World Wide Tax News Issue 54 - March 2020

Transposal of EU Directives on reporting of cross-border arrangements and hybrid mismatches in Romania

Reporting of cross-border arrangements - EU Directive 2018/822 – CAD 6

The provisions of EU Directive 2018/822 – CAD 6 are transposed into Romanian legislation through Ordinance No. 5/2020, by introducing an obligation for intermediaries to report to the fiscal authorities information regarding cross-border arrangements that could be used to obtain tax advantages.

The cross-border arrangements that are subject to reporting are arrangements between entities from EU Member States, or between entities from EU Member States and entities from third countries, which meet certain conditions and provide certain distinctive signs.

The persons to whom the declaratory obligation applies are either intermediaries (professionals from different fields such as tax consultants, lawyers, accounting experts, financial consultants, etc.), or the relevant taxpayers within 30 days of the date on which any of the following events first occurs.

The new reporting requirements will enter into force from 1 July 2020; however, there is an obligation to provide information for affected transactions carried out between 25 June 2018 and 1 of July 2020, until 31 August 2020. The form used for reporting is yet to be approved.

Hybrid mismatches - EU Directive 2017/952 – ATAD II

The provisions of EU Directive 2017/952 – ATAD II are transposed into Romanian legislation through Ordinance No. 6/2020 that establishes the rules applicable to hybrid mismatches.

Hybrid mismatches are a consequence of differences in the legal definition of payments or the tax residence of entities, and differences arise when the legal systems of two jurisdictions interact. These treatments often lead to a double deduction or a deduction of income in one state without including it in the tax base in the other state.

Thus, in the case hybrid mismatches that result in a double deduction, the deduction is granted only in the Member State in which the payment originates; where the hybrid mismatches result in a deduction without inclusion on the basis of taxable amount of another Member State, the Member State of the payer will refuse to allow deductibility of that payment.

The provisions of Ordinance No. 6/2020 entered into force from 3 February 2020.

Dan Bărăscu
dan.b[email protected]

Vlad Mădăras
[email protected]

Andreea Munteanu Soroiu
[email protected]