Overcoming new Romanian limits on deductibility for cross-border affiliate transactions through APAs

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Overcoming new Romanian limits on deductibility for cross-border affiliate transactions through APAs

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Adrian Rus and Georgiana Bizdrigheanu of EY Romania explain how advance pricing agreements can help taxpayers navigate Romania’s new deductibility limitations and improve predictability and efficiency

Romania introduces a special tax regime starting from fiscal year 2026, limiting the deductibility of certain expenses incurred with non-resident affiliated entities. This change will have a major impact on companies engaged in cross-border transactions, particularly in areas such as management services, consultancy, and intellectual property rights.

What does the new tax regime entail?

The new tax regime sets a strict cap on the deductibility of certain expenses recorded in transactions with non-resident affiliated entities. Specifically, if a Romanian company had a turnover of less than €50 million in the previous year and incurs expenses for intellectual property rights, management, and/or consultancy services from affiliated entities outside Romania, these expenses will be subject to significant limitations. The deductible amount cannot exceed 1% of the company’s total expenses.

It is important to note that this limitation applies only to transactions with non-resident affiliates, meaning the impact will be felt primarily by multinational group companies purchasing services or intellectual property rights from related entities abroad.

Certain cross-border intercompany expenses are excluded from these rules, such as:

  • Expenses incurred for acquiring trademarks, industrial designs, copyrights, and similar rights registered in Romania; and

  • Expenses that are capitalised in the value of tangible or intangible assets.

Also, Romanian credit institutions and the Romanian branches of foreign credit institutions are excluded from the scope of the new regime.

APAs and the new tax regime

The advance pricing agreement (APA), which is a formal agreement between a taxpayer and one or more tax authorities, becomes a critical tool under the new rules. Romanian taxpayers that hold or, starting from fiscal year 2027 (or modified fiscal years beginning in 2027), request an APA from Romanian tax authorities for the targeted transactions are excluded from the 1% cap. This exclusion offers a major competitive advantage for companies with complex structures involving management services, consultancy, or intellectual property arrangements.

By obtaining an APA with Romanian tax authorities, companies secure certainty regarding transfer pricing methodologies, avoiding subjective interpretations and the risk of future tax adjustments. Additionally, removing the newly introduced deductibility limitations reduces cost pressure and provides predictability in financial planning.

APAs also help mitigate tax risk and prevent costly disputes with tax authorities by offering a clear, agreed framework for intragroup transactions. Romania has strengthened the attractiveness of APAs in 2025 by introducing a rollback option of up to five years, allowing historical transactions to align with agreed methodologies and reducing exposure to retroactive transfer pricing adjustments.

Possible developments

Romanian tax authorities are reviewing the minimum turnover tax (MTT), and its elimination is being considered as a real option starting in 2027. If the MTT is removed, the deductibility limitation could be extended to taxpayers with turnover exceeding €50 million.

While the business environment would welcome the elimination of the MTT, such an extension would represent a major shift, directly impacting large companies engaged in complex transactions with non-resident affiliates. Although no official legislative draft exists yet, recent statements suggest the government is exploring alternative measures to maintain budgetary balance and reduce aggressive tax optimisation practices.

Implications for Romanian businesses

Given the recent actions of the Romanian tax authorities, which are currently auditing about one-third of large taxpayers, the importance of proactive transfer pricing planning has grown significantly.

In this context, the president of the National Agency for Fiscal Administration reiterated the institution’s commitment to simplifying the APA process and encouraged taxpayers to submit more APA requests, assuring timely resolution will be a priority.

APAs are no longer just an option – they are becoming a strategic instrument for companies seeking stability, compliance, and long-term tax optimisation.

Key steps for companies

The new tax deductibility limitation represents a significant shift in Romania’s approach to cross-border intercompany transactions.

Businesses, especially those with significant cross-border management and/or consultancy services or intellectual property arrangements, should evaluate whether their intercompany arrangements fall within the scope of the new regime and assess the potential impact on their tax position. They should also consider applying for an APA to gain certainty in relation to the applicable transfer pricing policies and obtain an exemption from deductibility limitations. Finally, they should consider exploring the APA rollback option to address historical transfer pricing exposure.

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