Tax alert – Transfer pricing

Government Decision no. 387/2018 for the approval of the Multilateral competent authority agreement regarding the exchange of country-by-country reports, signed in Bucharest on 19 December 2017

The Government Decision no. 387/2018 published in the Official Gazette no. 507/2018 approves the Multilateral Competent Authority Agreement regarding the exchange of country-by-country (CbC) reports, signed in Bucharest on 19 December 2017 (“MCAA”). This has been issued based on the Convention on Mutual Administrative Assistance in Tax Matters (including the amendments via the Protocol) (“the Convention”) and covers jurisdictions that are parties/territories covered under the Convention.

Objectives of the MCAA

The MCAA has been signed with the objective to increase the degree of international tax transparency and improve access of their respective tax authorities to information regarding the global allocation of the income, the taxes paid, and certain indicators on the location of economic activity among tax jurisdictions in which multinational enterprise groups operate, with a view to:

  • assess high-level transfer pricing risks;
  • assess base erosion and profit shifting related risks;
  • perform economic and statistical analysis, where possible.

The scope of the MCAA: the automatic exchange of CbC Reports

The MCAA sets the rules and conditions according to which the competent authorities annually exchange on an automatic basis CbC Reports (received from reporting entities resident for tax purposes in own jurisdictions) with all such other competent authorities of jurisdictions (i) with respect to which the MCAA is in effect and (ii) in which one or more constituent entities of the multinational enterprises group of the reporting entity are either resident for tax purposes, or are subject to tax with respect to the business carried out with a permanent character. By exception, jurisdictions that have expressed their option to be considered non-reciprocal jurisdictions transmit but do not receive CbC Reports based on the MCAA.

Validity: activation of bilateral automatic exchange relationships based on each jurisdiction notification

The competent authority in Romania becomes signatory of the MCAA as of 19 December 2017. Subsequently, the effective exchange of information based on the MCAA shall take place on a bilateral basis between the competent authorities, according to the individual notifications submitted by the latter to the Coordinating Body Secretariat within the OECD.

The notification has to be submitted by the competent authority upon signing the MCAA or a or as soon as possible thereafter to specify the following:

  • Confirmation on the existence of laws to require CbC reporting;
  • Option of the jurisdiction as regards its inclusion on the list of non-reciprocal jurisdictions;
  • Methods for electronic data transmission of CbC Reports;
  • Confirmation on the existence of the legal framework and infrastructure to ensure confidentiality, data safeguards standards and appropriate use of the information; and
  • List of the jurisdictions with respect to which the MCAA will be in effect.

The MCAA shall thus come into effect between the competent authority in Romania and other jurisdiction on the later date between:

  • The date on which the second of the two competent authorities has provided complete notification that includes the jurisdiction of the other competent authority, and
  • The date on which the Convention has entered into force and is in effect for both jurisdictions

The Coordinating Body Secretariat within the OECD publishes on the OECD website lists regarding the competent authorities which signed the MCAA and respectively the competent authorities between which the MCAA is in effect.

EY is able to provide support on any specific aspects related to the above.

 

For additional information, please contact:

Alex Milcev, Partner – Head of Tax & Legal

Email: office@ro.ey.com



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