Romania: Rules for the effective minimum taxation of 15% of multinational enterprise groups and large national groups

By Law no. 431/2023 transposes the provisions of Directive (EU) 2022/2523 (hereinafter referred to as "Pillar 2 Directive"), introducing in Romania a complex system of rules for the minimum effective taxation of 15% of multinational enterprise groups and national groups of large size with annual consolidated revenues of at least 750 million euros, from at least two of the four previous financial years. Law no. 431/2023 applies in respect of financial years starting from 31 December 2023.

General provisions

Similar to the OECD Model Rules and the Pillar 2 Directive, the provisions of Law no. 431/2023 apply to groups of multinational enterprises with annual consolidated revenues of at least 750 million euros, from at least two of the four previous financial years. At the same time, in accordance with the Pillar 2 Directive, not only multinational groups are targeted, but also groups that operate exclusively in Romania and that reach the income threshold above.

Additional global minimum tax regime

The determination of the global minimum tax is carried out through a complex system based on a series of interconnected rules ("GloBE rules"):
The so-called income inclusion rule (IIR) according to which a parent company of a group is obliged to calculate and pay its allocated part of the additional tax for the constituent entities of the group that are taxed at a reduced level;

If the additional tax has not been levied by IIR at the level of the parent company for the constituent entities of the group taxed at a reduced level, the following rule, of undertaxed profits (UTPR), will apply. Under it, a constituent entity of an MNE group owes a tax that is recorded as an additional expense equal to its share of the additional tax that was not levied under the IIR;

For the constituent entities of the multinational enterprise group or the large national group, the law introduces a national additional tax (QDMTT) which is qualified in accordance with the provisions of the OECD model rules. This will be determined on a priority basis prior to the application of the above rules and may reduce to nil the additional tax due under the IIR and UTPR rules in other jurisdictions, as appropriate.

The provisions will apply starting from the following terms:
Income Inclusion Rule (IIR) - January 1, 2024
The undertaxed profits rule (UTPR) - January 1, 2025
National Additional Tax (QDMTT) - January 1, 2024

Audit, Book Keeping, VAT