This section includes a list of the most frequently asked questions on benchmarking studies in Romania.

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1. What are the steps in preparing a benchmarking study?

The main steps in preparing a benchmarking study are as follows:

• electronic identification: This step involves the designing a search strategy suitable for the transaction under review in order to identify an initial sample of comparables in the database used for the study;
• quantitative screening: This step involves a selection of the comparables in the initial sample according to specific quantitative criteria (if possible) in order to ensure on the one hand that the comparability degrees of the remaining comparables is increased and on the other hand that the resulting sample is reduced to a size that is easier to manage in the following steps;
• qualitative screening: This step involves an assessment of the remaining comparables according to qualitative characteristics in order to ensure that the final sample only contains results that are reasonably comparable to the transaction under review;
• determination of results: Once the final sample of comparables has been obtained, for each of them a specific selected indicator (if no such selected indicator was already available) is determined according to the particular type of the tested transaction and the required arm's length range is then determined based on such results.

2. What databases are most often used to prepare benchmarking studies?

According to the specifics of the transaction under review and consequently the type of data required to conduct a benchmarking study, the most frequently used databases are as follows:

• Amadeus – contains information on more than 3 million companies (except financial companies such as banks) from 41 European countries, including all member states of the European Union;
• ORBIS (also including the data contained in the Amadeus database) – contains both information on financial companies and information on companies in all industries operating globally, therefore not being limited to the European area;
• Royaltystat – is an on-line available database containing information on more than 15,000 license agreements for intellectual property rights;
• LoanConnector – is a database compiled by Thomson Reuters containing information on more 220,000 financial transactions involving loans or securities;
  Bloomberg – similar to LoanConnector, is a database containing information on financial transaction involving loans and various types of securities.

3. How often benchmarking studies must be updated?

In general benchmarking studies should be updated on an annual basis to reassess the impact of the prevailing market conditions on companies’ profitability. Nevertheless, where a company operates on a steady market and its results do not vary significantly from year to year, benchmarking studies can be reasonably updated every two years.

4. Are benchmarking studies conducted at the pan-European level acceptable to the Romanian authorities?

Yes, but only if: (i) a local search is first performed and insufficient or no local comparables are found, (ii) the independence criteria are in line with the local legislation.
The Romanian transfer pricing legislation specifically provides that all benchmarking studies must be first prepared at a local level. In case no local comparables are found the geographic criteria can be extended to the European Union level and to the worldwide level.

5. What are the most frequent errors in preparing a benchmarking study?

Most often the reliability of a benchmarking study is affected by either a failure to adjust the search strategy to both the specific requirements of the local legislation and the principles of the OCED Guidelines, or a failure to adjust such search strategy to the particularities of the type of data available in each individual database.

Also, it is crucial that benchmarking studies be auditable and replicable when inspected by the competent tax authority. This involves that the company that prepared the benchmarking study is able to prove itself as legitimate owner of the database that was used in preparing that study. As databases are updated on an annual basis, where transfer prices are investigated after a given time since the preparation date of the transfer pricing documentation file / benchmarking study, it may be necessary during a tax inspection for the company that prepared the report to provide the competent tax authority with the version of the database that was used in preparing the study. This is precisely required to prove that the competent tax authority would obtain the same results as the party preparing the study if it applied the same search strategy in relation to that database in conducting the relevant benchmarking study.