Draft on taxing multinational corporations for the loans granted to the subsidiaries in Romania

A draft law stipulates that multinational corporations should pay taxes for the loans granted to the subsidiaries in Romania.

The draft initiated by 23 Liberal deputies says that the redundant costs of the debt are educible only up to 30% from the contributors’ earnings.

One of the ways to avoid fiscal duties practices at present by most of the multinational corporations is to credit the subsidiary and then to use its returns to pay back the loan and that expense is tax free. Therefore, instead of profit, the local subsidiary is paying back the loan granted by the  mother company, thus eroding its profit margin.

The draft tabled by the National Liberal Party comes to restrict this expense of loan reimbursement by 30% from returns, while the rest is to be taxed by 16% (tax on profit).

The draft also stipulates taxation of the companies in the country where the profit has been made. The draft is transposing the EU Directive 1164/2016 of the European Council into the domestic legislation. Romania must enforce it by 2019.