to correct certain transfer pricing “slips” in time. Thus, if, following the preparation of the comparability studies, it emerges that the analyzed company should have a net profit margin of 5% instead of the 2% it recorded at the end of the year, it can correct (ideally, by the date of filing the tax return on profit) the result registered at the local level.
Voluntary adjustments made at the end of the year can significantly reduce late penalties and interest, penalties and interest which, if related to an audit for the last 5 completed years, can, as a rule, double the adjusted principal amount.
The latest transfer pricing projects prepared by Cabot Transfer Pricing are presented here.
Cabot Transfer Pricing evaluated the intra-group flows of over 50 companies – local subsidiaries of international or Romanian groups. Our recent projects are presented here.