Today our office was home to the first DAC-Partner workshop and if I were to pick one word to describe the event, it would be INSTRUCTIVE. Ok, it’s two of them: VERY INSTRUCTIVE.

And this was thanks to our partners, all the 24 participating managers of the Tax/Compliance departments of high flying companies (keep it at that: the most profitable company in Romania, the biggest employer, the most powerful Romanian tech brand name etc.), in industry, services, including providers of intermediation services. I’m once again thankful to them for, through their active participation*, helped me and NNDKP colleague Silviu Bădescu to better understand the specific concerns of the business environment about this DAC6 over-reporting requirement. Also, I think that the cross-fire of questions and answers generated by our free talks helped us get a better sense of what we know and what we don’t know for now, about how the Directive is to be transposed through the new adopted Government Ordinance (OG, in Romanian) 5/2020.

By the way, let us mention that 23 of the 24 participants (that is 95%**) expect the ANAF (The Romanian Tax Administration) clarification guidelines to be the first factor to help their compliance with DAC6. Ranking second is ”clearer procedures in the matter at the level of their own group”. Then follow ”automation of the reporting process”, ”training for the tax department” with the ”delegation of compliance process to intermediary involved in transaction / a third party” factor coming last. This order is completely explainable to our participants as highly knowledgeable professionals (half of whom have known of DAC6 for more than six months): they realized, particularly once national legislation was published, that DAC6 was about the transactions of their companies and, since they are relevant taxpayers, they / their companies must be in control of reporting.

For that matter, 90% of them said they favoured the concept that their intermediary report solely with taxpayer’s consent, as also suggested by OG5. And 95% of them said they would appoint a company officer to be responsible for supervising transactions for DAC6 purposes.

To note that the big companies, while using a consultant (that is 65% of our respondents), mostly apply arrangements/transactions prepared by the specialist departments of the company / Group (hence the above mentioned need for clear Group-wide reporting procedures to be in place).

Sure thing, assigning the reporting responsibility is a thorny issue (as shown by 55% of the votes), particularly in terms of compliance costs (40% believe that such costs would be increased by at least 25%), at which point I brought up the automated solutions built for the purpose of DAC6, such as the VinciWorks solution, which is also available in the UK market. I once again assert my willingness to hold DEMO sessions at any time to show how such a solution can help you better manage the data you need for your DAC6 compliance (click here to sign up for a DEMO session). I equally want to re-emphasize that this automatic solution, well, won’t promptly tell you you should report this, you shouldn’t report that!

Yes, this is the great challenge, classifying / identifying the transactions to report, as also pointed out by our participants (90% of the answers).

For 100% it’s all clear – less than a quarter of their transactions involve a tax advantage. However unanimity vanishes when it comes to the percentage of the transactions that should be reported under DAC6. There are taxpayers that see a reporting percentage going as high as 50% of their transactions (15% of the votes) taking into consideration that there is a wide reporting area going beyond the main benefit test (which, by itself, offers a generous margin of interpretation as it is). And things become more complicated when it comes to the relationship with related parties: for 45% of the respondents, their inter-company transactions account for more than 50% of the total number of transactions (in 17% of the cases the threshold of 75% of the transactions is exceeded). As it is known, for ”Category E” (hallmarks concerning transfer pricing), reporting does not depend on the existence of a tax benefit. Likewise, for some of the ”Category C” transactions involving deductible payments between associated enterprises, it is not necessary the existence of a tax advantage. This is why more than half of the respondents agree that documenting intra-group transactions (economic substance, market analysis) helps minimize uncertainty related to the DAC6 reporting.

And while we’re at no-test transactions, the issue of transactions with parties residing in countries that do not have an agreements on automatic exchange of information in place with Romania was raised during the workshop. Even though not every single transaction falling under ”Category D” with entities in such countries is automatically reported, it is advisable to check the existing status of the automatic exchange of information here, on OECD’s official website.

In terms of the actual analysis of transactions, taxpayers identify their own major types of transactions with a reporting potential as follows (multiple choice):

  • Payments that enjoy a preferential tax treatment in the jurisdiction where payment beneficiary is tax resident - 55%
  • Loan conversion into capital/debt to equity swap - 45%
  • Payments to beneficiaries being tax residents in jurisdictions deemed as non-cooperative - 35%
  • Transfers of intangible assets - 30%
  • Transfer of a production operation concurrently with transfer of services and/or intangible assets as part of a business restructuring process - 15%
  • Other - 40%

Once again, what seems obvious at first glance is that there is reporting potential in these types of transactions. It takes a review of each individual transaction (first of those which have become effective since 25 June 2018 until now) – which review should be first undertaken by the beneficiary company (the relevant taxpayer), then by the company together with the involved intermediary, and if need be (for instance, where divergences are encountered by the two parties), the opinion of a third party observer should be sought. Both how we report and not report (that position-paper whereby we explain our decision not to report) transactions become crucial points in the economy of the DAC6 compliance process, which is not completed upon filing the DAC6 statement (statement which may look like this, see TPS’ article in July 2019).

A significant number of respondents already consider the effects of post-reporting: 60% already expect that reporting be followed by their company being classified under a higher tax risk.

Under such circumstances cases where DAC6 may have an impact are expectable, as is a potential need to change a company’s business model, including the type of its transactions – as believed by 75% of the participants in the DAC-Partener workshop.

To them and to our other business partners, we promise to keep standing by to ensure that the impact of DAC6 is not just easy to manage, but also that it ends up appearing as propitious for the (financial) health of that company / group.

Continue to rely on us! That being said, we look forward to seeing you at our next interactive and instructive DAC-Partner workshop (February 26). Please click here to sign up!


Thank you for your trust




* For the precise reason that we sought and keep seeking interactive workshops, where everyone is given an opportunity to air their views, we decided to cap the number of participants at 25 individuals. We will keep such restriction for the next workshops as well.

** The questionnaire in this piece was administered using a real time audience surveying automated platform. In order to make them more suggestive, we expressed results as percentages and as wholes (please consider this in any conversion into absolute data.)


DAC6 Resources

Questionnaire + Answers, TPS workshop, February 2020

DAC6 - Implementation Status, EU level, TPS, January 2020

Evaluation of the Directive on Administrative Cooperation, European Commission, September 2019

DAC6 - an introduction, TPS, July 2019



If you read during the week an editorial written by a well-known name here in Romania, not only by economists but also by the general public, you already know that "transfer-pricing practices (of profit export through manipulated transfer prices) are more detrimental for the host country in time of crisis."

And if you heard the Minister of Finance’s statements you also know that upgrading IRS’s department of transfer pricing is a priority. "I’m not saying that such operations are illegal, but we must be careful that profits of multinationals are being distributed in a fair way for the Romanian state too." 

With two or three more such public declarations I think the Romanians will be enlightened and even if they won’t exactly know what "this transfer pricing" means they will certainly know "it's not good. It's some sort of conspiracy, there’s a hidden agenda "... What more can we say, it is the perfect public enemy.

If I tell you that transfer prices are nothing more than the prices at which a subsidiary carries out transactions with the parent company/majority shareholder ... that these prices are correct and no one is to say they are high, low, good or bad prices as long as they are at market value ... that for years, also in Romania, each company member of a group (national, multinational) has a duty to prove that it used the correct prices otherwise is fined... That being the case, you would probably think that I want to distract you from…what do they call it ... transfer pricing? 

Actually, I would really like you to see the real issue here and no, I am not going to give a technical speech. Instead, I would like you to relax for a few minutes, and soak up the atmosphere of an American baseball game.

Imagine a huge baseball stadium with excited people in the stands and tense teams swinging their bats. The megaphone announces that a powerful team is about to enter on the field but they seem to have a problem with the “fair balls”.

Specifically: around spring, the permanent investigations subcommittee of the US Senate releases a report - "The Caterpillar off-shore tax strategy". I will not go into details but I guess you figured it out…it’s about transfer pricing. It looks like Caterpillar has established a subsidiary in Switzerland which sells spare parts on foreign markets and it records all profits even thoughthe job of buying parts from suppliers, storage etc. it’s for those from back home in the States where they do not receive the applicable tax. That’s around $ 2.4 billion in 13 years, as calculated by the “Swiss Scheme” regarding the loss for the IRS.

Did you get the picture? In Bucharest, if you come across a construction site you will immediately understand what a CAT bulldozer is and what the business with spare parts for such a machinery entails. Go to the States and ask how many employers from the heavy industry provide 52,000 jobs and you will understand why CAT is a symbol-company loved by Americans ... But this company does not bring the profits backhome (as we would say, it exports it) ... and acts just like the stubborn “Irish” from  the IT business (i.e. American multinationals that establish their subsidiaries in Ireland. For example Apple who obviously has a report from the US Senate).

The political megaphone can see that it upset the crowd and wants to cool off the small taxpayers / SMEs blasting "Look who's to blame! That's why we have large deficits, because multinationals, with their transfer prices are exporting profits! And now, with a bulldozer!”.

But even if it’s not a thin report (it has 90 pages) and gentle at all, a political report can’t give a verdict. After making some noise the IRS enters the field! Feared by all, the IRS bulldozer who caught even Al Capone enters the scene and puts everything in order.

The game has started. Immediately after the report, CAT throws the ball really hard with a tough statement - “We disagree with these proposed adjustments, which the IRS did not propose in previous audits of U.S. tax returns in which the same tax positions were taken,” IRS does not retaliate (officially it doesn’t give details about the control checks) but I don’t believe it was pleased about it. So the IRS was conducting audits and found nothing suspicious...this is not at all a gracious statement; it looks like CAT wants to play hard. 

Once again, the megaphone announces the mighty "policeman" for the American capital market, also known as SEC, who is submitting a question: let CAT tell us (because it's listed) what is their opinion about the IRS inspection and what will they do if...? "More likely than not” to win, CAT insists. They also make it clear that the The IRS is likely to make its determination within 12 months, Caterpillar, and if the IRS disallows Caterpillar's Swiss tax strategy, the company said, it would appeal that decision, a process that could take years.

Speaking the language from the baseball field do you have any idea how such an answer could be interpreted? 

However, where did this unusual bravery of CAT came from? With the IRS? No room for negotiation?

CAT's defense is simple:

1. We have a plan of tax restructuring which was meant to improve the business by eliminating the redundant middleman between supplier and client, given that two-thirds of sales are from outside US. 

2. The Swiss maneuver played out within the legal framework, exploiting the offered opportunities.

In a few words "Americans pay the taxes they owe, but not more. As an American company we pay the taxes we owe, not more"- as one of CAT’s tax manager said in the Senate hearings. Remember we are talking about a iconic-company, so he knows the language of the spectators.

Any ordinary man can now understand what happens on the field- it is natural (neither good nor bad) for a company to pursue their interest / profit within the legal framework ahead of them. If the government doesn’t agree with the results then there’s nothing else to do but change the law. It has the right, but it also has to face the consequences of their action. 

You, American government, ask yourself: would CAT still be able to offer employment to hundreds of thousands of Americans (directly and indirectly through suppliers) if the provided framework is uncompetitive, and lose to Japanese or Chinese competitors? You should ask yourself, why did you come to have the highest effective tax rate among industrialized countries and the third highest in a ranking of 163 countries? 

This also applies for us now that the Tax Code is in discussion, including transfer pricing. I really welcome the fact that there are taken into consideration the points of view from the business community. This is the kind of atmosphere that should always be on the field, because we are not in a game with the good and bad, on one side the government and on the other side the multinationals. We are actually playing a game where there should not be opponents or an enemy handed for the crowd to bite from.

Article published on in August 27. Author: Adrian Luca, TPS.


In the September 2013 issue of our newsletter (TPS Express) we brought into discussion several suggestions that could make make life easier for the taxpayers and even serve the interests of the tax authorities. Today, the measures are up-to-date:

The situation

1. Current Romanian legislation requires all companies to have transfer pricing documentation with regard to transactions carried out with related parties. 

2. The law does not take into account the size of the companies or value of transactions. In other words, a company with 10 employees performing occasional intra-group transactions of EUR 1,000 may have the same fixed costs of documentation as a company with 500 employees and current transactions of one million euros. 

3. EU Joint Transfer Pricing Forum recommends a flexible, balancedapproach to rules for reporting / transfer pricing documentation for SMEs. 

The solution 

1. Elimination of transfer pricing documentation regarding related party transactions in cases where:

i) companies with turnover below a certain level; 

ii) transactions that combined do not exceed a certain annual value. 

2. Introduction of simplified transfer pricing documentation (eg. no mandatory benchmarking studies for certain transactions) for companies with turnover within a certain range;

3. Regulation adjustment mechanism 

Do you agree with these measures? That these should be the legal thresholds? 

You can write your opinions and comments at:, 0742.159.142. 

We want a constructive dialogue regarding this issue therefore, in order to make an informed decision we would like to offer you all the necessary elements. The actual question is:

  • Should the current system of "required documentation submitted at the request of the tax authority, without any threshold of transactions" be kept or
  • Should the "mandatory annual reporting documentation, based on a threshold of transactions?” be applied?

It seems like we are on the horns of a dilemma… 


No manager will be able to do his job properly until there are definite regulations for all state companies to reject prices out of the market range.

For years there has been an important categoryof privately held companies which have no right  to presumption of innocence regarding taxes. The tax authority doesn’t trust companies part of a group that state "When I carry out transactions with my mama, I use only the market price, cross my heart and hope to die".

Therefore, when the tax authority goes to the privately held company, they do not ask whether they auctioned or not, or the name of the manager and what kind of person he is. They only ask whether the price is arm’s length.So why wouldn’t the state company be required to do the same, especially if we presume it to be part of an interest group? 

You can find the full article on Author: Adrian Luca, TPS