Public Country by Country reporting obligations - Further clarifications

Order No. 2048/2022 ("Order 2048") issued by the Ministry of Public Finance, which implemented the provisions of Directive 2021/2101/EU on public Country-by-Country reporting (the Directive) has been amended by Order 1730/2023 ("Order 1730") published in the Official Journal of Romania no. 559/2023. Order 1730 makes clarifications to the existing rules which are applicable as from 1 January 2023.

Reporting obligations for international groups of companies with presence in Romania

One of the amendments introduced by Order 1730 refers to the reporting obligation in Romania of Romanian subsidiaries with an ultimate parent company established in an EU Member State or a non-EU Member State. It has now been clarified that only Romanian entities with an ultimate parent company established in a non-EU Member State need to report under the Directive. We reiterate that the initial legislation did not distinguish between the reporting obligations in Romania for groups with an ultimate parent company established in an EU Member State or in a non-EU Member State and it could have been interpreted that any Romanian subsidiary of an international group of companies would have needed to report according to the provisions of Order 2048.

It has also been clarified that for a group of companies with its ultimate parent company established in a non-EU Member State, the requirement to make the report available can be fulfilled by any group entity falling within the scope of the Directive rules.

Turnover calculation

According to Order 1730, if the accounting standards based on which the financial statements are prepared do not include a definition of net turnover, the revenue calculated for the purposes of this reporting is the revenue established according to International Financial Reporting Standards (IFRS) or in the financial reporting standard based on which the annual financial statements are prepared. For example, Romanian entities preparing financial statements according to a local accounting standard (such as Order 1802/2014) will calculate their turnover according to this accounting standard.

Reporting deadlines

Order 1730 reconfirms that the first report on income tax information must be submitted for 2023, and no later than 31 December 2024 (for entities whose financial year is equivalent to the calendar year), as long as the consolidated net turnover requirements for 2022 and 2023 are met.

Order 1730 also confirms that if a reporting entity has a financial year different from that applied by its parent company, the report will be prepared based on the parent company’s financial year and not the reporting entity’s financial year.

Extension of rules applicable to EU based entities

As an additional provision to the text of the Directive, Order 1730 mentions that any reference to entities located in the European Union will also include entities established in countries which are part of the European Economic Area (Norway, Iceland and Lichtenstein).

In practice, this could have implications for how the information in the report is presented – i.e. separately for entities established in EEA jurisdictions and not aggregated, applicable to non-EU jurisdictions. Other implications could arise for international groups with their ultimate parent company established in the EEA, which would need to determine their reporting obligations according to the rules applicable for EU headquartered groups.

Reporting format

Order 1730 mentions that for the purposes of reporting under the Directive, the reporting format to be used is that applicable according to Directive 2013/34/EU (non-public Country-by-Country reporting, implemented in Romania through GEO 42/2017, for which form R404 is used).

We consider that, although certain important aspects relating to public Country by Country reporting have been clarified by Order 1730 (such as the requirement to report in Romania only for entities whose ultimate parent company is established in a non-EU Member State), certain aspects are still unclear, such as:

• Explanation of the expression seriously prejudicial to the commercial position - We believe that further details are still needed concerning the conditions based on which the option to postpone the publication of certain information required by the Directive could apply, what information companies should submit to justify their choice as well as whether certain estimates would be needed showing the negative impact of publishing that information.
  
  
• The reporting format – Order 1730 mentions that for the purposes of reporting according to the provisions of the Directive, the format established by the European Commission for non-public Country by Country reporting will be used (according to Directive 2013/34/EU). However, based on the available information, we understand that the European Commission will draft the forms for the public Country by Country reporting only in the third quarter of 2024. Given that the first year of reporting required by the Directive is 2023, with a reporting deadline no later than 31 December 2024, we believe that it is possible that the form issued by the European Commission could differ from that used for the reporting in Romania. This could lead, at least in the first reporting period, to un-uniform reporting and subsequently to a lack of comparability between reports submitted by the same multinational group in different jurisdictions.