Following the adoption of regulations allowing profit tax consolidation in late 2020, the Romanian tax authorities issued Order 1191/2021 approving the instructions for implementing and managing Profit Tax Groups (“PTGs”) on 6 August 2021.
Of the most important items in these instructions, we note the following:
1) The option to set up a PTG should be applied for electronically with the competent tax authorities by the designated leader of the PTG, by means of a standard application form D173, signed by the legal representatives of all PTG members. The application should be submitted at least 60 days before the beginning of the period for which the tax consolidation is requested. Along with the application, the members should submit trade registry excerpts and/or any other supporting documents showing that the 75% affiliation condition is met.
2) The application should be processed by the tax authorities within 45 days of submission.
3) The tax authorities verify whether all conditions of the law are met, i.e. all members have the same fiscal year, all members are registered as profit tax payers and apply the same payment system, none of the members belong to other PTGs, members are not undergoing dissolution or liquidation, and they do not operate night bars, night clubs, discos or casinos.
4) If all conditions are met, the tax authorities issue a decision approving the implementation of the PTG. However, if any of the aforementioned conditions are not met, the tax authorities will reject the application, but not before hearing the taxpayer’s position, in accordance with the existing procedural rules.
5) Once the PTG is active, the obligation to submit profit tax returns is deactivated in the fiscal vector of each member of the group, except for the designated leader of the PTG.
6) The PTG leader has the following obligations, among others:
- To submit written requests for every change in the structure of the PTG, e.g. the entry of a new member, the exit of an existing member, the extension of the 5-year minimum duration of the PTG, the voluntary dissolution of the PTG, etc.;
- To submit the quarterly and annual consolidated profit tax returns for the PTG and all the profit tax returns of the members.
7) If the membership conditions for the tax group are no longer met by a member of the PTG, before expiry of the minimum period of 5 years the latter must calculate its corporate income tax individually, starting with the quarter following that in which at least one of the PTG conditions is no longer met. For the period in which the respective member was part of the PTG, said member recalculates its profit tax based on its individual tax results. Late payment interest and penalties may apply. The member leaving the group is required to declare and pay profit tax.
The PTG leader also recalculates the profit tax owed by the group for the period during which the exiting member had been part of said PTG, and is required to submit the appropriate rectifying tax returns. In this case also, late payment interest and penalties may apply.
The member leaving the group in the above situations is audited by the tax authority competent to carry out tax inspections.
By Theodor Artenie, Tax Advisor, Noerr