Deloitte Romania and Reff & Associates obtained a final favorable solution at the High Court of Cassation and Justice which binds the tax authority to motivate applying a transfer pricing method different from the one chosen by the taxpayer

A multidisciplinary team, made of lawyers from Reff & Associates | Deloitte Legal and tax consultants from Deloitte Romania, has obtained a final favorable decision from the High Court of Cassation and Justice (HCCJ) by which the tax authority is bound to motivate the application of a transfer pricing method different from the one chosen by the taxpayer and, by default, the new analysis approach. The solution, obtained after more than five years, confirms that tax authorities must fully justify the reasons why a transfer pricing method has been applied and analyze the circumstances in which the company found itself at the time of the elaboration of the transfer pricing file, in order to establish the most appropriate approach for the transfer pricing analysis.

Through the solution obtained by the team of specialists from Reff & Associates | Deloitte Legal and Deloitte Romania, the HCCJ confirmed the nullity of the appeal filed by the tax authorities, given that, through the appeal, the latter did not submit specific illegality arguments regarding the decision issued by the first court, but only repeated the aspects already presented through the statement of defense submitted in the first tier of jurisdiction. Subsequently, the taxpayer recovered the amounts unlawfully imposed by the tax authorities, as well as the legal expenses.

The litigation team that represented one of the largest international companies operating in the field of consumer goods in this project was coordinated by Luiza Ionescu-Donoiu, Senior Managing Associate, and by Bogdan Marculet, Senior Managing Associate, with the contribution of Ivona Cristea, Senior Associate, Reff & Associates | Deloitte Legal, while Deloitte Romania’s tax practice advised on transfer pricing, as well as during the tax inspection, through the team led by Bogdan Barbu, Tax Partner.

“We are very pleased both by the solution issued in the first tier of jurisdiction, which substantially settled this case in the light of both the provisions set out by the Organization for Economic Co-operation and Development Guide and by the national legislation on transfer pricing, and by the procedural resolution offered by the HCCJ. Thus, the High Court confirms the approach of the courts of law to sanction the tax authorities that promote appeals without presenting specific grounds for the illegality of the judgments rendered in the first tier of jurisdiction, but only by repeating the arguments of the challenged administrative deeds," stated Luiza Ionescu-Donoiu, Senior Managing Associate at Reff & Associates | Deloitte Legal.

"This approach of the tax authorities is a common one and we are constantly trying to correct it in the administrative phase. With the help of this particular solution and others similar, I hope that we will be able to discourage it in the future, with the aim of correctly applying the principles of market prices," added Bogdan Barbu, Tax Partner, Deloitte Romania.

Reff & Associates | Deloitte Legal’s litigation practice, which consists of over 20 lawyers, covers all types of business disputes, from fiscal, to commercial and administrative litigation.

Deloitte provides worldwide audit, consulting, legal, financial advisory, risk advisory, tax and related services to public and private clients spanning multiple industries. Deloitte serves four out of five Fortune Global 500 companies through a globally connected network of member firms in more than 150 countries and territories, bringing world-class capabilities, insights, and high-quality service to address clients' most complex business challenges. Deloitte's goal is to make an impact that matters through its more than 345,000 professionals.

Deloitte Romania is one of the leading professional services organizations in the country providing, in cooperation with Reff & Associates | Deloitte Legal, services in audit, tax, legal, consulting, financial advisory, risk advisory, business processes as well as technology services and other related services, through over 2,600 professionals.