By Order no. 2.048/2022 amending accounting regulations applicable to economic operators (“the Order”), published in Official Gazette no. 878/07.09.2022, the Romanian authorities have transposed into national law the provisions of EU Directive 2021/2101 of the European Parliament and of the Council of 24 November 2021 (“the EU Directive”) amending Directive 2013/34/EU as regards the disclosure of income tax information by certain undertakings and branches.
By Carmen Mazilu, Tax Advisor, Noerr
The provisions of the Order entered into force on 1 January 2023. Although the Directive requires EU Member States to transpose it into national legislation by 22 June 2023, with the first financial year of reporting being the year starting on or after 22 June 2024 at the latest, Romania elected for an earlier adoption date. Therefore, the new rules entered into force on 1 January 2023, and the first report will need to be filed in 2024 for the financial statements corresponding to the 2023 financial year.
Controversies regarding early implementation
The early implementation of the EU Directive in Romania has raised some concerns in the business environment in Romania due to:
Romanian companies subject to reporting obligations
If the total consolidated revenue in their balance sheet falls below RON 3.7 billion for each of the previous two consecutive financial years as reflected in their consolidated financial statements, the aforementioned companies are no longer required to submit the CbC report.
Content of the CbC public report
The CbC public report includes information on all the companies’ activities, including those of all affiliated entities consolidated in the financial statements for the relevant financial year.
The report consists of:
Romania allows for one or more specific items of information to be temporarily omitted from the report if their disclosure would be seriously prejudicial to the commercial position of the companies to which the report relates. Any omission is to be clearly indicated in the report, together with a duly reasoned explanation. However, all omitted information is made public in a later report, within no more than five years of its original omission.
Publication methods
The CbC reporting is to be made accessible to the public free of charge on the website of the reporting companies in at least one of the official languages of the EU no later than 12 months after the close of the financial year for which the report is drawn up.
If the report is simultaneously made accessible to the public on the website of the Romanian Trade Registry, the website of the reporting companies must contain a reference to the website of the Romanian Trade Registry where the report can be accessed.
The report must remain accessible on the website for a minimum of five consecutive years.
Conclusions
The early adoption of CbC public reporting has created a stir in the Romanian business environment for the reasons detailed above, but also due to the fact that many companies are still struggling to implement SAF-T reporting and to comply with e-invoicing requirements in their ERP/accounting systems. Lately it seems that all that Romanian companies do is prepare one new report after another. And if that were not enough, there is ever-increasing frustration that the Romanian authorities still do not have the IT infrastructure and capacity to correlate all the data they receive by electronic means, and thus it cannot be properly reviewed and processed. This means that the effort that goes into complying with all the new requirements will not reduce tax evasion and profit shifting, but rather put pressure on compliant companies.