The fiscal authorities had conducted inspections at a quarter of the companies interviewed by PwC Romania for the study Trends on Tax Inspections of 2019. The companies are mostly medium size (42 percent) and some are big companies with over 1,000 employees (28 percent). The study shows that the fiscal authority carries many inspections every year.
The 2019 Edition of the Survey The PwC Romania Trends on Tax Inspections of 2019 highlighted among others that 45 percent of the participating companies challenged the taxation acts, compared with 38 percent of the contestation highlighted by the similar survey conducted in 2018. Approximately one third (28 percent) of the tax appeals were solved favorably or partially favorably for the companies, compared to 57 percent of the favorable administrative solution highlighted by the similar survey conducted in 2018.
Almost a quarter (22 percent) of the surveyed companies said they were subject to tax inspections in 2018. According to data released by the National Agency for Tax Administration (ANAF), the number of tax inspections carried out in the first nine months of 2018 was almost at the same level as in the same period in 2017. The inspections carried out by the tax anti-fraud unit were 45 percent more than in the same period last year. From this perspective, it should be noted that participants in the PwC 2019 survey mentioned an increase in the number of tax audits carried out in 2018 (22 percent of total participants) compared to 2017 (8 percent of total). In contrast, out of the sample of 139 companies surveyed in the PwC survey, 18 percent were never subject to tax inspections, while 24 percent were controlled before 2013.
As with the PwC Poll 2018 edition, most of the inspections (40 percent) had a relatively short duration (1-3 months), and the additional payment amounts in most cases (43 percent) were up to RON 500,000. In 18 percent of cases, inspections lasted more than a year and there were cases where the additional amounts set exceeded RON 2 million. One important point to note is that in 18 percent of cases no additional payment amounts have been established following tax audits.
Like the previous edition of the PwC survey on tax inspections, most of the participating companies said the attention of tax inspection teams was also focused on corporate tax and value added tax (VAT). 45 percent of the controls had the main focus on corporate income tax, namely the deductibility of services, adjustments from controlling transfer pricing, fuel expenditure deductibility, deduction of the technology consumption standard or qualitatively degraded goods. More than one third (36 percent) indicated value added tax (VAT) as the main focus of tax inspectors, from the deduction of value added tax for different goods and services to items that applied for the reductions under different promotions.
“The existence of a computer system linking the taxpayer and the tax authorities would substantially improve both the level of collection of fees and the traceability of documents and due debts. A system of simple and clear procedures and forms to keep from one financial exercise to another would greatly contribute to taxpayers’ compliance, as well as the ease in submitting them on time, fairly and completely. Predictability and legislative stability are two important conditions that can ensure confidence in the Romanian tax system as well as sustainable long-term development of companies,” said Daniel Anghel, leader of Tax and Legal Consultancy, PwC Romania.
In the cases where taxing actions were challenged by companies, according to the PwC Survey, it was found that in 23 percent of the cases a total or partial cancellation was made. In 5 percent of cases, the re-examination of the disputed aspects was entirely ordered. These taxpayer-friendly solutions (28 percent), although a lower percentage than the results of the survey last year (57 percent), show an even stronger tendency for the review bodies to confirm the interpreters’ interpretations. Just like last year, about half of the survey participants (49 percent) used assistance from external consultants during or after tax inspections, and those who have fully recovered the tax situation following the tax appeal were assisted by 100 percent external consultants.
Of those who have received a negative or partially favorable solution to the challenge of taxing, a majority of 56 percent chose to appeal the lawsuits. Of the cases in which the court proceeded, in approximately 15 percent of the cases the court canceled the tax acts. In the other cases (85 percent), the file is still pending at the courts, the litigation being still at an early stage.
“The fairly high percentage of companies choosing to challenge taxpayers shows taxpayers’ confidence in the arguments put forward in the administrative phase, which they want to bring to the attention of the courts, for the protection of their rights violated by the solutions adopted by the tax authorities. Different interpretations of the legislation in force are often the result of a difficult and difficult legislative framework that has been adopted too lately, in violation of decision-making transparency. Better communication and a constructive discussion of legislation would contribute to predictability and voluntary compliance, and ultimately relieve trials that could be avoided,” said Dan Dascalu, partner, leader of the Commercial and Tax Litigation Team , D & B David and Baias.
The PwC survey was conducted between 13 December 2018 and 25 January 2019 on the basis of a questionnaire answered by representatives of 139 Romanian companies from various sectors of the national economy. Thus, survey participants belong to the retail (23 percent), industrial (22 percent), financial (18 percent), pharmaceutical (7 percent), 4 percent automotive, 3 percent in the energy industry, 2 percent in the public sector, 1 percent in IT, and 8 percent are companies from other fields of activity, such as consultancy and management, human resources and personnel leasing.
Most survey respondents (42 percent) have a staff of up to 200, followed by companies with more than 1,000 employees (28 percent). Companies with a workforce of between 201 and 500 employees represent 20 percent of respondents and those with between 500 and 1,000 employees, 10 percent. Most of the survey responses were provided by staff in the finance and accounting department (82 percent), but also in other departments, such as control, risk management or legal.