The Senate has adopted a legislative proposal that drastically limits the deductibility of certain intragroup expenses when calculating corporate income tax.
Thank you for reading this post, don't forget to subscribe!The measure aims to tighten tax rules for multinational companies and limit the use of cross-border transactions between affiliated entities as mechanisms to reduce the tax base in Romania.
Interest with limited deductibility. The adopted text classifies interest expenses, late payment penalties, and other interest-equivalent costs related to intragroup loans as expenses with limited deductibility. These may be deducted only up to the average interest rate prevailing in the financial market of the creditor’s country of residence, to which a fixed margin of no more than 1% may be added.
Non-deductible intragroup services. Payments made under intragroup contracts for management, consulting, or assistance services, or for the transfer of intellectual property rights, will be classified directly as non-deductible expenses.
Rationale for the initiative. The explanatory memorandum cites the need to curb aggressive tax planning and the erosion of the tax base. According to the memorandum, transactions involving intangible services and intra-group financing are frequently used to artificially shift profits to jurisdictions with more permissive tax regimes.
Timeline and status of the bill. If the legislative process is completed without major changes, the new regulations would take effect on January 1, 2027. However, the bill does not currently have legal effect: it still requires adoption by the Chamber of Deputies, which is the decision-making body, followed by promulgation by presidential decree and publication in the Official Gazette. This context is relevant because a similar initiative, adopted by the Senate at the end of 2023, remained stalled in the Chamber of Deputies.