Ordinance 8/2013 establish the terms and conditions in which the tax authorities are to determine, when establishing the amount of a tax or duty, which transactionmay be disregarded as one that has no economic purpose or can reclassify the form of a transaction so that it reflectsthe economic substance of that particular transaction.
Where transactions or series of transactions are classified as artificial, they will not be considered part of the scope of the avoidance of double taxation conventions. An artificial transaction isthe transaction or series of transactions that have no economic content that can‘tnormallybe used within ordinary business practices, their main purpose being to avoid taxation or to obtain tax advantagesthatotherwise could not be granted.
The new Ordinance 8/2013 emitted by the Romanian authorities lists and sets the new revenues that shall be considered as wholly obtained in Romania, whether they’re received in Romania or abroad. These are: earnings from services performed in Romania and outside Romania if the services are one of the following: management services, consultancy in any field, marketing, technical assistance, research and design in any field of advertising and publicity in any form in which they are made, and the services provided by lawyers, engineers, architects, notaries, accountants, auditors;it isn’t taxable income in Romania international transport revenues and services that are accessories to that type of transport.
Ordinance 8/2013 regulates the measures regarding tax losses registered until the 30th of June 2013 by the permanent offices belonging to the same foreign entity, namely the recovery of losses depending on the period in which they were registered.
In terms of international tax issues, namely issues related to the income of a permanent office of a foreign legal person, Ordinance 8/2013 stipulates that in case the foreign legal entity operates in Romania through a permanent office, this permanent office is designated to fulfill the obligations of foreign legal person in Romania.
The ordinance also 8/2013 regulates the situation where the taxable profits of the foreign legal entity come from activities of multiple offices in Romania. Thus, starting from 1 July 2013, the foreign legal person that carries on its business through multiple permanent offices in Romania is required to establish one of these locations as designated permanent office for the fulfillment of its obligations.
The permanent office set to accumulate the income and expenses of all the other offices belonging to the same foreign entity. It calculates declares and pays all the obligations under the income and expenses of all the other offices belonging to the same foreign entity.
Ordinance 8/2013 establishes a series of changes when it comes to withholding tax from income obtained from Romania, regardless if revenues are received in Romania or abroad.
The tax payable is thus calculated by applying a rate of 50% for incomes provided in art. 115 para. (1). a)-g), k) and l) - on dividends from a resident,interests from a resident , interests from a non-resident that has a permanent establishment in Romania if the interests is an expense of the permanent office/ the office permanently appointed, to resident fees, royalties from a non-resident that has a permanent establishment in Romania, where the fee is an expense of the permanent office / permanent office appointed a resident fees, commissions from a resident who has a permanent establishment in Romania, where the commission is an expense of the permanent establishment / permanent establishment designated if revenues are paid into a state with which Romania has no signed treaty under which to carry out the exchange of information. These provisions apply only when the kind of income of mentioned above is paid as a result of transactions classified as artificial as defined above, in this report legal.
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