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Study: Companies report business figure drops but only 19% reviewed policy of transfer prices

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In 2020 only 19% of multinational companies reported that they had reviewed the transfer price policy, although more than half (52%) reported that the pandemic had negative effects on the business figure or operational result, according to an EY Romania survey. The sectors which felt a negative pandemic effect include industries like defense, agriculture, vehicles, constructions and engineering, transports and logistic.

 

Most of them (81%) did not adjust the price calculation principles applied to transactions with companies affiliated to Romanian companies. In most cases, revision was not made in writing between parties as expected, to be able to continue these amendments within inspections of transfer prices.

The survey made by EY Romania in March 2021 also shows that most responding companies (57%) expect to meet difficulties at future fiscal inspections in the field of transfer prices. The percentage is similar to the one registered in global EY surveys, a sign that transfer prices are common subject of fiscal controversies both in Romania and at world level.

 

Considering there is no fiscal inspection without checking transfer prices, and an overwhelming percentage of these inspections ended with adjustments of transactions with affiliated parties, we consider there is a high enough percentage of tax payers who are not familiar with the reality of fiscal inspection activities.

 

Companies which do not anticipate such difficulties are found mainly in sectors like IT, consumer goods, hospitality and recreation, pharmaceutical industry or oil and gas.

 

According to the activity sector, the pandemic had a different impact. 52% of responding companies in Romania reported that the pandemic had negative effects on the business figure or on the operational result. The rest of 48% indicated that the pandemic wither did not have an impact or the latter was a positive one for the business figure or the operational result of the company.

 

The sectors which felt a negative pandemic effect include industries like defense, agriculture, vehicles, constructions and engineering, transports and logistic. The sectors that did not felt a specific impact were banking, stock market, media, consumer goods and IT.

 

According to survey results, companies preferred technical unemployment and reducing salary packages -70% of respondents. Only 30% used harsher measures, such as firing or unpaid leave.

 

49% of surveyed companies indicated they had not adopted any measure to reduce costs with personnel in the Covid 19 context, in this situation finding companies in the banking, pharmaceutical, petrol and gas sectors.

 

Although understandable, such new transactions made in 2020 increase possible subjects of controversies with authorities in fiscal controls on transfer prices. We will see how they will be approached n inspections, in the pandemic context, but it is hard to anticipate to what extent they will be observed,” Adrian Rus explained.

 

The EY study points out an extremely low use of means allowing the suspension of execution of amounts additionally imposed by ANAF, only 1.8% of participants offering warranty letters and one of them making appeal to courts of law to suspend the execution.

EY is one of the professional service companies at world level, with 298,000 employees in over 700 offices in 150 countries and incomes of 37.2 billion dollars in the fiscal year concluded in June 2020.

 

EY has been present in Romania since 1992, the over 800 employees from Romania and Moldova offering integrated services of audit, fiscal, juridical assistance, strategies and transactions, consulting to multinational and local companies. It has offices in Bucharest, Cluj Napoca, Timisoara, Iasi and Chisinau.

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