Starting with 1 January 2022 (or a later date for taxpayers with a different fiscal year), the option of fiscal consolidation of profit tax and the possibility of setting up a fiscal group from the perspective of profit tax is introduced.
Members of the group can only be Romanian legal entities and/or persons with a registered office in Romania established according to European legislation. In certain situations, a permanent establishment in Romania of a non-resident entity may be included in the tax group.
Members must be profit taxpayers, with the same payment system (quarterly calculation or advance payments), have the same fiscal year and not be in dissolution/liquidation. Microenterprises or companies carrying out activities such as bars/nightclubs, discos, casinos and those that are simultaneously payers of profit tax and specific tax cannot be members of the tax group.
An essential condition is that the minimum holding, direct or indirect, be 75% of the value/number of participation titles or voting rights, for an uninterrupted period of one year prior to the start of consolidation. A company cannot be a member of several tax groups.
During the consolidation period, the members of the group who, during the period of existence of the tax group, would meet the conditions to become payers of microenterprise income tax or specific tax, will only apply, by derogation, profit tax.
The option to set up a tax group shall be communicated to the tax authority at least 60 days before the beginning of the consolidated fiscal year. The system is optional, valid for 5 fiscal years, after which the option must be expressly extended.
One of the members is appointed as group’s representative: it has the role of calculating, declaring and paying the consolidated profit tax by adding together individual calculations of each member. Thus, at the level of the tax group, tax profits and losses of the members may be settled.
Tax losses incurred by a member of the group before the system is applied cannot be offset at the group level.
If the group is disbanded after five years, the losses recorded and not recovered during the consolidation period shall be recovered by the group’s representative.
An express obligation to draw up a transfer pricing file is introduced, both for transactions with members of the tax group and with affiliates outside it. Transfer pricing files prepared by members will be submitted by the designated person.
If one of the members no longer meets the conditions, that member and the responsible legal person shall recalculate income tax due individually/for the group, with the collection of interest and late payment penalties, as the case may be.
The tax is not recalculated in the following situations: sale/assignment of participation titles held to one of the group members if the holding falls below 25%; dissolution of a member; departure of a member of the group as a result of reorganization operations (merger, division, transfer of assets, exchange of shares).
APEX comment: implementation of the profit tax consolidation system is a step towards modernization of the fiscal system and to stimulate investments in Romania. This long-promoted business proposal is becoming reality. However, we must emphasize that the consolidation mechanism is relatively simplistic and refers to an algebraic consolidation of individual results, with obvious limitations in the application of deductions or facilities. The system should have allowed for a real consolidation of profit and loss accounts of all members and the application of limitations and deductions to the consolidated results and not to individual results. The simplest example would be the tax credit for sponsorship or various tax facilities that a taxpayer which records a tax loss cannot benefit from at the individual level and implicitly at the group level, since the individual calculations are added together. However, in the remaining year until effective implementation, it is possible to adjust some rules on fiscal consolidation.