Ministry of Finance seeks to shift the paradigm for handling multinational companies in Romania

Finance Minister Alexandru Nazare said Wednesday that the Ministry of Finance seeks to shift the paradigm for handling multinational companies in Romania, noting that the National Tax Administration Agency (ANAF) has taken very few measures to monitor artificial profit transfers by these corporations."Today, on the occasion of publishing the fiscal component of Package 2 for public consultation, we will present a series of measures we propose in this regard. I will begin by listing the measures that, in my view, are very important in terms of economic impact, especially in the investment sector. The main point I want to emphasize is that we will change the paradigm in the way we handle multinational companies. Multinational companies have been discussed extensively, yet very little action has been taken over many years - and I can tell you, based on my experience over these past weeks and months since taking office, that I have found very few traces of action within ANAF regarding the monitoring of artificial profit transfers by multinationals. I have not even found a clear record of the amounts transferred to affiliates. So we are starting a completely new exercise, which will also involve strengthening ANAF's transfer pricing department, which over the past four years has been severely under-resourced, both in terms of personnel and materials," Alexandru Nazare told a press conference at Victoria Palace of Government.He noted that the goal is to move from a turnover-based tax to one that targets the areas through which multinationals export their profits."The effort is more extensive. Where did we start? We started from quantifiable records. ANAF's records include categories of multinational company expenses related to affiliated entities. Here we are talking about management fees, administrative expenses, intellectual property, intra-group interest, and consultancy. These expenses appear in the records that these companies report - and from now on, we want to focus especially on these expenses, which are traditionally used by multinationals to transfer profits. Why are we doing this? Because we want to change the approach from a turnover-based tax on a multinational, which in fact restricts it, hinders economic growth, and discourages company investment, to a tax that specifically targets the channels through which the multinational exports its profit," the Finance minister explained.According to Nazare, the calculation volume for 2024 in transactions with affiliates across the four identified categories amounts to nearly 15 billion lei."Thus, for these four categories that we have already identified, we have a calculation volume for 2024 of almost 15 billion lei in relations with affiliates. We have created a new taxation formula, inspired by the Base Erosion and Profit Shifting (BEPS) model, and the U.S. tax, with a 3% trigger on these four expense categories, so that anything exceeding this 3% is considered non-deductible. We allow certain deductible expenses, but at a minimum threshold of 3%. Anything above this 3% is taxed at 16%. Accordingly, we expect an effect both in terms of higher corporate tax and a much clearer record of these areas that have always been susceptible to profit export by multinationals. This tax will be built for 2026, based on 2024 as the reference year, and we believe it will better target this area of profit export. Our proposal is that the new affiliate tax we are proposing today will replace the turnover tax currently applied to companies with revenues exceeding 50 million euros," the Finance Minister added.