Object of activity: Manufacture of made-up textile articles (except apparel and underwear), CAEN code 1392
Period audited:
01.06.2016 – 31.12.2021: VAT
01.01.2016 – 31.12.2021: corporate income tax
The main observations of the tax inspection authorities were:
Income tax
S.C. X S.R.L. carried out the activity of production and distribution of car tarpaulin covers, having as main suppliers and customers companies with which it is in affiliation relations, all of them being part of the X Group.
From the analysis of the transfer pricing file, it was found that for the production activity in 2019 and 2020, the RRC indicator is lower than the lower quartile of the market range determined in the comparability study, requiring the adjustment of the revenues obtained from transactions carried out with affiliated partners.
S.C. X S.R.L. recorded service expenses totaling RON x on the basis of invoices and statements issued by the parent company X S.R.L. From the analysis of the documents submitted, the tax inspection authorities found that these expenses represent costs reallocated to the Romanian company from the expenses incurred by the parent company as “expenses for consultancy, management and coordination services”.
As the documents justifying the actual provision of these services by the employees of the parent company and the proof of the provision of these services for the benefit of the economic activity carried out by the company audited were not submitted, these expenses were established as non-deductible expenses for tax purposes for the calculation of corporate income tax.
Also, the tax inspection authorities found that S.C. X S.R.L. erroneously prepared the 2018 corporate income tax return, code D101, unduly reducing the corporate income tax due by the amount of x lei.
Value added tax
For the management services purchased in the period audited from the intra-community operator X S.R.L., the taxpayer under audit registered deductible VAT and VAT collected in the amount of x lei. Since it has not been proved that these services were actually rendered, that they were used for its own benefit and for the benefit of its taxable operations, the taxpayer is not entitled to deduct VAT, but is liable to pay VAT in Romania, being obliged to enter in the VAT return both the VAT collected and the deductible VAT only within the deductibility limit.
Source: ANAF