Romania plans to join the Base erosion and profit shifting (BEPS) program as an associate member.

The program equips governments with domestic and international instruments to address tax avoidance. The program’s objective is to have profits taxed where economic activities generating the profits are performed.

The Finance Ministry has published a draft law on approving the accession of Romania as an associate member to this project, reports local Profit.ro.

The Base erosion and profit shifting (BEPS) project is developed by the Organization for Economic Co-operation and Development (OECD). It refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations.

Some multinationals have been avoiding paying taxes locally through a common mechanism. The parent banks borrow money to their subsidiaries and extract the profits from the local companies through interest payments.

Taxing the profits that multinationals shift abroad is a hot topic these days in the European Union and Romania. The European Commission recently relaunched the debate on new legislation to create an overarching corporation tax regime across all member states. In Romania, the National Liberal Party recently proposed a bill to tighten taxation for multinationals.

editor@romania-insider.com