Over 22 percent of companies in Romania were targeted by tax inspections in 2018, almost three times more than in 2017 or 2016, but below the Central and Eastern Europe average of 32 percent, according to a survey by the PwC Tax Controversy & Dispute Resolution (TCDR) network in Central and Eastern Europe.
Romania ranks 7th in the region, while the first places went to Bosnia and Herzegovina (63 percent), Bulgaria (48 percent), Poland (48 percent) and the Czech Republic (35 percent). Both in Romania and in the other Central and Eastern European countries, most tax inspections concerned the corporate income tax and the VAT. 45 percent of inspections in Romania verified aspects of the corporate income tax, above the regional average of 34 percent, and 36 percent targeted the VAT, compared with 27 percent at the CEE level.
“In this survey, we aimed to identify local trends in the tax inspections area compared to those in other states in the region as we find it extremely important to observe how this important component of tax administration evolves in our region. Although there are some differences from the perspective of the fiscal, administrative and judicial systems, the countries in this region have enough commonalities in the practical evolution, during the last 30 years, and the results are extremely interesting,” said Dan Dascalu, Partner D&B David and Baias, leader of the PwC TCDR network in CEE.
The survey found that 40 percent of tax inspections in Romania were completed in no more than 3 months, compared to 47 percent in the region. States that have reported comparable periods include Bosnia and Herzegovina, Latvia and Lithuania.
“We found that the inspectors’ approaches are similar in most countries, as the areas of interest are the same. For example, in the case of corporate income tax, the most frequently verified issues are related to intra-group transactions, services deductibility and transfer pricing, and in the case of VAT, the most common cases refer to deductions. Also, the duration of the inspections, as well as their implications, including from the perspective of challenging the tax documents, have many points in common, which can be a starting point in the ANAF – taxpayers dialogue, in order to improve the relationship between them, including by relating to other CEE states’ experiences,” explained Dan Dascalu.
Regarding the additional liabilities assessed by tax inspection authorities, in most cases the amounts were up to EUR 100,000, respectively 43 percent of the respondents in Romania and 51 percent in Central and Eastern Europe. At the other end of the spectrum, the survey highlighted that 18 percent of inspections led to taxation between EUR 1 million and EUR 5 million in Romania, compared with the European average of 5 percent.
Over half of respondents in Romania (55 percent) chose not to object against the taxing acts issued as a result of tax inspections, while in CEE the percentage was 62 percent.
The main reasons for the respondents lack of objections against the conclusions of tax inspections were the acceptance of findings, the small number of findings and a distrust in the effectiveness of a challenge.
In cases where businesses objected against the inspection findings, in 37 percent of the cases the appeal was totally rejected in Romania, compared to 42 percent in CEE, while 28 percent of the Romanian companies obtained a fully or partly successful solution, compared to an average of 38 percent in the region.