Effective from 1 July 2013, foreign legal entities that have several permanent establishments in Romania can consolidate their permanent establishments, allowing one permanent establishment’s taxable profits to offset the tax losses of another permanent establishment.
Romania introduced a consolidated tax group regime (regime) effective 1 January 2021.
Under the regime, a consolidated tax group may be formed by:
- A Romanian legal entity or legal entity with its registered office in Romania and established under European law and one or more other such entities where the first-mentioned legal entity directly or indirectly holds at least 75% of the value/ number of shares or voting rights in the other entities;
- At least two Romanian entities in which a Romanian natural person directly or indirectly holds at least 75% of the value/ number of shares or voting rights;
- At least two Romanian entities in which a foreign natural or legal person directly or indirectly holds at least 75% of the value/ number of shares or voting rights, where such foreign person is resident in a state with which Romania has concluded a tax treaty or exchange of information agreement; and
- At least one Romanian legal entity and the permanent establishment in Romania of a foreign legal person directly or indirectly holding at least 75% of the value/ number of shares or voting rights in the Romanian legal entity, where such foreign legal person is resident in a state with which Romania has concluded a tax treaty or exchange of information agreement.
An anti-abuse measure provides that the regime does not apply if it is aimed at tax fraud and evasion.
The regime is optional and applies for five fiscal years, calculated starting with the first year of application of the regime. Applications for tax consolidation are required to be submitted at least 60 days before the start of the relevant tax year. After the initial five-year period, the consolidated tax group may be renewed.
The following conditions are required to be met on the date of submission of the application for the regime:
- The conditions for the types of consolidation mentioned above must be fulfilled for an uninterrupted period of at least one year prior to the beginning of tax consolidation;
- The members of the group must be corporate taxpayers;
- The members of the group must follow the same fiscal year;
- The members of the group must not be members of another tax group;
- The members of the group must not be payers of income tax on micro-enterprises or specific tax;
- The members of the group must not fall under the provisions of the special scheme for taxpayers carrying out activities such as night bars, nightclubs, discos, and casinos; and
- The members of the group must not be in dissolution/ liquidation.
When forming a consolidated tax group, one of the group members must be designated as the responsible legal person to determine the consolidated tax result of the tax group, file the tax return, and make tax payments on behalf of the group. Every member of a consolidated tax group must also prepare a transfer pricing file that includes both the transactions carried out with the members of the tax group and with the affiliated entities outside the tax group.