Country-by-country (CbC) report under the scrutiny of international and local authorities
General context
The Country-by-Country report is part of an international initiative, whose purpose is to promote fiscal transparency at global level and to support fiscal administrations in combating the taxable base erosion and profit shifting practices (BEPS project – Base Erosion and Profit Shifting).
This initiative involves specific reporting and notification obligations for entities which are part of large multinational groups (with total consolidated revenues, equal or bigger than 750 million EUR), as well as automatic exchange of information between fiscal authorities regarding the information from these reports.
Romania has transposed since 2017 the provision or the EU directive 2016/881 on the automatic exchange of information regarding CbC. The obligation to report generally applies to entities from Romania which are the final Mother Company of a large group (as defined above), but also entities from Romania which are only members of a such group for specific cases in which the information does not reach the Romanian fiscal authorities through the exchange information. Moreover, the entities from Romania which are not the final mother company of a large group have the obligation to notify National Agency for Fiscal Administration (“NAFA”) the identity and fiscal residence of the entity which submits the report at group level.
Observations and good practices at the international level
At international level, the Organization for Economic Co-operation and Development (OECD) has published a series of guides and manuals, in order to assist and offer greater certainty to both tax administrations and multinational groups regarding the implementation and operation of CbC reporting.
In a recently published material, OECD has compiled a series of frequently encountered errors in CbC reports (for example: missing or incorrectly filled-in tax identification codes, use of unauthorized symbols, inconsistency between information from different sections of the report, etc.).
Reiterating the importance of these reports in the global context, the OECD encourages multinational groups to analyze the list of errors in order to make sure that these are not perpetuated and, at the same time, encourages tax administrations to collaborate with multinational groups in correcting these errors.
From the moment the EU Directive 2016/881 was transposed into local legislation in 2017 until recently, the tax authorities in Romania did not seem to pay increased attention to CbC reporting.
However, in the NAFA Performance report for the year 2024 it is shown that the NAFA control activity has started to be directed towards the verification to the CbC report obligation. Thus, actions were taken transmitting compliance notifications (i.e. 316 companies were notified, feedback from taxpayers has been collected and analysed, hearing were organized, etc.)
The need for pro-active compliance
Although recent actions taken by the authorities have aimed to increase taxpayer compliance and improve the quality of data subject to information exchange, we recall that failure to comply with CbC reporting requirements may attract considerable financial sanctions.
Thus, failure to submit the CbC report is sanctioned with a fine between RON 70.000 and RON 100.000, and late submission of the report or submission of incorrect / incomplete information is sanctioned with a fine between RON 30.000 and RON 50.000.
In this context, it is essential for the entities from Romania, members of multinational groups, to rigorously verify their specific case and ensure that they fulfil their reporting obligations.
Nowium team stands close by its clients with consultancy services and assistance regarding the CbC reporting, whether we are discussing about the identification of potential notification/reporting obligations or the preparation and submission of CbC notifications/reports.
Article written by Andreea Cosma, Senior – Nowium Transfer Pricing
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