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June 7, 2021

Romania amends MDR legislation

Executive summary

Recently, the Romanian Government published Law no. 123/ 20211 regarding the approval of Government Ordinance no. 5/ 2020 amending the provisions of DAC 6 Directive as transposed in the Fiscal Procedure Code (Mandatory Disclosure Rules (MDR) legislation), in the Official Gazette. The amendments relate to:

  • Introduction of an exemption from reporting if certain conditions apply
  • Updates to hallmarks B (specific hallmarks related to the main benefit test) and E (transfer pricing hallmarks)

The amendments are effective as of 7 May 2021.

Key highlights

DAC6 imposes the obligation on intermediaries or taxpayers to report to the tax authorities potentially aggressive cross-border tax arrangements, identified based on certain hallmarks.

According to Government Ordinance no. 5/ 2020, intermediaries now may be exempted from the obligation to report information on cross-border arrangements if they have conclusive evidence to show beyond any doubt that the information has already been reported to the National Agency for Fiscal Administration (NAFA) or to the competent authority of another Member State by another intermediary. This exemption also applies to the relevant taxpayers under the same conditions.

Amendments were also made regarding the hallmarks in categories B and E from Annex no. 4 to the Fiscal Procedure Code, as follows:

Hallmarks B – specific hallmarks related to the main benefit test:

  • When defining hallmark B1, the reference to artificial cross-border transactions defined according to art. 11 para. (3) of the Fiscal Code is eliminated.
  • Hallmark B3 is aligned with the text of the DAC6 Directive and will include circular transactions resulting in a round tripping of funds […], whereas the previous wording referred to “circular transactions resulting in money laundering [...]. At the same time, this wording is in line with the DAC6 Application Guide issued by the Romanian tax authorities.

 Hallmarks E – transfer pricing hallmarks:

  • Hallmark E2 is supplemented to state that the definition of hard to value intangibles will take into account the meaning set forth by the Transfer Pricing Guidelines issued by the Organisation for Economic Co-operation and Development for multinational companies and tax administrations.
  • Hallmark E3 corrects the definition of earnings before interest and taxes (EBIT), now referring to the expected annual profits (instead of income).

Non-fulfillment of the reporting obligation triggers a penalty of up to RON100,000.

Next steps

Determining if there is a reportable cross-border arrangement raises complex technical and procedural issues for taxpayers and intermediaries. Taxpayers and intermediaries who have operations in Romania should review their policies and strategies for logging and reporting tax arrangements so that they are fully prepared for meeting these obligations.


For additional information with respect to this Alert, please contact the following:

Ernst & Young SRL, Bucharest