Fiscal revolution BEPS: companies must get ready for major changes to international tax rules

According to Badin, the measures and recommendations from the BEPS Action Plan will be implemented through changes in domestic legislation, the OECD’s Model Tax Convention and consequently bilateral agreements concluded between states as well as OECD Transfer Pricing Guidelines.

“Moreover, the OECD’s initiative aims to develop an innovative fiscal instrument in which Romania is also interested in order to implement the new measures and recommendations proposed by the OECD”, added Badin.

Monica Todose – Director of the Direction for Transfer Pricing and Advance Rulings at the National Agency for Fiscal Administration (ANAF) stated that the Romanian tax authorities are interested in OECD’s approach towards BEPS and follow the EU’s position on the proposed action plan against BEPS.

“Before implementing any measures proposed by the OECD Action Plan against BEPS, Romania is waiting for the EU’s position on this matter in order to be in accordance with the member states’ approach towards the proposed recommendations and not to have an unilateral approach”, stated Todose.

One of the significant measures proposed within the BEPS Action Plan, and which is to be implemented in Romania as well, refers to transfer pricing documentation requirements.

“Therefore, among the existing documentation requirements, the new recommendations made by OECD include additional reporting requirements with respect to the allocation of income and economic activities among group members, as well as the allocation of taxes paid in each of the jurisdictions in which the group is active (country by country reporting),” said Ciprian Gavriliu, Director within the Transfer Pricing Department of Deloitte Romania.

Following the implementation of Action 13 at the international level, the Romanian tax authorities will benefit from the information collected from other states’ authorities that will be used in risk assessments carried out by Romanian authorities in order to establish the taxpayers that will be subject to tax audits.

“Through the BEPS Action Plan, the tax authorities are provided with an entire guide with respect to the aspects that should be followed within a tax audit”, stated Iwona Georgijew - Deloitte's Regional Transfer Pricing Leader for Central and Eastern Europe and member of the European Union Joint Transfer Pricing Forum.

Deloitte’s representatives noted that the new rulings on fiscal transparency and exchange of information will also impact the companies that are decent taxpayers and pay their “fair share of tax” in various jurisdictions and do not apply aggressive planning structures or do not have the intention to shift profits to low tax jurisdictions.

“As a result of the new changes, transfer pricing audits around the world will certainly increase”, Georgijew added.

Daniel Petre – Director within the Direct Taxes Department of Deloitte Romania, said “the new rules implemented as a resort of the Action Plan against BEPS may lead to restructuring of the activities performed by the multinational companies, including in Romania”.

Ana Petrescu – Manager within the Direct Taxes Department of Deloitte Romania, added that: “taxpayers will most likely apply new deductibility rules on financing costs incurred, taking into account group position and allocation of interest expenses among the group, based on the economic activity performed by each company”.

Albert Baker – Deloitte's Global Leader on Tax Policy and an active participant in the OECD’s discussions regarding BEPS, recommends that the Romanian companies react in a timely manner to the measures proposed by the OECD Action Plan against BEPS and to benefit from the transition period in order to be able to identify the best way to respond to the proposed changes in legislation.

“BEPS - Tax rEvolution” conference was held by Deloitte Romania’s specialists together with Deloitte experts in the field of international taxation in countries such as Canada and Poland and ANAF’s representative. The event agenda included subjects such as fiscal transparency and exchange of information, new transfer pricing documentation requirements, the limitation of the deductibility of interest expenses as well as new fiscal changes with respect to permanent establishments.