Tax challenges for large taxpayers in 2025

In January 2025, I wrote about the tax measures applicable to SMEs in 2025. We have dedicated the second newsletter of 2025 to tax challenges specific to large taxpayers, out of the desire to help the boards, financial directors and financial-accounting departments of large contributors to the national budget to direct their tax compliance efforts and attention to areas of high tax risk.

Of course, the increase in the dividend tax rate, the increase in the minimum wage and the elimination of the incentives for the taxation of salaries in IT, construction, agriculture, food industry, large digitization projects (RO e-Invoice, RO e-Cash registers, Ro e-VAT, SAF-T), tax on constructions, modification of accounting regulations (monthly trial balance, submission of annual financial statements) that I wrote about in January also apply to large taxpayers,  but they also face specific tax challenges.

1. Corporate income tax

We do not have any changes applicable with 01.01.2025, but we would like to remind you of some legislative changes that occurred in 2024, which continue to affect large taxpayers in 2025.

a. The main challenge for 2025 remains the minimum income tax (”IMCA”) – we have implementing rules published at the end of 2024

Please be reminded that the minimum income tax (“IMCA”) was introduced by Law 296/2023, according to which taxpayers who register a turnover of more than 50,000,000 euros in the previous year and who, in the current year, have computed a profit tax lower than IMCA, are obliged to pay the corporate income tax at the level of the IMCA.

GD 1393/2024, published in the Official Gazette 1125 of 11 November 2024, introduces norms for the application of the provisions on the minimum turnover tax (IMCA) regarding:

• Calculation of the Total Income indicator (VT)
• The taxpayers which can subtract from the total revenues the revenues representing the excise duties that were reflected simultaneously in the expense accounts
• Calculation of the sponsorship tax credit that is deducted from IMCA
• Clarifications on the application of the external tax credit
• Clarifications on the comparison between corporate income tax and IMCA
• Calculation of the turnover indicator (VT-Vs) for economic operators regulated/licensed by ANRE who, in the previous year, obtained revenues from electricity and natural gas distribution/supply/transmission activities.

You may read more about these norms on the Tax & Training blog: Methodological norms for the minimum tax and for the microenterprise income tax, and amendments regarding the additional tax – Tax and Training.

b. From September 2024, we also have tax incentive for taxpayers performing R&D activity and are obliged to pay IMCA

Also, the end of 2024 brought a facility for IMCA payers who qualify for the extra deduction of 50% of research and development expenses when calculating corporate income tax. According to GEO 115/2024, published in the Official Gazette 970 of September 26, 2024, taxpayers who apply the additional deduction for research and development activities to the calculation of the taxable profit, according to the provisions of art. 20 of the Fiscal Code, will deduct from the minimum income tax the value obtained by applying the 16% rate to the amount representing the additional deduction of 50% of the eligible expenses for qualifying research and development activities. The decrease of this value is made within the limit of the minimum turnover tax due, the provision also applying to the determination of the minimum corporate income tax for the fiscal year 2024/modified fiscal year starting in 2024.

c. We have the new model of the annual corporate income tax return (D101)

The National Agency for Tax Administration’s President Order 206/2025 for the approval of the model, content and instructions for filling in forms 101 “Annual corporate income tax return” and 101 Fiscal group “Consolidated declaration on corporate income tax determined by the fiscal group” was published in the Official Gazette 140 of February 18, 2025.

Order 206/2025 modifies the existing form D101 by introducing lines relevant to the corporate income tax calculated at the level of IMCA. I was asked why the new D101 does not have rows for ICAS, given that ICAS was regulated in 2024 as an additional tax to profit tax, but under Title II, Corporate Income Tax of the Fiscal Code. I have analyzed this, and the answer is as follows: according to Order 587/2016, with subsequent amendments and completions, ICAS is declared by D100 (position 95 in the nomenclature of tax obligations to be declared in D100), quarterly, until the 25th of the first month following the quarter, for the quarters I-III, and by the deadline for submitting D101, for ICAS due for quarter IV of the fiscal year. So ICAS is declared exclusively through D100, only the terms of declaration and payment per quarter IV being the same as the declaration deadline for D101.

2. Additional special tax for the financial-banking sector and for the oil & gas sector

a. Moving the additional special tax from Title II “Corporate Income Tax” to Title II¹ “Additional Tax” (attention, the changes are not only of reposition, but also of substance)

Please be reminded that Law 296/2023 has introduced an exception from the IMCA rule presented above, applicable for credit institutions – Romanian legal entities and Romanian branches of credit institutions – foreign legal entities, respectively for legal entities carrying out activities in the oil and natural gas sectors (ICAS). In 2024, according to art. 18² and 18³ of the Tax Code, and by exception from art. 18¹ of the Tax Code regarding IMCA (all 3 included in the Title II “Profit Tax” of the Tax Code), these taxpayers owe specific taxes, in addition to the profit tax resulting from the application of the tax rate of 16% to their taxable profit (minus tax credits, tax exemptions and reductions).

From January 2025, by Law 290/2024, the additional tax for credit institutions – Romanian legal entities and Romanian branches of credit institutions – foreign legal entities, and the additional tax for legal entities carrying out activities in the oil and natural gas sectors are regulated as taxes different than profit tax. In this regard, Articles 18² and 18³ of Title II “Corporate Income Tax” were repealed, and Articles 46¹ and 46² were introduced in Title II¹ “Additional Tax” of the Fiscal Code.

Please be reminded that GEO 138/2024 (art. VI, point 2) also regulated that those taxpayers who fall under art. 46¹ and art. 46² of title II¹, during the period of application of these provisions, are exempted from the application of the provisions of art. 18¹ of the Tax Code (regarding IMCA).

b. Substantive amendments regarding ICAS, applicable from 03.02.2025

In addition, GO 3/2025, published in the Official Gazette 92 of January 31, 2025, brings changes to the way in which the additional special tax for the 2 sectors is regulated. Thus, the modification of the 2 types of additional special taxes is not only about positioning the same provisions in another place in the Fiscal Code, but the implications are much more substantial:

• First of all, both in terms of banking institutions and oil & gas companies, their applicability is no longer regulated only for taxpayers with a turnover in the previous year of at least 50 million euros.

The provisions of Articles 18² and 18³ of the Fiscal Code, applicable in 2024, were regulated by exception from art. 18¹, which applies only to taxpayers exceeding 50 million in turnover in the previous fiscal year. However, Articles 46¹ and 46² are no longer regulated as an exception to the IMCA, and the content of these 2 new articles no longer refers to any minimum turnover threshold.

• Secondly, the scope of ICAS also extends to foreign legal entities that individually or in a form of association deliver goods, provide services on the territory of Romania or deliver goods from the territory of Romania, carrying out activities in the oil and natural gas sectors.

Both foreign legal entities that have registered a permanent establishment in Romania and those that have not registered a permanent establishment in Romania are considered taxpayers. In this case, the VT indicator represents the revenues made from the supplies / provision of services on the territory of Romania, respectively from the supplies on the territory of Romania corresponding to the NACE codes provided in the Fiscal Code, established on the basis of the value recorded in the customs declaration or in the documents attesting the intra-community supplies. Supplies from the territory of Romania means any operation that involves the removal of goods from the territory of Romania.

Foreign legal entities that do not have a permanent establishment in Romania, but have the obligation to pay ICAS, must register for tax purposes in Romania, either directly (only for EU companies) or through a tax representative, the tax representative being jointly and severally liable with the non-resident for the fulfillment of tax obligations in Romania.

Also, non-residents subject to ICAS who do not have a permanent establishment in Romania, or their representative are/is obliged to provide a guarantee within 15 days from the cash collateral at a unit of the State Treasury, on behalf of the central tax body. The amount of the guarantee is EUR 1 million, equivalent in lei, set at the exchange rate communicated by the NBR on the date of the guarantee. The BGL will be executed by NATA if the non-resident does not pay the declared ICAS within 30 days from the payment deadline, with the obligation to replenish the BGL within 15 days from its execution.

Failure to comply with the obligations of establishment/ replenishment of the BGL entails the prohibition of carrying out any customs formalities or of any formalities in the area of movement of excise goods, with regard to the goods under the responsibility of legal entities that have not complied with their obligations, until the moment of fulfilling these obligations.

ICAS owed by non-residents does not fall within the scope of the double tax avoidance conventions concluded by Romania with another state, so NATA will not issue certificates attesting the ICAS paid in Romania, and the non-resident cannot obtain an exemption or corresponding tax credit in the country of residence (ICAS is not considered a corporate income tax).

• Thirdly, the definition of the activity carried out in the oil and natural gas sectors, by reference to the NACE codes corresponding to the main or secondary activity, is now done by law (Fiscal Code), and not by order of the Minister of Finance, thus removing one of the important criticisms against the legislative technique of regulating ICAS.

In addition to the previous provisions of Order 6830/2024, from 2025 the Fiscal Code provides that ICAS also applies to NACE code 0910 – “Service activities related to the extraction of crude oil and natural gas”.

• Fourthly, since some NACE codes that define activities in the oil & gas sectors also include activities carried out as secondary activities by companies in fields not related to the oil and gas sector, from 2025 certain activities covered by 2 NACE codes are excluded from the application area of ICAS: 4671 (NACE Rev2) / 4681 (NACE Rev 3), respectively 4730.

Basically, ICAS targets, among the oil & gas activities, wholesale (NACE 4671/4681) and retail (NACE 4730) fuel traders who carry out this activity as their main activity, or as a secondary activity, but not those who sell, as a secondary activity, other products than fuel, covered by the 2 NACE codes.

These are taxpayers who obtain income from the sale of solid fuels, naphthaline, heating oil, lamp oil, hydrogen, lubricating and cooling products, within the activities corresponding to NACE codes: 4671 – “Wholesale of solid, liquid and gaseous fuels and derived products”/4681 – “Wholesale of solid, liquid and gaseous fuels and derived products”,  4730 – “Retail trade of motor fuels in specialized stores”/4730 – “Retail sale of motor fuels”, and whose main activity corresponds to NACE codes other than those that define the activity in the oil and natural gas sector. They do not owe specific tax for the oil & gas sector, starting with the quarter in which they obtain these incomes. The exclusion does not apply if these taxpayers carry out as secondary activities other activities corresponding to the NACE codes that define the activity in the oil and gas sector, other than NACE codes 4681 and 4730 (NACE Rev 3).

This exclusion from ICAS would include, for example, traders who sell engine oil and antifreeze, importers of cars who also have a car service in which they would use engine oil or antifreeze, etc. However, in practice, it may be proven that the exclusion regulated by GO 3/2025 is not sufficiently comprehensive.

• Fifthly, as in 2024, the specific turnover tax is calculated, declared and paid quarterly, as follows: a) for quarters I-III, until the 25th of the month following the quarter for which the payment is made; b) for the fourth quarter, until the date of submission of the annual corporate income tax return.

From 2025, however, ICAS is due starting with the quarter in which the activities corresponding to the NACE codes mentioned by the Fiscal Code are carried out, a provision that also applies to newly established legal entities during the respective fiscal year. If, during the fiscal year, the taxpayers who owe ICAS cease to carry out the activities corresponding to the NACE codes mentioned by the Fiscal Code, they shall no longer owe this tax starting with the quarter following the quarter in which the respective activities are no longer carried out.

It remains valid that ICAS is calculated cumulatively from the beginning of the fiscal year. The ICAS due quarterly is determined as the difference between the ICAS calculated cumulatively from the beginning of the fiscal year and the ICAS due for the period prior to the calculation period.

In addition, foreign legal entities that do not have a permanent establishment in Romania (therefore do not owe corporate income tax in Romania) calculate, declare and pay the specific turnover tax, for the quarters I-IV, until the 25th of the month following the respective quarter.

• Sixthly, the provision according to which the additional special tax (both in the financial-banking sector and in the oil & gas sector) is a non-deductible expense for determining the taxable profit is eliminated.

The following provisions remain unchanged:

• Limited applicability of ICAS until 31.12.2025 or until the end of the fiscal year ending in 2026, for taxpayers who have a fiscal year different from the calendar year.
• Exclusion from the applicability of ICAS for the taxpayers who exclusively carry out electricity and natural gas distribution/supply/transmission activities and who are regulated/licensed by ANRE.
• Exclusion from the ICAS calculation formula, for the indicators VT, VS, I, A, of the elements related to the activities of distribution/supply/transmission of electricity and natural gas, in the case of taxpayers who carry out, among other activities, as activities covered by the NACE codes for oil & gas, activities of distribution/supply/transmission of electricity and natural gas and which are regulated/licensed by ANRE.

3. Global minimum tax of 15% (OECD Pillar 2)

Law 431/2023 on ensuring a global minimum level of taxation for multinational enterprises and large national groups (Official Gazette 8/2024) transposes the provisions of EU Council Directive 2022/2523 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union.

The provisions apply to the constituent entities registered in Romania and that are members of a group of multinational enterprise groups or of a large national group, which have an annual income of at least the RON equivalent of the amount of EUR 750,000,000, recorded in the consolidated financial statements of the ultimate parent entity, in at least 2 out of the 4 financial years immediately prior to the reference financial year.

The law establishes three measures to ensure the minimum effective taxation of 15% for multinational enterprises and for large national groups:

• An income inclusion rule (IIR) in accordance with which a parent entity of an MNE group or of a large-scale domestic group computes and pays its allocable share of top-up tax in respect of the low-taxed constituent entities of the group.
• An undertaxed profit rule (UTPR) in accordance with which a constituent entity of an MNE group has an additional cash tax expense equal to its share of top-up tax that was not charged under the IIR in respect of the low-taxed constituent entities of the group.
• A qualified domestic top-up tax rule (QDMTT), in accordance with which top-up tax shall be computed and paid on the excess profit of all the low-taxed constituent entities located in Romania.

These 3 rules apply as follows:

• Income Inclusion Rule (IIR) – starting with January 1, 2024;
• Undertaxed profits rule (UTPR) – starting with January 1, 2025;
• National qualified domestic top-up tax rule (QDMTT) – starting January 1, 2024.

For the fiscal year 2024 (or starting after January 1, 2024), the deadline for declaring and paying the additional tax is 18 months from the last day of the reporting financial year. (i.e., for those who have a fiscal year equal to the calendar year, the first reporting deadline is on June 30, 2026). For the following years, the term will be 15 months.

The calculation of the additional tax involves the calculation of the effective tax rate (ETR), by dividing the adjusted covered taxes of all constituent entities in the respective jurisdiction (in our case, Romania), to the qualified profit of these entities. The calculation is complex and requires specialized knowledge and access to information at the group level, not just at the level of the Romanian entity that is obliged to make this calculation.

Although the first deadline for declaration and payment does not occur until mid-2026, the assessment of the additional tax due under Pillar II should be included, as a provision, in the individual and consolidated financial statements for the financial year 2024 (or starting after 01 January 2024).

Groups in the scope of the Pillar 2 Directive should also check whether they can apply certain exclusions or protection regimes.

4. Transfer pricing, Country by Country (“CbCR”) reporting and EU Public CbCR reporting

a. News regarding the transfer pricing guidelines

As you can read on the OECD website, on 24 February 2025, the OECD published the Consolidated Report on Amount B. As part of the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy agreed by the OECD/G20 Inclusive Framework on BEPS in October 2021, Amount B provides for a simplified and streamlined approach to the application of the arm’s length principle to in-country baseline marketing and distribution activities, with a particular focus on the needs of low-capacity countries. This consolidated report incorporates the agreed materials on Amount B that have been released by the Inclusive Framework since February 2024 up until December 2024.

In October 2021, the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (Inclusive Framework) agreed to simplify and streamline the application of the arm’s length principle to in-country baseline marketing and distribution activities, with a particular focus on the needs of low-capacity jurisdictions. Following that mandate, OECD released guidance on “Special considerations for baseline distribution activities” which is incorporated into the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022 as an Annex to Chapter IV. 

Transfer pricing is a hot topic in the tax audits performed by the Romanian tax authorities, and it is highly advisable for the Romanian subsidiaries of the groups of companies to pay attention to:

• Alignment of the legal form with the economic substance of the transactions, in order to avoid reclassifications,
• The design of transfer pricing policies that finance departments can realistically implement,
• Monitoring actual profit margins compared to targeted ones, formalized in the transfer pricing policies, and, if necessary, agreeing on transfer pricing adjustments reflecting the arm’s length principle,
• Building transfer pricing policies and TP documentation on comparability studies made with correct search criteria, taking into account the local legal requirements,

Please be reminded that Romanian large taxpayers are obliged to prepare the transfer pricing file annually, by the legal deadline for submitting the annual corporate income tax return, the comparability studies having to comply with certain requirements from the perspective of the geographical criterion.

You can read about a successful transfer pricing setup engagement on the Tax & Training website: Transfer pricing assistance – Tax and Training.

b. Country-by-country report and EU Public CbCR

Please be reminded that Romania has implemented CbCR reporting, according to the European Directive DAC 4 (Council Directive (EU) 2016/881), the first year of reporting being 2016. Romanian subsidiaries of multinational groups with a consolidated turnover of at least EUR 750 million must:

• Notify the Romanian tax authorities of the identity of the ultimate parent entity filing the country-by-country report, by the last day of the Group’s fiscal year, but no later than the last day for filing the annual corporate income tax return for the previous fiscal year, valid for that subsidiary (form D405).
• Submit the country-by-country report with the Romanian tax authorities, within 12 months from the end of the Group’s financial year, if the ultimate parent entity is located in a state with which Romania does not have a legal instrument for automatic exchange of information for country-by-country reporting (form D404).

Country-by-country report is intended to provide tax administrations with a comprehensive overview of the overall allocation of revenues, profits, activities of multinational firms, for easier transfer pricing risk assessment by the tax authorities in the country in which the MNE group operates.

Please be reminded that Romania has adopted the EU Public CbCR provisions, according to the DIRECTIVE (EU) 2021/2101 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 24 November 2021 amending Directive 2013/34/EU as regards disclosure of income tax information by certain undertakings and branches. The first year of application is 2023 or the financial year starting in 2023, and the deadline for publication of the report is 12 months from the end of the financial year. Unlike the CbC report under DAC4, that is submitted with the tax authorities, the EU Public CbC report has to be published on the website of the Romanian subsidiaries of the targeted groups.

You can read about a success story of a tax assistance engagement in this area, provided to a Romanian subsidiary of a multinational group, on the Tax & Training website: Tax advice on the tax and tax compliance implications of legal and operational restructurings – Tax and Training

5. Application of double taxation treaties – MLI

Please be reminded that over 50 double taxation treaties to which Romania is a party have been amended by the entry into force of the multilateral instrument (MLI) resulted from the BEPS project, the amendments taking effect starting with the 2024 tax obligations.

Romania has implemented all those measures related to the BEPS minimum standard. The covered treaties have undergone changes such as, for example, the modification of the tie-breaker rule for dual resident companies, the implementation of the general treaty anti-abuse rule, the implementation of the requirement of the minimum holding period of shares for the application of the reduced quota to the dividend tax for shareholders with significant participations, the provision of increased access to the mutual agreement procedure (MAP).

We recommend consulting the summarized texts of the treaties amended by MLI, on the ANAF website.

If the topics in this newsletter are of interest and you would like to further discuss with us, you can schedule an exploratory discussion here.