The relationship between the tax authorities and taxpayers has significantly improved in recent years. The conduct of inspections has evolved, and the perspective of implementing remote controls, punctually, only in cases identified based on risk analysis, instills confidence in simplifying and streamlining procedures in the field.

However, in practice, there are still at least questionable situations regarding the treatment applied to taxpayers, such as the issuance of tax registration decisions by the authorities in the absence of prior control, without hearing, and even without informing the targeted legal entity. Moreover, such decisions are considered justified, even by the General Directorate for the Resolution of Disputes in the Ministry of Finance.

These situations are encountered, for example, after a tax audit conducted on a contractual partner of the taxpayer in question when the latter receives a decision from the tax authority without having the right to present their point of view.

The current legislation allows the tax authority to issue tax registration decisions ex officio concerning any taxpayer operating in Romania, but it also obliges them to inform and grant the concerned person the opportunity to present their opinion.

However, in no case, in a democratic state with principles of fiscal governance based on good intentions, can the tax authority be justified in issuing decisions of major importance (such as imposing taxes, tax registration obligations, changing tax treatment, etc.) without prior hearing of the taxpayer, allowing them to present their point of view.

In such cases, where the taxpayer receives a decision they consider unfounded, they have the right to contest it within the legal deadline at the General Directorate for the Resolution of Disputes, recently transferred from ANAF to the Ministry of Finance, precisely to guarantee the objectivity of the resolution.

Under these circumstances, it is even more regrettable that the institution mediating tax disputes does not consider such practices contrary to general principles of taxation in a European state and thus encourages incorrect approaches by tax inspectors.

Establishment of Fixed headquarters

Concretely, such situations arise during the verifications conducted by ANAF to determine whether non-resident taxpayers operating in Romania have established fixed and/or permanent establishments, as this aspect implies several tax obligations for these taxpayers.

In principle, any individual or entity subject to a fiscal legal relationship in Romania is obliged to register for tax purposes.

Therefore, in cases where the tax authorities believe that a non-resident taxpayer had this obligation but did not comply, they have the right to register the respective taxpayer ex officio or at the request of another authority administering tax claims, but only after hearing the taxpayer.

The right to be heard before the tax authority takes a decision that affects them is a fundamental right, which must be applied in any procedure that could lead to an individual measure affecting the taxpayer in any way.

This rule applies even in the procedure of tax registration ex officio or at the request of another authority administering tax claims. Of course, there may be exceptions, but they remain limited and applicable in specific and explicitly individualized cases by law because otherwise, the right would lose its effectiveness.

Situations Derived from Practice

However, in practice, it is increasingly common for the tax authorities, following an audit of a Romanian taxpayer, to consider that a third-party non-resident taxpayer with whom the Romanian entity has a contractual relationship had the obligation to register for tax purposes but did not do so.

Subsequently, based on the findings made at the Romanian taxpayer, the tax authority issues a decision to register the non-resident taxpayer ex officio or at the request of another authority administering tax claims, but without hearing the non-resident taxpayer and even without notifying them in advance that they are subject to such a registration procedure.

In practice, the non-resident taxpayer finds out that they have been tax registered in Romania by the tax authority only when they receive the registration decision, and sometimes the communication of this decision is done questionably by the tax authority.

Such conduct by the tax authority issuing the decision cannot be justified by the fact that tax registration is based on findings by a tax control body during an inspection carried out in accordance with the applicable legislation in such cases, which would provide adequate procedural guarantees.

Such justification would only be valid if the non-resident taxpayer, who was subject to tax registration ex officio or at the request of another authority, had already undergone a tax audit.

If this were the case, there might be arguments supporting the idea that hearing the non-resident taxpayer is no longer necessary since they already knew the relevant aspects of the tax control (a debatable argument in itself). However, the situation is entirely different when the tax control was carried out on a third party with whom the non-resident taxpayer has no affiliation but only a simple contractual relationship.

In any case, beyond the aspects of legislative technique, a non-resident taxpayer cannot be subject to discretionary decisions by the tax authority based on information obtained during a tax control procedure carried out on a third party, of which the non-resident taxpayer cannot possibly know and regarding which they are not asked for their point of view.

The basis for such a decision is weak since it is not based on a transparent, objective, and impartial process. The right to be heard is an essential component of the taxpayer's right to defense and the expression of the principle of good faith in the relationship between the taxpayer and the tax administration, universally recognized in European and Romanian law.

In conclusion, such conduct by the tax authority or the authority resolving tax disputes, where the taxpayer's right to be heard is violated, is entirely inconsistent with the spirit and letter of the law, representing a serious deviation and considerable regression compared to the evolution of legislation and jurisprudence in this field.

This practice must be corrected to provide the local business environment and potential investors with the confidence that they will receive fair tax treatment from the Romanian authorities.

(Opinion piece by Vlad Boeriu, Coordinating Partner of Tax and Legal Services at Deloitte Romania, and Bogdan Mărculeț, Senior Managing Associate at Reff & Associates, Deloitte Legal.)