Understanding the concept of Permanent Establishment, or Permanent Headquarters, or Permanent Office (=ro. Sediu Permanent) and its implications for foreign businesses is crucial for tax compliance and operational efficiency in Romania.
A Permanent Establishment arises when a foreign company has a fixed place of business in Romania, leading to tax obligations. This includes offices, factories, or even construction sites operating for more than six months.
Why is this important? Identifying if your activities constitute a Permanent Establishment is key to understanding your tax liabilities. If recognised as such, your profits attributed to the Romanian entity will be subject to corporate income tax here.
But it's not just about tax. Recognising your Permanent Establishment status also affects how you manage your operations, reporting, and compliance with local regulations.
The importance of strategic planning and proper advice in this area is paramount. Missteps can lead to hefty penalties or double taxation.
In conclusion, understanding and correctly managing your Permanent Establishment in Romania is not just about compliance; it is a strategic move that can significantly impact your business.
Let's look at what the Romanian Tax Code has to say:
Art. 8: Definition of permanent establishment
(1)In the sense of this code, the permanent establishment is a place through which the activity of a non-resident is fully or partially carried out, either directly or through a dependent agent. When defining the permanent establishment, the comments from art. 5 "Permanent establishments" from the model of the double taxation avoidance convention of the Organization for Economic Cooperation and Development are taken into account.
(2)A permanent establishment includes a place of management, a branch, an office, a factory, a shop, a workshop, as well as a mine, an oil or gas well, a quarry or other places of extraction of natural resources, as well as the place where an activity continues to be carried out with the assets and liabilities of a Romanian legal entity that enters a reorganization process provided for in art. 33.
(3)A permanent establishment implies a construction site, a construction project, an assembly or assembly or related supervisory activities, only if the construction site, project or activities last more than 6 months.
(4)As an exception to the provisions of para. (1)-(3), a permanent establishment does not imply the following:
a)using an installation only for the purpose of storing or displaying products or goods belonging to the non-resident;
b)maintaining a stock of products or goods belonging to a non-resident only for the purpose of being stored or displayed;
c)maintaining a stock of products or goods belonging to a non-resident only for the purpose of being processed by another person;
d)the sale of products or goods belonging to a non-resident, which were exhibited in non-permanent or occasional exhibitions or fairs, if the products or goods are sold no later than one month after the end of the fair or exhibition;
e)maintaining a fixed place of business only for the purpose of purchasing products or goods or gathering information for a non-resident;
f)keeping a fixed place of activity only for the purpose of carrying out preparatory or auxiliary activities by a non-resident;
g)keeping a fixed place of activity only for a combination of the activities provided for in letter a)-f), provided that the entire activity carried out in the fixed place is of a preparatory or auxiliary nature.
(5)As an exception to the provisions of para. (1) and (2), a non-resident is considered to have a permanent establishment in Romania, with regard to the activities that a person, other than an agent with independent status, undertakes on behalf of the non-resident, if the person acts in Romania in the name of the non-resident and if one of the following conditions is met:
a)the person is authorized and exercises in Romania the authority to conclude contracts on behalf of the non-resident, except for the cases in which the respective activities are limited to those provided for in paragraph (4) lit. a)-f);
b)the person maintains in Romania a stock of products or goods from which he delivers products or goods on behalf of the non-resident.
(6)A non-resident is not considered to have a permanent establishment in Romania if he only carries out activity in Romania through a broker, agent, general commission agent or an intermediate agent having an independent status, if this activity is the usual activity of the agent, according to the description in the constitutive documents. If the activities of such an agent are carried out entirely or almost entirely on behalf of the non-resident, and in the commercial and financial relations between the non-resident and the agent there are conditions different from those that would exist between independent persons, the agent is not considered to be an agent with independent status.
(7)A non-resident is not considered to have a permanent establishment in Romania only if he controls or is controlled by a resident or by a person carrying out an activity in Romania through a permanent establishment or otherwise.
(8)Romanian legal entities, resident natural persons, as well as foreign legal entities carrying out activity in Romania through a permanent establishment/designated permanent establishment, beneficiaries of services of the nature of construction work activities, assembly, supervision, consultancy, technical assistance and any other activities, performed by foreign legal entities or natural persons not resident on the territory of Romania, have the obligation to register the contracts concluded with these partners at the competent fiscal bodies, according to the procedure established by order of the president of the A.N.A.F. Contracts concluded for activities carried out outside the territory of Romania are not subject to registration according to these provisions. For the classification as permanent establishment of a construction site or a construction, assembly or assembly project or the supervision activities related to these and other similar activities, the date of the start of the activity from the concluded contracts or any other information will be taken into account which proves the start of the activity. The periods consumed for the realization of related contracts that are directly related to the first contract that was executed are added to the period consumed for the realization of the basic contract.
(on October 27, 2016, Art. 8, paragraph (8) of Title I, Chapter III was related to Order 2994/2016 )
(9)In the sense of this code, the permanent establishment of a natural person is considered to be the fixed base.
The Metodological Norms for the application of the Tax Code offer several examples:
Point 3. from title I, chapter I, section 3 (Methodological Norms from 2016) on 2016-01-13 for Art. 8 from title I, chapter III
3. _
(1) In applying the provisions of art. 8 of the Fiscal Code, the phrase "place through which the activity is fully or partially carried out" covers any kind of buildings, equipment or installations used to carry out the activity of the non-resident, regardless of whether or not they are used exclusively for this purpose. A place of activity also exists if the non-resident only has a space, and no buildings are needed to carry out his activity. It is not important whether the buildings, equipment or installations are owned, rented or otherwise available to the non-resident. A place of activity can be constituted by a stall in the market or it can be located in the building of another company, when a non-resident permanently has the building or parts of it at his disposal.
(2) It is sufficient for a non-resident to have at his disposal a space used for economic activities in order for it to constitute a place of activity, no document being necessary to refer to the right to use that space.
(3) Although no document is necessary to refer to the right to use that space, for that place to constitute a permanent establishment, the mere presence of a non-resident in a certain location does not mean that that location is located at the disposition of that non-resident. This principle is illustrated by the following situations in which representatives of a non-resident are present on the premises of another company:
a) A seller who regularly visits a main customer to receive orders and meets with the purchasing manager or the person holding a position similar in his office. In this case, the client's building is not at the disposal of the company for which the seller works and does not constitute a fixed place of activity through which the activities of the non-resident are carried out. However, depending on the existing situation, art. 8 para. (5) of the Fiscal Code to consider that there is a permanent establishment.
b) An employee of a company who is allowed, for a long period of time, to use an office in the premises of another company in order to ensure compliance by the latter company with the obligations assumed by the contract concluded with the first company. In this case, the employee carries out activities related to the object of the first company, and the office available to him in the headquarters of the other company will constitute a permanent establishment of his employer, if the office is made available to him for a period of time long enough for to constitute a "place of activity" and if the activities performed there do not fall into the categories of activities specified in art. 8 para. (4) of the Fiscal Code.
c) A road transport company that uses daily, for a limited period, a delivery platform from its customer's warehouse, to deliver goods purchased by that customer. In this case, it is not considered that the road transport company has that place at its disposal to be considered a permanent establishment.
d) A painter who, for 2 years, spends 3 days a week in an office building belonging to his main client. In this case, the presence of the painter in that office building where he carries out his activity, respectively paints, constitutes a permanent establishment of the painter.
(4) The words "through which" must be applied in all situations where the economic activities are carried out in a specific location that is available to the company for this purpose. Thus, it will be considered that a company hired to pave a road carries out its activity "through" the location where the activity takes place.
(5) The place of activity must be "fixed", so that there is a connection between the place of activity and a certain geographical point. The period of time during which a company of a Contracting State operates in the other Contracting State is not important if it does not do so in a distinct place, but it does not mean that the equipment constituting the place of business must actually be fixed on the ground. It is enough that the equipment remains in a certain place. If there are several places of activity and if the other conditions of the permanent establishment are met, at each of these places, the company will have several permanent establishments. It is considered that there is a single place of activity when a certain location, within which the activities are moved, can be identified as forming a unitary whole from a commercial and geographical point of view, as regards the respective activity. This principle can be illustrated by examples:
a) A mine constitutes a single place of activity, even if the activities may be moved from one location to another within that mine, because the respective mine constitutes a single geographical and commercial unit from the point of view of of the mining activity. An "office hotel" in which a consulting firm regularly leases various offices is considered to be a single place of business for that firm, because in this case the building constitutes a geographically unitary whole and the hotel is the only place of activity of that consultancy firm. A pedestrian street, an open market or a fair where a merchant sets up his stand is the sole place of activity of that merchant.
b) The fact that the activities can be carried out in a limited geographical area does not result in the consideration of that geographical area as a unique place of activity. Thus, when a painter works successively under a series of unrelated contracts for several different clients, in an office building, without a contract for painting the entire building, the building is not considered as a single place of business. However, if a painter performs, within the framework of a single contract, works in the entire building for a single client, this contract represents a single project and the building as a whole is a single place of activity for the painting works, because it constitutes a unitary whole from the point of view from a commercial and geographical point of view.
c) An area where the activities are carried out as part of a single project that constitutes a unitary whole from a commercial point of view and that does not meet the same conditions from a geographical point of view does not constitute a single place of activity. Thus, when a consultant works in different branches in different locations within a single project of professional training of bank employees, each branch is considered separately. However, if the said consultant moves from one office to another within the same branch, it will be considered that he remains in the same place of activity. The unique location of the branch falls under the condition of being geographically unitary, a situation that is missing if the consultant moves between branches located in different locations.
(6) Since the place of activity must be fixed, it is considered a permanent establishment if that place of activity has permanence. It is thus considered that there is a permanent establishment when the place of activity has been maintained for a period longer than 6 months. Thus, in the case of activities whose nature is repetitive, each period in which the place of activity is used must be analyzed in combination with the number of occasions in which the said place was used, which may span a number of years.
A place of activity can still constitute a permanent establishment, even if it exists only for a short period of time. Thus:
a) Temporary interruptions of activity do not determine the termination of the existence of the permanent establishment. When a particular place of activity is used only for short periods of time, but these uses occur regularly over long periods, the place of activity should not be considered to be of a strictly temporary nature.
b) Situations in which a place of activity is used for very short periods of time by several companies managed by the same person or associated persons.
c) When a place of activity that was initially designed to be used for a short period of time, so that it did not constitute a permanent establishment, but was maintained longer, becomes a fixed place of activity and is retroactively transformed into an establishment permanent. A place of activity can also constitute a permanent establishment from its establishment, even if it existed only for a short period of time, if it was liquidated before the term due to special situations, such as the failure of the investment.
(7) In order for a place of activity to constitute a permanent establishment, the company using it must fully or partially carry out its activities through that place of activity. The activity must not be permanent in the sense that there are no interruptions of operations, but operations must be carried out regularly.
(8) When tangible assets, such as machinery, industrial, commercial or scientific equipment, buildings, or intangible assets, such as patents, procedures and other similar properties, are rented or leased to third parties through a fixed place of business maintained by a foreign legal person in Romania, this activity will give the place of activity the character of permanent establishment. The same applies when capital is provided through a fixed place of business. If a foreign legal entity rents or leases machinery, equipment, buildings or intangible properties to a company in Romania without maintaining a fixed place of business for this lease, then the machinery, equipment, building or intangible properties leased do not constitute a permanent establishment of the lessor, provided that the object of the contract is limited to the simple rental of machinery or equipment. This is also the case when the lessor provides personnel, after installation, to operate the equipment, provided that their responsibility is limited to the operation and maintenance of the equipment under the direction, responsibility and control of the lessee. If the staff have wider responsibilities, such as participating in decisions about the work in which the equipment will be used, or if they operate, service, inspect and maintain the equipment under the lessor's responsibility and control, then the lessor's activity may go beyond simply renting the equipment and constitutes an entrepreneurial activity. In this case, it is considered that there is a permanent establishment if the criterion of permanence is met.
(9) The activity of a company is carried out mainly by the entrepreneur or by personnel in a remunerated employment relationship with the company. These personnel include employees and other persons who receive instructions from the company as dependent agents. The prerogatives of this staff in its relations with third parties are irrelevant. It is of no importance whether the dependent agent is authorized or not to conclude contracts, if he works at the fixed place of activity. A permanent establishment is also considered if the company's activity is carried out mainly with the help of automated equipment, the staff's activities being limited to the installation, operation, control and maintenance of this equipment. Therefore, the winning machines, vending machines and other similar equipment installed by a company of one state in the other state constitute a permanent establishment depending on the carrying on by the company of activities other than the initial installation of the machines. There is no permanent establishment when the company just installs the machines and then rents them to other companies. A permanent establishment exists when the company that installs the machines deals on its own with their operation and maintenance. The same applies when the machines are operated and maintained by a dependent agent of the company.
(10) A permanent establishment exists as soon as the company begins to carry out its activity through a fixed place of activity. This is the case when the company prepares the activity for which the place of activity will serve permanently. The period of time in which the fixed place of activity is established by the company should not be taken into account, provided that this activity differs substantially from the activity for which the place of activity will serve permanently. The permanent establishment will cease to exist with the abandonment of the fixed place of activity or with the termination of any activity carried out through it, respectively when all acts and measures related to the previous activities of the permanent establishment are completed, such as the completion of current transactions, maintenance and repair of machinery. However, a temporary interruption of operations cannot be regarded as a cessation of activity. If the fixed place of activity is rented to another company, it will only serve the activities of that company, not the activities of the lessor. The permanent establishment of the lessor ceases to exist, except in cases where he continues to carry out his activity on his own account through the fixed place of activity.
(11) Although a location where automatic equipment is operated by a company may constitute a permanent establishment in the country in which it is located, a distinction must be made between a computer, which can be installed in a location so that under certain conditions it can constitutes a permanent establishment, and the data and software used by that equipment or stored on it. Thus, an Internet website, which is a combination of software and electronic data, does not constitute a tangible asset, does not have a location that can constitute a "place of activity" and there is no "site, such as buildings or, in some cases, equipment or machinery" in terms of the software and data that make up the website. The server on which that website is stored and through which it is accessible is a piece of equipment that has a physical location and the physical location may constitute a "fixed place of activity" of the company that operates the server.
(12) The distinction between the website and the server on which it is stored and used is important, because the company that operates the server may be different from the company that carries out activities through the website. It is common for a website through which a company carries out activities to be hosted on the server of an internet service provider. Although the fees paid to an Internet service provider under this arrangement may be based on the size of the disk space used to store the software and data necessary for the website, under these agreements the server and its location are not at the disposal of the company, even if that company was able to determine that its website would be hosted on a specific server in a specific location. In this case, the company has no physical presence in that location, because the website is not physical. In these cases, it cannot be considered that the respective company has acquired a place of business through the website hosting arrangement. If the company carrying out activities through a website has the server at its disposal, it owns or rents the server on which the website is stored and used and operates this server, the place where the server is located constitutes a permanent establishment of the company, if the other conditions of art. 8 of the Fiscal Code are met.
(13) The computer in a certain location can constitute a permanent establishment only if it fulfills the condition of having a fixed place of activity. A server must be located in a certain place, for a certain period of time, to be considered a fixed place of business.
(14) In order to determine whether the activity of a company is fully or partially carried out through such equipment, it must be analyzed on a case-by-case basis if, thanks to this equipment, the company has facilities available where the company's activity functions are performed.
(15) When a company operates a computer at a certain location, there may be a permanent establishment, even if no employee of the company is required to be present at that location to operate the computer. The presence of personnel is not necessary to consider that a company carries out its activities partially or totally in a location, when the presence of personnel is not required to carry out activities in that location. This situation applies to electronic commerce to the same extent that it applies to other activities where the equipment operates automatically, such as in the case of automatic pumping equipment used in the exploitation of natural resources.
(16) Another aspect is related to the fact that it cannot be considered that there is a permanent establishment when the electronic commerce operations carried out by computer in a certain location in a country are limited to the preparatory or auxiliary activities described in art. 8 para. (4) of the Fiscal Code. To determine whether certain activities carried out in such a location fall under art. 8 para. (4) of the Fiscal Code, they must be analyzed on a case-by-case basis, taking into account the various functions performed by the company through the respective equipment. Preparatory or auxiliary activities include in particular:
a) providing a communication link - very similar to a telephone line - between suppliers and customers;
b) advertising for goods or services;
c) transmission of information through a mirror server for security and efficiency purposes;
d) collecting market data for the company;
e) providing information.
(17) There is a permanent establishment when these functions constitute the essential and significant part of the company's business activity or when other main activities of the company are carried out by computer, the equipment constituting a fixed place of activity of the company, as these functions exceed the activities provided for in Art. 8 para. (4) of the Fiscal Code.
(18) The main activities of a certain company depend on the nature of the business activity carried out by that company. Some Internet service providers operate their servers for the purpose of hosting websites or other applications for other companies. For these Internet service providers, the operation of servers that offer services to customers is a component of the commercial activity that is not considered a preparatory or auxiliary activity.
In the case of a company called "e-tailer" or "e-merchant" whose activity is the sale of products via the Internet and whose activity is not the operation of servers, the performance of services through a location is not sufficient to conclude that the activities carried out in that place there are more than preparatory and auxiliary activities. In such a situation, the nature of the activities carried out must be analyzed from the perspective of the activity carried out by the company. If these activities are strictly preparatory or ancillary to the activity of selling products on the Internet and the location is used to operate a server that hosts a website that is used exclusively for promotion, for presenting the product catalog or for providing information to potential customers , art. applies. 8 para. (4) of the Fiscal Code and the location will not constitute a permanent establishment. If the typical functions related to the sale are performed at that location, such as concluding the contract with the customer, processing the payment and delivering the products that are performed automatically by the equipment located at that location, these activities cannot be considered strictly preparatory or auxiliary.
(19) The provisions of art. are not applied to an internet service provider that offers the service of hosting the websites of other companies on the server. 8 para. (5) of the Fiscal Code, since internet service providers are not considered agents of the companies to which the websites belong, do not have the authority to conclude contracts on behalf of these companies and do not normally conclude such contracts, they are considered agents with independent status acting according to their usual activity, which is also highlighted by the fact that they host websites for different companies. Since the website through which a company carries out its activity is not in itself a "person", according to the definition provided in art. 7 of the Fiscal Code, art. 8 para. (5) of the Fiscal Code cannot be applied to consider that there is a permanent establishment, by virtue of the fact that the website is an agent of the company, within the meaning of that paragraph.
(20) By the phrase "any other activities" in art. 8 para. (8) from the Fiscal Code means the services provided in Romania, which generate taxable income.
(21) When a contract is not concluded in written form, the documents justifying the actual provision of services on the territory of Romania are registered: work reports, reception minutes, work reports, feasibility studies, market studies or any other appropriate documents.
The Tax Procedure Code goes into even more detail:
TITLE III: General procedural provisions
CHAPTER I: Competence of the central fiscal body
Art. 30: The material and territorial competence of the central fiscal body
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(2) In the case of the non-resident taxpayer/payer who carries out activities on the territory of Romania through one or more permanent establishments, the competence rests with the central fiscal body in whose territorial radius the permanent establishment designated according to the Fiscal Code is located.
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CHAPTER IV: Documents issued by fiscal bodies
Art. 52: The anticipated individual fiscal solution and the advance price agreement
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(2) The advance price agreement is the administrative document issued by the central fiscal body in order to resolve a request of the taxpayer/payer, regarding the establishment of the conditions and methods in which the transfer prices are to be determined, during a fixed period, in in the case of transactions made with affiliated persons, as defined in the Fiscal Code. Future transactions that are the subject of the advance price agreement are valued according to the date of submission of the application. The taxpayer/payer will be able to request a price agreement in advance and to determine the fiscal result attributable to a permanent establishment.
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TITLE IV: Tax registration
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Art. 82: Tax registration obligation
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(8) In the case of non-resident taxpayers who carry out activities on the territory of Romania through one or more permanent establishments, with the submission of the tax registration declaration, they have the obligation to indicate the permanent establishment designated according to the provisions of the Fiscal Code. In the case of fiscal registration, the fiscal registration declaration is submitted to the fiscal authority within whose jurisdiction the permanent establishment to be designated is located.
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TITLE V: Establishing fiscal claims
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CHAPTER III: Provisions regarding the fiscal declaration
Art. 101: Obligation to submit the fiscal declaration
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(6) In the case of non-resident taxpayers who carry out activities on the territory of Romania through several permanent establishments, the declaration obligation provided for in para. (5) is fulfilled through the permanent establishment designated according to the provisions of the Fiscal Code.
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TITLE X: International aspects
CHAPTER I: Administrative cooperation in the fiscal field
SECTION 1: General Provisions
Art. 286: Definitions
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14. n) anticipated tax decision with cross-border application - any agreement, communication or any other instrument or action with similar effects, including a decision issued, modified or renewed in the context of a tax control and which fulfills , cumulatively, the following conditions:
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4. refers to a cross-border transaction or to the question of whether the activities carried out by a person in another jurisdiction generate a permanent establishment or not; and
5. is taken prior to transactions or activities in another jurisdiction that have the potential to generate a permanent establishment or prior to the filing of the tax return for the period in which the transaction or series of transactions or activities took place.
Cross-border transactions may include, but are not limited to, the making of investments, the provision of goods, services, financing or the use of tangible or intangible assets and do not necessarily have to directly involve the person to whom the advance tax ruling with cross-border application is addressed ;
15. o) prior agreement regarding the transfer price - any agreement, communication or any other instrument or action with similar effects, including one issued, modified or renewed in the context of a tax audit and which fulfills, cumulatively, the following conditions;
[...] 3. establishes, prior to cross-border transactions between associated enterprises, an appropriate set of criteria for establishing transfer prices for these transactions or determines the attribution of profits to a permanent establishment;
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18. s) cross-border transaction :
1. in the sense of lit. n) - a transaction or a series of transactions in which:
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(iii) one of the parties to the transaction or series of transactions carries out its activity in another jurisdiction through a permanent establishment and the transaction or series of transactions constitutes part or all of the activity at the permanent establishment. A cross-border transaction or series of transactions also includes actions taken by a person in relation to commercial activities in another jurisdiction that the person carries on through a permanent establishment;
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19. ş) enterprise - within the meaning of letter o)-s), any form of conducting a commercial activity.
20. t) cross-border arrangement - an arrangement that involves either more than one member state, or one member state and a third country, if at least one of the following conditions is met:
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3. one or more participants in the arrangement carry out an economic activity in another jurisdiction through a permanent establishment located in that jurisdiction, and the arrangement constitutes all or part of the activity of that permanent establishment;
4. one or more participants in the arrangement carry out an economic activity in another jurisdiction without having fiscal residence or without establishing a permanent establishment in that jurisdiction;
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23. v) intermediary - any person who designs, markets, organizes, makes available for implementation or manages the implementation of a cross-border arrangement that is the subject of reporting.
It also means any person who, having regard to the relevant facts and circumstances and on the basis of available information, relevant specialist knowledge and understanding necessary for the provision of such services, knows or would reasonably be expected to know that he has undertaken to provide, directly or through other persons, aid, assistance or advice with regard to the design, marketing, organization, making available for the implementation or management of the implementation of a cross-border arrangement that is the subject of the report.
Any person has the right to provide ANAF with evidence that he did not know and could not reasonably have been expected to know that he was involved in a cross-border arrangement that is the subject of reporting. For this purpose, the person in question may refer to all the relevant facts and circumstances, to the available information, as well as to his relevant specialist knowledge and understanding.
To be an intermediary, a person must meet at least one of the following additional conditions:
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2. to have a permanent establishment on the territory of Romania through which the services related to the arrangement in question can be provided;
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SECTION 2: Exchange of Information
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SUBSECTION 2: §2. Mandatory automatic exchange of information
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Art. 291/3 : The scope and conditions of the mandatory automatic exchange of information regarding the report for each individual country
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(2) The competent authority in Romania that receives the report for each individual country provided for in paragraph (1) transmits, through the automatic exchange of information and within the term established in para. (4), the country-by-country report of any other member state in which, based on the information in the country-by-country report, one or more constituent entities of the multinational enterprise group of the reporting entity have their fiscal residence or are subject to taxation for the economic activity carried out through a permanent establishment.
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Art. 291/4 : The scope and conditions of the mandatory automatic exchange of information regarding cross-border arrangements that are the subject of reporting
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(5) If the intermediary has the obligation to report information regarding a cross-border arrangement that is the subject of reporting to the competent authorities of several member states, then this information will be reported only to the competent authorities of the member state that occupies the first place in the list below:
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b) the member state in which the intermediary has a permanent establishment through which the services related to the arrangement in question are provided;
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(11) If the relevant taxpayer has the obligation to report information on the cross-border arrangement that is the subject of reporting to the competent authorities of several member states, this information is reported only to the competent authorities of the member state that ranks first in the list below :
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b) the member state where the relevant taxpayer has a permanent establishment that benefits from the arrangement in question;
c) the member state in which the relevant taxpayer obtains income or generates profits, even though he does not have his fiscal residence or a permanent establishment in a member state;
d) the member state in which the relevant taxpayer carries out an activity, even though he does not have his fiscal residence nor does he have a permanent establishment in a member state.
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APPENDIX no. 1: Reporting and fiscal due diligence PROCEDURES for the exchange of information on financial accounts
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SECTION V: Fiscal due diligence procedures regarding pre-existing entity accounts
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(D) Examination procedures for the identification of entity accounts subject to the reporting obligation. For the pre-existing entity accounts provided in subsection B, the reporting financial institution must apply the examination procedures, provided in point 1 and point 6, to determine whether the account is held by one or more entities that are covered persons reporting or by one or more entities that are passive ENFs with one or more controlling persons that are persons subject to reporting.
1. Determine whether the entity is a reportable person, as follows:
a) to examine the information kept for regulatory or customer relations purposes, including information collected in accordance with customer due diligence measures specific to the legislation for the prevention and combating of money laundering and terrorist financing, to determine whether the information indicates that the account holder the pre-existing entity is resident in a reporting jurisdiction. For this purpose, information indicating that the pre-existing entity account holder is resident in a reporting jurisdiction includes:
(i) a place of registration or incorporation in a reporting jurisdiction; or
(ii) an address in a reporting jurisdiction; or
(iii) an address of one or more fiduciaries of the trust/trust, as the case may be, in a reporting jurisdiction, to the extent that this information is available.
However, the existence of a permanent establishment, including a permanent establishment address or a branch office, in a reporting jurisdiction does not in itself indicate residency for reporting purposes.
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APPENDIX no. 3: Reporting RULES for multinational enterprise groups
SECTION I: Definitions of terms
The following terms are defined below:
1. Group means a set of enterprises related by ownership or control, so that it is either required to prepare consolidated financial statements for financial reporting purposes under the applicable accounting principles, or would be required to do so if the participations in the equity capital of any of the respective enterprises would be traded on a public stock exchange.
2. Enterprise means a form of carrying out an economic activity by a person referred to in art. 286 lit. k), with the exception of natural persons.
3. Multinational enterprise group means a group that includes two or more enterprises whose tax residence is in different jurisdictions or that includes an enterprise with tax residence in one jurisdiction but which is taxable in another jurisdiction for the activity carried out through a permanent establishment and which is not an excluded multinational enterprise group.
4. Excluded group of multinational enterprises means a group that, in the year preceding the reporting fiscal year, has a total consolidated income of less than 750,000,000 euros or an amount in lei equivalent to 750,000,000 euros, as reflected in the statements consolidated financial statements of the group for the respective previous fiscal year.
For each reporting fiscal year, the average exchange rate of January 2015 communicated by the National Bank of Romania will be used to determine the amount in lei.
The total consolidated income is determined according to the provisions of Directive 2013/34/EU of the European Parliament and of the Council of June 26, 2013 regarding annual financial statements, consolidated financial statements and related reports of certain types of enterprises, amending Directive 2006/43/EC of of the European Parliament and of the Council and repealing Directives 78/660/CEE and 83/349/CEE of the Council, transposed into national legislation.
5. Constituent entity means any of the following:
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c) a permanent establishment of any separate operational unit of a group of multinational enterprises referred to in letter a) or b), provided that the operational unit in question prepares a separate financial statement for the respective permanent establishment for the purpose of financial reporting, reporting for regulatory purposes or fiscal reporting or for internal management control purposes.
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SECTION II: General reporting requirements
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4. If the same group of multinational enterprises has more than one constituent entity with tax residence in the European Union and if one or more of the conditions established in letter b) from point 1 of this section, the group of multinational enterprises can designate one of the respective constituent entities to present the report for each country in accordance with the requirements of art. 291 3 para. (3), regarding a reporting fiscal year, within the term specified in art. 291 3 para. (1) and to notify the competent authority in Romania that the purpose of the presentation is to fulfill the reporting obligation that falls to all constituent entities of the group of multinational enterprises in question that have their tax residence in the European Union. The competent authority in Romania communicates, pursuant to art. 291 3 para. (2), the report for each individual country received by any other member state in which, based on the information in the report for each individual country, one or more constituent entities of the group of multinational enterprises of which the reporting entity is a part they have their fiscal residence, or are taxable for the economic activity carried out through a permanent establishment.
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APPENDIX no. 5: Fiscal due diligence PROCEDURE, reporting procedure and other rules for Platform Operators
This annex establishes the fiscal due diligence procedure, the reporting procedure and other rules that must be applied by the Platform Operators who have the reporting obligation to allow the competent authority in Romania to communicate, through automatic exchange, the information provided for in art. 291 5 para. (2) and (3).
This annex also establishes the rules and administrative procedures that must be in force in Romania to ensure both the effective implementation and compliance with the fiscal due diligence procedure and the reporting procedure presented below.
SECTION I: Definitions of terms
The following terms have the meaning defined in the following provisions:
SUBSECTION A: Platform operators who have the obligation to report
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4. Reporting Platform Operator means any Platform Operator, other than an Excluded Platform Operator, that is in any of the following situations:
a) has fiscal residence in Romania or another member state or, when the respective Platform Operator does not have fiscal residence in Romania or another member state, but fulfills any of the following conditions:
(i) is constituted under the legislation of Romania or another member state;
(ii) has the seat of management, including the seat of effective management, in Romania or another member state;
(iii) has a permanent establishment in Romania or another member state and is not a Qualified Platform Operator from outside the Union;
b) does not have tax residency, is not incorporated or administered in Romania or any other member state, nor does it have a permanent seat in Romania or any other member state, but facilitates the performance of a Relevant Activity by Reportable Sellers or a Relevant Activity which involves the rental of real estate located in Romania or another member state and is not a Qualified Platform Operator from outside the Union.
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SECTION II: Fiscal due diligence procedure
In order to identify the Reportable Sellers, the procedure described below is applied.
SUBSECTION A: Sellers Not Subject to Examination
To determine whether a Seller who is an Entity qualifies as an Excluded Seller in the sense described in point 4 letter a) and b) of subsection B of section I, a Platform Operator that has a reporting obligation may use publicly available information or a confirmation from the Seller that is an Entity.
To determine whether a Seller qualifies as an Excluded Seller in the sense described in point 4 letter c) and d) from subsection B of section I, a Platform Operator who has the obligation to report may use the records at his disposal.
SUBSECTION B: Collection of information about the Seller
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2. The reporting platform operator collects all of the following information for each Seller who is an Entity and who is not an Excluded Seller:
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f) the existence of any permanent establishment through which Relevant Activities are carried out in Romania or in any other member state, if the information is available, indicating each member state in which such a permanent establishment is located.
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SUBSECTION D: Determination of the Member State(s) of the European Union of residence of the Seller within the meaning of art. 291 5 of the law and of this annex
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3. If the Seller has provided information regarding the existence of a permanent establishment in Romania or in another member state, in accordance with point 2 letter f) from subsection B, a Platform Operator who has the reporting obligation considers that a Seller is also resident in Romania or in the respective member state, as stated by the Seller.
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