Government Ordinance no. 16/2023 introduced changes to the Fiscal Procedure Code:
- The provisions of Council Directive (EU) 2021/514 amending Directive 2011/16/EU for administrative cooperation and extending the automatic exchange of information in the tax field to income made through digital platforms (DAC7) have been transposed into the national legislation.
- Amendments to the amicable procedure have been introduced and the scope of its application extended.
- Changes have been introduced regarding: (i) financial institutions’ reporting obligations and (ii) the exchange of information.
We present below the most important changes brought by OG no. 16/2023 to the Fiscal Procedure Code:
1. The Ordinance transposes reporting rules introduced by Council Directive (EU) 2021/514 amending Directive 2011/16/EU (DAC7)
- Platform operators in Member States and third countries are required to collect information on reportable sellers (e.g. name, address, VAT code, VAT number, if the seller has a permanent establishment) and report it to the tax authorities on an annual basis.
- Platform operators with DAC7 reporting obligations must register with the competent authority in Romania or any other member state to comply with the fiscal due diligence and reporting procedures.
- “Platform” is defined as a website or part of a website and applications, including mobile applications, that allow sellers to connect with other users to carry out a relevant activity.
- “Relevant activity” means an activity carried out in exchange for consideration and consists of any of the following:
- Rental of real estate, including residential and commercial, as well as any other real estate and parking spaces;
- Provision of services;
- Sale of goods;
- Renting means of transport.
- “Platform operator” means a company that makes all or part of the platform available to sellers under contracts.
- Reporting platform operator means any platform operator that:
- has its tax residence, place of incorporation, place of effective management or a permanent establishment in the EU, or
- facilitates the carrying out of a relevant activity that is not reported in a jurisdiction that has implemented rules equivalent to DAC7 and that exchanges information with the EU.
- No information is reported for the following types of sellers:
- Government entities or entities whose shares are regularly traded on a regulated market.
- Entities for which the platform operator facilitated more than 2,000 rentals during the year (e.g. hotel chains).
- Entities for which the platform operator facilitated fewer than 30 sales of goods and for which the total value did not exceed the equivalent in RON of EUR 2,000 during the year (e.g. occasional sellers).
- A platform operator with reporting obligation has to complete the fiscal due diligence procedure by 31 December of the period reporting. The procedure includes identification of sellers subject to examination, collection and verification of information (including leased real estate), determination of tax residency of sellers. For reportable sellers already registered on the platform on 1 January 2023, the tax due diligence procedure must be completed by 31 December of the second reporting period.
- The annual reporting obligation applies for digital platform operators starting with the activity in 2023, and the first reporting deadline is 31 January 2024.
- For non-compliance with DAC7 obligations, platform operators may face a fine of RON 5,000 to RON 100,000. The tax authorities can also order providers of electronic communications networks or services to cease providing access to the website or application of platform operators with reporting obligations.
2. The Ordinance modifies the amicable procedure
- The amicable procedure regarding the elimination of double taxation in relation to the adjustment of profits has been amended. When they consider that the taxation does not comply with the provisions of the convention or the agreement to avoid double taxation concluded by Romania with another state, taxpayers can address the competent authority of any of the contracting states to file an objection. If this course of action is not provided for by convention or agreement, a taxpayer resident in Romania can request that the National Tax Administration Agency (ANAF) initiate the amicable procedure if that taxpayer considers that the measures taken by one or both contracting states result in taxation that does not comply with the provisions of the respective convention or agreement.
- If the provisions of the convention or the agreement to avoid double taxation concluded by Romania with another state do not establish the possibility to address the competent authority of any of the contracting states and ANAF considers that the taxpayer’s objection cannot be admitted or is unjustified, ANAF notifies the competent authority of the state with which Romania has concluded a convention or an agreement to avoid double taxation regarding this fact or implements a bilateral consultation process that allows the competent authority of the other state to present its views on the subject of the amicable procedure.
- The above rules apply to applications submitted as of the date from which the provisions of the Multilateral Convention for the Implementation of Measures Related to the Prevention of Erosion of the Taxable Base and the Transfer of Profits, opened for signature and signed by Romania in Paris on 7 June, are applicable within the tax treaties 2017, ratified by Law no. 5/2022, or after that date for conventions or agreements to avoid double taxation concluded by Romania with other states which provide for the possibility that a taxpayer can present its case to the competent authority of any of the contracting states. Requests for the initiation of the amicable procedure submitted before the date of entry into force of the ordinance are resolved in accordance with the provisions in force on the date of submission of the request for the initiation of the amicable procedure.
- ANAF also carries out the amicable procedure if the competent authority of the state with which Romania has concluded a convention or an agreement to avoid double taxation requests it.
- The manner of conducting the amicable procedure will be approved by order of the president of ANAF.
III i) The Ordinance introduces changes regarding financial institutions’ reporting obligations
- It has been established that ANAF can carry out checks and inspections to verify reporting financial institutions’ compliance with the reporting and fiscal due diligence procedures provided for in annexes nos. 1 and 2 and the compliance procedures provided in annex no. 1 to the FATCA Agreement, as well as to monitor the reporting financial institutions if undocumented accounts are reported. The administrative and implementation procedures of these provisions are to be approved by order of the ANAF president.
- Financial institutions with this reporting obligation have 45 days as of the ANAF request, within the retention period, to provide the information and documents relating to the measures and evidence on which they relied for the application of fiscal due diligence procedures and of reporting, of special fiscal due diligence procedures, as well as of additional reporting and fiscal due diligence procedures for the exchange of information related to financial accounts and for compliance with the rules provided by the FATCA Agreement.
- The regime of contraventions and sanctions for non-fulfilment or improper or timely fulfilment of reporting obligations has also been amended. These changes are to apply as of 2 March 2023;
- Non-reporting is regulated separately and sanctioned with a fine of between RON 20,000 and RON 100,000. This fine is also applied for the failure to fulfill the obligations to keep all the records obtained by applying the fiscal due diligence and reporting procedures, the special fiscal due diligence procedures, the additional reporting and fiscal due diligence procedures for the exchange of information and any evidence upon which they were based, including records obtained under the FATCA Agreement, and the obligation to provide at ANAF request the information and documents related to the previously mentioned measures and evidence.
- Late reporting and incorrect or incomplete reporting is sanctioned with a fine of between RON 2,000 and RON 5,000 for each account that is the subject of reporting. Reporting financial institutions’ failure to apply the fiscal due diligence procedures, reporting procedures, special fiscal due diligence procedures, the additional reporting and fiscal due diligence procedures or the compliance procedures provided for by the FATCA Agreement is sanctioned with a fine of RON 5,000 to RON 10,000 for each account that is the subject of reporting.
ii) The Ordinance introduces changes regarding the exchange of information
- New definitions have been introduced:
- Joint control represents an administrative investigation carried out by ANAF jointly with one or more competent authorities from other member states and related to one or more persons of interest to ANAF or for the competent authorities of the respective member states.
- Breach of data security is one that leads to the disclosure or inappropriate use of data, including, but not limited to, personal data transmitted, stored or otherwise processed, as a result of illegal or negligent acts. It may also concern data confidentiality, availability and integrity.
- The standard of “foreseeable relevance” has been introduced into the framework for the exchange of information on request. This relates to the exchange of tax information according to which the tax authority of a member state addresses a request for information to another member state’s tax authority. The requestor has to specify the fiscal purpose for which the information is requested and what information is needed to apply the provisions on fees and taxes.
- The scope of the automatic exchange of information has been widened to include royalties in the specific categories of income and capital that can be subject to reporting.
- ANAF will make annual statistics on the volume of automatic exchanges of information available to the European Commission.
Source: [Government Ordinance no. 16/2023 amending and completing Law no. 207/2015 regarding the Fiscal Procedure Code, published in the Official Gazette no. 86 dated 31 January 2023]