Since September 1, 2022, Romania has issued Order No. 2048, which implements EU Directive on Country-by-Country Reporting (EU) 2021/2101. This brings significant changes for companies operating in Romania as it requires certain multinational enterprises to provide detailed information about their activities, profits, and taxes paid in each country where they operate.

The Country-by-Country Reporting Directive is part of the broader EU effort to promote transparency and responsible behavior regarding tax matters. It obliges multinational enterprises with consolidated revenue of at least 750 million euros to report certain financial and tax information, covering each jurisdiction in which they operate.

According to Order No. 2048, the reporting obligation will apply to multinationals that are resident in Romania and have consolidated revenue of 750 million euros or more for the financial year starting on January 1, 2023.

The information to be reported includes, among others, the nature of activities carried out in each jurisdiction, the number of employees, recorded revenues, recorded profits, and declared and paid taxes. The implementation of the directive in Romania is expected to enhance the tax authorities' ability to identify attempts of tax evasion and profit shifting by multinational companies.

By requiring the reporting of this information, tax authorities will gain a better understanding of how multinational enterprises operate and how they allocate their profits among different jurisdictions.

It is important for affected multinational groups to prepare for these reporting obligations as non-compliance with the new requirements can lead to sanctions and damage the reputation of companies. Multinationals will need to ensure they have systems and processes in place to collect the necessary information and report it accurately and timely.

There are also some challenges in implementing this reporting, including the capacity of Romanian tax authorities to manage and administer the information obtained through this endeavor, as well as coordinating with tax institutions in other jurisdictions.

Furthermore, to enforce this directive, Romanian tax authorities will require specific tools to detect and investigate cases of tax evasion, which will necessitate significant investments in training, technology, and other resources.

Additionally, the implementation of the directive will require coordination between Romanian tax authorities and tax authorities in other countries where multinational groups operate. This can be challenging, especially in cases where there are differences in reporting requirements or when tax treaties between countries are unclear or inconsistent.

Therefore, the implementation of the EU Directive on Country-by-Country Reporting, or "Public CBC" as referred to by the business community, in Romania is an important step towards increasing transparency and accountability in tax matters. It will assist tax authorities in identifying tax evasion and profit shifting and ultimately ensure that the tax system is fair and efficient for all.