Fiscal control has recently become almost generalized and, even if its main areas of interest have generally remained the same as in previous years, ANAF’s approaches have become more innovative and complex with other consequences for taxpayers. These topics were discussed during the annual PwC tax conference in Romania on panel III, coordinated by Dan Dascelu, partner of D&B David C. Baias, which discussed the ten most relevant areas that our specialists predict will be of interest to the controls carried out by ANAF in 2024, which we will briefly present in two consecutive articles in the next period. The first part of this analysis includes comments by Monica Todose, director of PwC in Romania, on transfer pricing audits, which have become more common recently, and comments presented by Adina Vizoli and Tiberiu Panfila (directors of PwC in Romania) on another favorite ANAF audit. (i.e. management and consulting services) and two other topics that are increasingly being addressed in tax audits (i.e. permanent headquarters and permanent headquarters)

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Rather, digitization has become an excuse to take measures that violate the rights of the taxpayer

Dan Daskalou, partner at D&B David and Baias: Fiscal control carried out by ANAF has become almost generalized and diversified, and documentary audits (carried out following a simplified procedure) are added to fiscal audits. Referring to the ANAF statistics, we note that 87,000 fiscal control measures are mentioned with the results of additional revenues to the budget of 11 billion lei last year, of which 33,000 were carried out by Antifraud, with revenues of 6 billion lei.

It can be said that there has been a decrease in the interaction and communication of ANAF with the taxpayer. A lot of action really happened at a distance, and unfortunately, what we would like to do for the benefit of taxpayers has very often turned out to be to their detriment, namely: digitalization has become more of a screen and a pretext for taking measures that violate the rights of the taxpayer , by limiting access to information and the right to protection to a minimum.

Transfer pricing audits are increasingly linked to the substance of transactions and ANAF’s approaches are diversifying

Monica Todose, director of PwC Romania: In the area of ​​transfer pricing inspections, we have found that discussions with ANAF inspectors are increasingly related to the substance of the transactions. If we do not convince the tax authority that the intragroup transactions we carry out have an economic meaning, their reclassification will be a direct consequence. I have come across quite a few re-employment situations lately, but I will only mention two of them. The first reclassification situation concerns intra-group loans, and here we have an element of novelty, as the tax office analyzes loans starting from the provisions of the OECD Guidelines (version 2022), including retroactively (for periods up to 2022). If the tax office is not convinced that the relevant loan was granted in the relevant amount by an independent financial institution, it can proceed with the reclassification of the loan, even bypassing the good economic arguments provided by the taxpayer. In practice, this is only partially recognized as having the nature of a loan.

The second situation of reframing is the analysis of the behavior of the parties involved in the agreement. Thus, tax authorities require additional records to document the behavior of the parties to the transaction. If this evidence does not support the contractual provisions or detailed information in the transfer pricing file, the tax office may change the functional profile. If the records from several sources do not match, and also differ from the contractual provisions, the tax authorities question whether the conduct of the parties or the contractual provisions (if any) prevail in determining profitability.

The topic is not new, I have already mentioned these practical trends of the tax in other cases, but in the near future we will also have legislative provisions that will legislate the right of tax inspectors to check the behavior of the parties to an intra-group transaction. Starting in 2026, a new European transfer pricing directive is to be transposed, which, among other provisions, contains a special article, most likely to be taken as such in the Fiscal Code, which obliges tax inspectors to carry out analyzes of the conduct of parties to intra-group transactions. operations In practice, we will have local tax legislation in the field of analysis of the conduct of the parties to the agreement, opposition legislation for transnational groups and ANAF inspectors from Romania.

Type of permanent establishment from the point of view of VAT – ANAF usually requires additional amounts from Romanian companies, not from non-resident companies

Adina Vizoli, director of PwC Romania: Going concern findings began several years ago in the pharmaceutical industry, continued at the processor level, and recently spread to several industries: distribution, energy, and even gambling. What is the involvement of the tax service? How is money collected from this find? Well, the money is collected from the companies in Romania, not from the non-resident companies for whom this permanent office is set up for VAT purposes. For services normally invoiced without VAT, ANAF says to charge VAT. However, the effect is temporary because if the Romanian company collects this VAT, it may be refundable VAT at the level of the non-resident for whom this permanent establishment was established. It’s just that in most cases there are delays in recognizing the effect of the refund, which affects the taxpayers involved.

Not only ANAF thought to make money from the permanent headquarters case, but also the tax authorities of other countries, such as Poland or Belgium, so we have cases that have recently been heard or are pending before the Court of Justice of the European Union, including questions sent from Romania. To prevent possible negative consequences, an analysis of the operating model is necessary, especially if you are an operator with limited functions, to carefully analyze the involvement of your own human resources in the activities related to the operations carried out by a non-resident and the way of wording in the job description or power of attorney that you received from a non-resident.

Stationary headquarters are often combined with permanent headquarters – the topic is becoming more and more relevant and has prospects for expansion

If the judgments of the Court of Justice of the European Union ultimately invalidate the ANAF findings on permanent headquarters, the desire for permanent headquarters is expected to persist and even grow.

Tiberiu Panfilou, director of PwC Romania: Over the years, we have already noticed that permanent establishment checks both address the concept of permanent establishment, although we obviously have different definitions. Why is this happening? Because, in fact, these two concepts are intertwined. We all know that maintaining a permanent establishment in Romania will not lead to the creation of a permanent establishment if that permanent establishment carries out activities of a preparatory or auxiliary nature. The OECD Model Convention Commentary states that when we talk about preparatory or support activities, we usually have relatively limited resources in terms of staff and assets. When we talk about extended resources (permanent representation condition), it is automatically more difficult to argue that this activity is of an auxiliary nature, and we come to the discussion of permanent representation.

We continue to face ANAF’s rather formal and aggressive approach to management and advisory services, including from a VAT perspective.

Tiberiu Panfilou, director of PwC Romania: In addition, we continue to face a rather formal and aggressive approach from regulators regarding intra-group services, and the first topic in this regard will be the issue of the adequacy and relevance of the supporting documentation provided. Analysis, of course, also imposes a certain dose of subjectivity, and it still seems that everything we have at our disposal is still not enough. Fortunately, the case law of the courts, including the High Court, which we have also become involved in through our case law, is very helpful in this regard and often condemns government intervention. But this topic of documentation level still needs to be treated with special attention, and documentation needs to be obtained systematically and early.

We have also observed that the deduction is not a single rate and ANAF has also gone to the non-resident income tax implications of treating the services received as artificial or denying the quality of the actual beneficiary of the service provider, in case he engages a party to provide services and re-bills her account is in place, so the Double Taxation Convention does not apply.

Adina Vizoli, director of PwC Romania: Almost similar conclusions also justify the denial of the right to deduct VAT for intra-group services, including the reverse charge mechanism. They continue to refer to aspects of necessity and opportunity that have no analogues in the VAT provisions, as well as to the fact that proof of the provision of services for the benefit of Romanian society will not be made in a sufficiently precise and detailed manner. , elimination of the right to deduction, retention – still VAT will be charged by ignoring the principle of VAT neutrality. If these issues have been resolved positively in the national case law, in which we participate together with lawyers D&B David and Baias, we hope that the decision of the ECJ, which will be delivered in the case of the Romanian company they represent, will finally clarify this and therefore left by ANAF.

Article supported by PwC Romania