Incurred by Non-Resident Related Entities – Proposed Amendments
The recent practice in the field has shown that the expenses with intragroup services are currently one of the main topics addressed during tax audits and, at the same time, one of the main topics generating tax controversies.
As per the general rules in the field, deductible expenses are those incurred for the purpose of carrying out the economic activity. Additionally, Art. 25 para. (4) of the Fiscal Code provides for a certain category of expenses that are not deductible.
Currently, the expenses for management, consultancy, assistance or other services provided by a person located in a country with which Romania has not concluded a legal instrument for the exchange of information are excluded from deduction and this is applicable only in the case in which the expenses are incurred as a result of transactions qualified as “artificial”.
Artificial transactions are those cross-border transactions or series of cross-border transactions which do not have an economic content and which cannot normally be used in ordinary economic practices, the essential purpose of which is to avoid taxation or to obtain tax advantages which could not otherwise be granted.
