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Tax Groups in Romania

posted 2 years ago

For the reasons of the fiscal consolidation at group level, respectively the declaration and payment of the over tax amount resulting from the summation of the individual tax liabilities for each group member, companies of the same company group form “tax groups“ (Ro: grup fiscal). Currently such groups are allowed for VAT purposes; beginning with 2022 it is also possible to establish groups related to corporate income tax (CIT).

Conditions

At least two Romanian companies may establish a VAT group if they are independent legal entities, but with tight organizational, financial and economic relationship. It is assumed that such condition is met if a shareholder holds (directly or indirectly) more than 50% of the capital. The following conditions shall be fulfilled in order to join a group:

  • the tax payer is member of a sole group
  • the duration of the group is of at least two years
  • the VAT reporting period is the same for all group members.

For a CIT group the members have to be:

  • Romanian legal entities,
  • legal entities established according to EU law, headquartered in Romania, or
  • permanent establishments of parent companies resident in states with which Romania has concluded a double taxation convention or an agreement on information exchange.

The members must meet the following requirements cumulatively:

  • the direct or indirect participation of at least 75% between the members or between members and a common shareholder is continuously given for at least a year;
  • they are exclusively payers of corporate income tax and have the same reporting system (quarterly or yearly);
  • they apply the same fiscal year;
  • no participation in other corporate tax groups.

Functioning

The purpose of a tax group is next to the consolidated reporting, the payment by the leader/representative appointed by the members of the corporate income tax and the VAT.

Group members can partially settle profit and loss, so that ultimately only the net amount is to be paid. Same applies to VAT groups; VAT payment obligations can be credited against the VAT credit of each member.

Procedure

The same procedure applies for both cases. The fiscal group shall appoint a representative/leader, who will file (at least 60 days before the beginning of the consolidation period) the respective application, including certain documents for all members to the competent financial administration.

From the moment of the tax treatment as a group, the registration obligation for the respective taxes pertain to the leader/representative of the group. However, the members have certain further obligations.

The members are jointly liable with regard to tax liabilities reported by the group.

Despite the existing difficulties, if implemented correctly and managed accordingly, joining a tax group can generate significant advantages. The necessary steps must however be prepared in advance.

Please find more detailed information under: https://stalfort.ro/wp-content/uploads/2021/10/20210917_AZ_Tax-groups-in-Romania-%e2%80%93-regulated-however-not-common.pdf

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