In the Official Gazette, Part I no. 878 of 07 September 2022 was published the Order of the Ministry of Finance (MF) no.2048 on the completion of accounting regulations applicable to economic operators.
The provisions of the normative act enter into force on 1 January 2023.
The order was published as a result of the need to transpose a new European directive which establishes the obligation for certain entities to submit information on corporate income tax.
Thus, the document introduces the obligation to draw up and complete a corporation tax report for certain companies. The change applies from 1 January 2023.
Obligation to submit corporation tax reports:
According to article 5923, paragraph (1) of OMFP 1802/2014, the ultimate parent companies, whose consolidated net turnover exceeded at the date of their balance sheet, for each of the last two consecutive financial years, the amount of 3,700,000,000 lei (equivalent to 747,474. 740 at the exchange rate published in the Official Journal of the European Union on 21 December 2021), as reflected in their annual consolidated financial statements, are obliged to prepare, publish and provide access to a report on information relating to corporate income tax for the most recent of those two consecutive financial years.
An ultimate parent company shall no longer be subject to the reporting obligations set out in paragraph (1) when its consolidated net turnover at the balance sheet date falls below the amount of 3,700,000,000 lei for each of the last two consecutive financial years as reflected in its consolidated annual financial statements.
According to paragraph (3), autonomous entities whose net turnover has exceeded at their balance sheet date, for each of the last two consecutive financial years, the amount of 3,700,000,000 lei, as reflected in their individual annual financial statements, shall be obliged to prepare, publish and provide access to a report on corporate tax information for the most recent of those two consecutive financial years.
An autonomous entity shall no longer be subject to the reporting obligations set out in paragraph (3) when its net turnover at the balance sheet date falls below the amount of 3,700,000,000 lei for each of the last two consecutive financial years as reflected in its financial statements.
According to article 5925, paragraph (1), medium and large subsidiaries, as defined in item 9, paragraph (4), which are controlled by a ultimate parent company that is not subject to these regulations, when the consolidated net turnover has exceeded the amount of 3. 700,000,000 lei, as reflected in its consolidated financial statements, shall be obliged to publish and provide access to a report on the income tax information relating to that ultimate parent company for the most recent of those two consecutive financial years.
If that information or report is not available, the subsidiary shall require its ultimate parent company to provide it with all the information necessary to enable it to fulfil its obligations under paragraph 1. If the ultimate parent company does not provide all the information requested, the subsidiary shall draw up, publish and make available a report on income tax information containing all the information, obtained or acquired, which it holds and a statement that its ultimate parent company has not made available the necessary information.
Medium and large subsidiaries shall no longer be subject to the reporting obligations set forth in this paragraph when the total consolidated net turnover of the ultimate parent company as of the balance sheet date or falls below the amount of 3,700,000,000 lei for each of the last two consecutive financial years, as reflected in its annual consolidated financial statements.
According to Article 5926, paragraph (1), branches in Romania, established by entities which are not subject to the legislation of a Member State, are obliged to publish and provide access to a report on corporate tax information on the ultimate parent company or autonomous entity referred to in paragraph (6)(a), in respect of the most recent of the last two consecutive financial years.
If that information or report is not available, the person or persons designated to carry out the disclosure formalities referred to in paragraph 59213(2) shall request the ultimate parent company or autonomous entity referred to in paragraph 6(a) to provide them with all the information necessary to enable them to fulfill their obligations.
If all the information requested is not provided, the branch shall draw up, publish and provide access to a corporation tax information report containing all the information which it holds, has obtained, or has acquired and a statement that the ultimate parent company or autonomous entity has not provided the necessary information.
The reporting obligations set out in this paragraph apply only to branches whose net turnover has exceeded the threshold indicated in paragraph 9(3) for each of the last two consecutive financial years.
A branch which is subject to the reporting requirements under this point shall no longer be subject to those requirements when its net turnover falls below the threshold indicated in point 9(3) for each of the last two consecutive financial years.
According to paragraph 6, a branch is subject to the rules set out in this point only if the following criteria are met:
a) the entity which has opened the branch is either an affiliated entity of a group whose ultimate parent company is not governed by the law of a Member State and whose consolidated net turnover has exceeded on the balance sheet date or, for each of the last two consecutive financial years, the amount of 3,700,000. 000 lei, as reflected in its consolidated annual financial statements, or an autonomous entity whose net turnover has exceeded at the balance sheet date or, for each of the last two consecutive financial years, the amount of 3,700,000,000 lei, as reflected in its financial statements; and
b) the ultimate parent company referred to in subparagraph (a) does not have a medium or large subsidiary as referred to in paragraph 5925.
A branch is no longer subject to the reporting obligations set out in this paragraph if the criterion set out in paragraph 6(a) ceases to be met for two consecutive financial years.
According to Article 5928, subsidiaries or branches not subject to the provisions of paragraphs 5925 and 5926 are obliged to publish and provide access to a report on information relating to income tax if these subsidiaries or branches serve the sole purpose of circumventing the reporting requirements laid down in this Chapter.
Content of the report on corporate tax information:
According to Order 2048, the income tax information report required to be filed under paragraph 592^3 -592^8 includes information on all activities of the autonomous entity or ultimate parent company, including the activities of all affiliated entities, consolidated in the financial statements for the financial year in question.
The information in the aforementioned Report includes:
a) the name of the ultimate parent company or autonomous entity, the financial year in question, the currency used for the presentation of the report, and, where applicable, a list of all subsidiaries consolidated in the financial statements of the ultimate parent company for the relevant financial year established in the Union or in the tax jurisdictions included in Annexes I and II to the Council Conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes;
b) a brief description of the nature of their activities;
c) the number of full-time equivalent employees;
d) income, which is the sum of net turnover, other operating income, income from participating interests, excluding dividends received from affiliated entities, income from other investments and loans forming part of fixed assets, other interest receivable and other similar income listed in item 600;
e) the amount of gross profit or loss;)
f) the amount of income tax accrued during the financial year in question, which represents the current tax expense recognised in respect of taxable profits or losses for the financial year in question by entities and branches in the relevant tax jurisdiction;
g) the amount of corporation tax paid in cash, which is the amount of corporation tax paid during the relevant financial year by entities and branches in the relevant tax jurisdiction; and
h) the amount of accrued gains at the end of the relevant financial year.
For the purposes of (d), income includes related party transactions.
For the purposes of (f), current tax expense relates only to an entity’s activities in the relevant financial year and does not include provisions for uncertain tax liabilities.
For the purposes of (g), taxes paid include withholding taxes paid by other entities in respect of payments to entities and branches within a group.
For the purposes of point (h), accumulated profits refer to the sum of profits of previous financial years and the financial year in question, the distribution of which has not yet been decided.
In the case of branches, accumulated profits are those of the entity which has opened the branch.
The information listed above can be reported on the basis of the reporting instructions mentioned in Section III Parts B and C of Annex III to Council Directive 2011/16/EU, as transposed into national law.
The information mentioned above is presented using a common template and machine-readable electronic reporting formats.
The Corporate Tax Information Report presents the above information separately for each Member State.
The Corporation Tax Information Report shall also present the information referred to in Article 5929(2) or (3) separately for each tax jurisdiction which, on 1 March of the financial year for which the report is to be drawn up, is listed in Annex I to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes, and present this information separately for each tax jurisdiction which, as at 1 March of the financial year for which the report is to be drawn up and as at 1 March of the preceding financial year, was mentioned in Annex II to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes.
The report on corporate tax information also presents the information mentioned in aggregate for other tax jurisdictions.
Please note that the information is attributed to each relevant tax jurisdiction on the basis of the location or existence of a fixed place of business or a permanent economic activity which, in view of the activities of the group or autonomous entity, may be subject to corporation tax in that tax jurisdiction.
Where the activities of more than one affiliated entity may be subject to corporation tax in a single tax jurisdiction, the information attributed to that tax jurisdiction is the sum of the information relating to such activities of each affiliated entity and its branches in that tax jurisdiction.
No information relating to a particular activity is attributed to more than one tax jurisdiction at the same time.
It is important to note that one or more specific items of information normally required to be disclosed under paragraph (2) or (3) may be temporarily omitted from the report if their disclosure would seriously prejudice the commercial position of the entities to which the report relates. Any omission shall be clearly indicated in the report, together with a properly reasoned explanation of the reasons for it.
All omitted information shall be disclosed in a subsequent corporation tax information report no later than five years after the date of the initial omission.
Information on tax jurisdictions included in Annexes I and II to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes, as referred to in paragraph 6, can never be omitted.
The report on information relating to corporation tax may include, where appropriate, at group level, an overview giving an explanation of any significant discrepancy between the amounts presented under paragraph 2(f) and (g), taking into account, where appropriate, the corresponding amounts relating to previous financial years.
The currency used in the report on income tax information shall be the currency in which the final consolidated financial statements of the parent company or the separate annual financial statements of the autonomous entity are presented. This report is published in the currency used in the financial statements.
However, in the case referred to point 592^5(2), the currency used in the tax information report is the currency in which the subsidiary publishes its annual financial statements.
The thresholds referred to point 592^5 and 592^6 shall be converted into an equivalent amount in the national currency of any relevant third country by applying the exchange rate valid on 21 December 2021, rounded to the nearest thousand.
It is important to note that the report on information relating to corporation tax specifies whether it has been prepared in accordance with point 592^9 paragraph (2) or (3).