Transfer pricing audits conducted by the Romanian tax authority (ANAF) are no longer a mere formality. In recent years, the authorities have developed an increasingly analytical approach, based on detailed financial testing and a strict interpretation of the arm’s length principle. The result has been a significant increase in adjustments applied to taxpayers, most of which relate either to the improper allocation of profits among affiliated entities or to the lack of solid economic justifications for the transactions reported.

ANAF’s adjustments start from the premise that intra-group transactions must reflect the conditions that would have been agreed between independent parties. In practice, inspectors compare the profit margins of the audited entity with those of similar companies in the market. When differences exceed the arm’s-length range, ANAF may recalculate the taxable result so that the company’s margin falls within the market interval. This is, in fact, one of the most frequent types of adjustments — increasing the taxpayer’s taxable profit on the grounds that transfer prices are “not in line with the arm’s length principle.”

Behind these adjustments, however, lie recurring documentation and interpretation errors. A major mistake consists in the mechanical application of group-wide transfer pricing policies without adapting them to local circumstances. Multinational groups often establish uniform pricing policies that do not always reflect the risks and functions undertaken by each entity. A subsidiary with no control over strategic decisions but assuming significant commercial risks cannot be remunerated at the same level as a low-risk, limited-function entity. This misunderstanding of the entity’s economic role is one of the main reasons ANAF deems the margins applied unjustified.

Another major source of adjustments is the comparability analysis. ANAF thoroughly reviews how taxpayers select comparable companies and calculate profit margins. When the benchmark set includes entities with different risk profiles, heterogeneous industries, or incomplete financial data, the results become unreliable. In such cases, the authorities often rebuild the entire analysis using their own databases or criteria, leading to substantial adjustments. Moreover, many companies fail to update their comparability analysis when significant operational or transactional changes occur — giving ANAF grounds to claim that the documentation no longer reflects the economic reality.

Intra-group services are also a frequent target for adjustments. In these cases, the authorities often challenge not the pricing itself, but the deductibility of the expenses. Without concrete evidence of the actual provision of services or the economic benefit received by the Romanian entity, ANAF may conclude that such services have no added value. This leads to the rejection of the related expenses and, implicitly, to an increase in the taxable base. The mere fact that the services are invoiced by a group company is not enough — the taxpayer must demonstrate that a measurable economic benefit was indeed obtained.

Transactions involving goods, especially between affiliated manufacturers and distributors, are also subject to adjustments when the distributor’s profit margins in Romania are lower than those of comparable independent companies. In such cases, ANAF may adjust the purchase price of goods or the resale margin to bring profitability within the arm’s-length range. Essentially, a company that purchases goods from an affiliate at an inflated price risks a transfer pricing adjustment increasing its taxable profit — on the grounds that real profits were “shifted” abroad.

Finally, documentation consistency plays a crucial role in ANAF’s decision to apply adjustments. Even when transactions are economically justified, the absence of a well-structured file aligned with the financial and contractual reality can raise red flags. Inspectors quickly notice discrepancies between the information in the transfer pricing file and accounting data, or between group policies and actual cash or goods flows.

In conclusion, transfer pricing adjustments are not mere accounting corrections — they reflect a complex evaluation of the economic substance of intra-group transactions. To prevent them, companies must adopt an integrated approach combining real economic analysis with rigorous and transparent documentation. In an increasingly demanding tax environment, the difference between a significant adjustment and a favorable audit often lies in the details: understanding each entity’s role, accurately defining risks, and demonstrating the arm’s length nature of all transactions.