Romania was one of the first EU member states to transpose the EU public country-by-country reporting directive into its domestic law and Romania’s public reporting requirements apply earlier than in the directive (CbCR directive 2021/2101) (for prior coverage of the directive, see the global tax alert from December 2021). In Romania, multinationals and standalone entities that fall within the scope of the directive are required to draw up and publish a report containing information on corporate income tax as from 1 January 2023.
The CbCR directive, which entered into force on 21 December 2021, applies to multinational enterprises with worldwide consolidated net revenue of more than EUR 750 million and that are active in one or more EU member states. CbCR public reporting also applies to non-EU-headquartered multinational groups, i.e., non-EU multinationals with EU subsidiaries or branches. The ultimate parent of a multinational group subject to the public reporting rules must draw up a report in which it provides information on its business activities and tax positions, including information on income tax accrued and actually paid in a financial year. The information must be provided for each member state individually, as well as for third-country jurisdictions that the EU has identified as not (sufficiently) cooperative for tax purposes. For all other third-country jurisdictions, the information is to be disclosed on an aggregated basis. EU member states are required to transpose the CbCR directive into their domestic law by 22 June 2023.
Romanian implementation of the public CbCR directive
The first reporting year in Romania is 2023 and companies have 12 months from the end of a financial year to publish the report that relates to that particular year. If the financial year differs from the calendar year, the first reporting year is the first financial year that begins after 1 January 2023. The reporting requirement under Romanian legislation starts as from 1 January 2023, whereas the directive provides that the requirement should commence at the beginning of the financial year starting on or after 22 June 2024, at the latest.
As implemented in Romania, the CbCR directive applies to EU-based or headquartered multinationals with total consolidated revenue exceeding RON 3.7 billion (the approximate equivalent of EUR 750 million) in each of the two previous financial years (or unconsolidated revenue for standalone companies). If the threshold is exceeded for two consecutive financial years, the reporting obligation becomes applicable for the last reporting year for which this criterion is met.
The following entities are required to prepare and publish a CbCR:
- Ultimate parent entities;
- Standalone companies;
- Medium and large subsidiaries that are controlled by an ultimate parent company that is not governed by Romanian law; and
- Branches of entities that are not governed by the law of an EU member state.
The Romanian tax authorities will need to provide further clarification of the reporting obligation on medium and large subsidiaries because the legislative language can be interpreted as extending the reporting obligation to all subsidiaries with a foreign ultimate parent company (including parent companies in other EU member states).
The CbCR must contain information on all activities of the ultimate parent company and all affiliated entities consolidated in the statements of the relevant financial years and must be presented using a common template and electronic self-reading reporting format.
The CbCR report and statement must be made publicly accessible (in Romanian and free of charge) no later than 12 months after the balance sheet date of the financial year for which the report is prepared. The documents must be posted for five years on the website of:
- The actual entities when dealing with ultimate parent company and standalone companies;
- The subsidiary or that of an affiliated company; or
- The branch or the entity that opened the branch, or an affiliated company.
As per the terms of the CbCR directive, an exemption from the website publishing requirement is available if the report is made accessible in a relevant business register, with proper online disclosure of that fact on the company/branch website.
The allocation of responsibility remains unchanged from the directive, i.e., the members of the administrative, management and supervisory bodies of the ultimate parent or standalone company, or that of the subsidiary, and the personnel in charge of disclosure formalities for the branch, respectively, have joint responsibility for ensuring the proper preparation of the CbCR. Disclosure of commercially sensitive information, i.e., information that would be seriously prejudicial to the relevant companies’ commercial positions, may be omitted for up to five years.
Financial institutions governed by the provisions of the National Bank and the Financial Supervisory Authority are subject to separate legislation, but the same public CbCR provisions apply to these financial institutions.
Alin Irimia
George Bidilică-Banu
BDO in Romania
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