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Tax alert 5 - Operation „Iceberg” – a new challenge for multinational companies operating in Romania

In this issue: Operation „Iceberg” – a new challenge for multinational companies operating in Romania


Following the controls performed by the General Antifraud Directorate (“DGAF”) starting with the first days of 2019, which focused primarily on verifying the transfer pricing documentation of large taxpayers operating especially in the retail sector, on January 24th, 2019, the National Agency for Fiscal Administration (“NAFA”) officially communicated its intention to initiate a series of tax audits with regard to large taxpayers, under the name “Operation <<Iceberg>>”.

Although concise, the document suggestively announces tax audits concerning the largest companies operating in Romania, aimed at “combatting profit shifting, verifying the way in which large companies perform intra-group transactions and dismantling transactional chains organized for the purpose of evading tax obligations by identifying and instrumenting tax fraud phenomena with significant negative implications on the state budget”.

NAFA’s communication confirms the suspicions generated by the aggressive approach of DGAF in this month’s unannounced audits, where, surprisingly, antifraud inspectors requested large taxpayers, for the first time, to present their transfer pricing documentation.

Aside from the technical issues surrounding the antifraud inspectors’ entitlement to request such documents in the context of an unannounced audit, DGAF’s approach highlighted NAFA’s growing appetite for combatting risks generated by “profit shifting”, as well as its predilection, fully manifested throughout 2018 as well, to perform significant transfer pricing adjustments within tax audits.

What is, however, of great concern, is the message this document conveys, by expressly indicating as a primary objective NAFA’s intention to dismantle “transactional chains organized for the purpose of evading tax obligations by identifying and instrumenting tax fraud phenomena […].” Since the exclusive recipients of this document appear to be the multinational companies operating in Romania, this message should be treated with the utmost seriousness. This conclusion should be even more so strengthened by the fact that the document also conveys the idea of criminal risks associated with potential non-compliance with Romanian legislation.

Thus, taking all precautionary measures so as to prevent any suspicions with regard to the reality and substance of transactions performed by large taxpayers becomes a matter of absolute necessity. Additionally, given NAFA’s explicit intention to verify intra-group transactions, it is essential to ensure full compliance with transfer pricing regulations and, why not, to perform voluntary adjustments where such risks may be identified.

In the context generated by today’s NAFA communication, “prophylaxis” is even more so important, as non-compliance with transfer pricing regulations usually translates into significant additional tax liabilities for the taxpayer. Taking also into account tax accessories, and the non-declaring penalty of 0.08% per day, in particular, avoiding transfer pricing adjustments performed by tax inspectors automatically reduces the exposure on tax accessories with at least two-thirds and, why not, may even reduce other risks as well.

Therefore, it is to be expected that in the following period we shall witness a significant increase in the controls performed by both DGAF, and other structures of NAFA. It is our view that this period should be used for taking all necessary measures to prevent the potential risks that may arise in a future tax audit.


Prepared by:

Alex Milcev – Partner, Tax & Law Leader Romania

Adrian Rus – Partner, Transfer Pricing

Emanuel Băncilă – Partner, Tax Policy and Controversy

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