Tax inspections carried out at S.C. X S.R.L., whose object of activity is “Renting and subletting of own or rented real estate”

S.C. X S.R.L., has as its object of activity “Renting and subletting of own or rented real estate”, CAEN code 6820.

Period audited: 01.01.2017 – 31.12.2021.

The main findings of the tax inspection authorities  were:

Expenses representing licenses for intellectual property rights and strategic asset management services in the total amount of x lei were not accepted for deduction, resulting in additional corporate income tax in the amount of x lei.

The reasons for disallowing the deduction of expenses representing strategic asset management services in 2019-2021 were:

  • Non-submission of conclusive supporting documents proving that the services were performed in the interest of economic activity;
  • Failure by the company to submit documents showing that these services were requested by S.C. X S.R.L.;
  • the invoices in question did not indicate the name of the services.

With regard to the interest expenses recorded on the basis of loan contracts concluded with company N in Member State X:

The tax inspection authorities  found that the audited company did not pay in full, at the due date agreed in the facility agreement, either the part of the loan contracted or the contractual interest accrued and due by means of additional deeds.

According to the contractual terms, “the unpaid balance is capitalized to the value of the loan”, thus increasing the debt of the borrower S.C. X S.R.L. by the amount of the contractual interest not paid on the due date.

Moreover, the audited company did not submit during the tax inspection any other document showing how much of the amounts paid to company N in Member State X represented interest and how much represented repayment of the loan capital.

By not paying in full on the due date the obligations related to the facility contract, represented by the contractual interest together with the borrowed capital, the company did not comply with the contractual provisions, proceeding to capitalize the accrued and unpaid interest in the amount of x lei, for the period 2016-2021, thus increasing the debt of X S.R.L. towards its creditor N from Member State X.

 

At the same time, there were differences resulting from the recalculation of depreciation during the period under review, for fixed assets in the amount of x lei, representing non-deductible expenses in the calculation of taxable profit and income tax calculated in the amount of x lei. The audited company did not submit sufficient and relevant documents and information proving that the fixed assets have been disposed of, and non-deductible expenses with the assets disposed of were established, for which the profit tax was calculated in the amount of x lei.

In conclusion, as a result of the tax inspection, additional tax liabilities totaling x lei were established, of which:

  • x lei corporate income tax;
  • x lei tax on interest income obtained in Romania by non-residents.

Source: ANAF