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Romania

27 May 2021

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Romania Publishes Order for the Regulation of Certain Aspects Regarding Tax Residence of Foreign Legal Entities

Romania has published Order No. 577 of 17 May 2021 for the regulation of certain aspects regarding tax residence of foreign legal entities in Romania. This includes two prescribed forms:

  • Questionnaire for establishing the tax residence of a foreign legal entity with their place of effective management in Romania (annex no. 1); and
  • Notification regarding the fulfillment of the residence conditions according to the provisions of points 18 and 37 of Article 7 of the Fiscal Code by a foreign legal entity (annex no. 2).

As previously reported, point 18 was amended with effect from 1 January 2021 to include a revised definition of place of effective management, which means the place where, unless otherwise proven, a foreign legal entity carries out operations corresponding to real and substantive economic purposes and where at least one of the following conditions is met:

  • The economic and strategic decisions necessary for the management of the activity of the foreign legal entity as a whole are taken in Romania by the executive directors/members of the board of directors; or
  • At least 50% of the executive directors/members of the board of directors of the foreign legal entity are resident (in Romania).

Point 37, which was also amended with effect from 1 January 2021, includes a revised definition of "resident", which means any Romanian legal entity, any foreign legal entity having their place of effective management in Romania, any legal entity with its registered office in Romania, established according to European legislation, or any resident natural person. Further, point 37 provides that a resident has full tax liability in Romania, being a taxpayer subject to taxation in Romania on worldwide income obtained from any source, both in Romania and outside Romania, according to the provisions of the Fiscal Code and the in-force tax treaties concluded by Romania.

Order No. 577 of 17 May 2021 provides that the questionnaire form in annex no. 1 is to be submitted along with specified documentation to the registry of the central tax authority, with the submission made through remote electronic means. The questionnaire forms and documentation will then be analyzed, and the central tax authority will notify the foreign legal entity, within 30 days of the form's submission, on whether or not the conditions for residence based on place of effective management are met. The notification is made using the form in annex no. 2, which will be communicated in triplicate by the central tax authority, with a copy sent to the foreign legal entity, a copy archived at the central tax authority that issued the notification, and a copy sent to the central tax authority where the foreign legal entity with the place of effective management in Romania is fiscally registered.

Where the residence conditions are met, the foreign entity will have 30 days from the date of the notification to register with the central tax authority and will be considered resident in Romania according to the place of exercising effective management from the date of registration. Where circumstances change, a revised questionnaire form may be submitted to change residence status. Foreign legal entities registered with their place of effective management in Romania until 31 December 2020 and in the period between 1 January 2021 and the date of entry into force of the order are required to submit the new questionnaire form and documentation by 30 June 2021.

Order No. 577 was published on 19 May 2021 and entered into force on that date.

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