Romania’s outsourcing industry, employing more than 200,000 people, has warned that a proposed “tax on affiliates” could undermine its competitiveness by effectively increasing the sector’s tax burden. The measure, part of a fiscal package drafted by the government, approved by parliament, and now under review by the Constitutional Court, restricts the deductibility of certain expenses between affiliated companies.
Under the draft law, expenditures in four categories – those viewed by authorities as potentially used for profit shifting – would no longer be fully deductible for tax purposes.
The Association of Business Service Leaders (ABSL), representing companies in the business process and IT outsourcing sectors, said the change would make Romania less attractive for investors.
“In an industry where relocation is easy to regions with lower wages or more favourable fiscal and legislative frameworks, Romania cannot afford to lose these investors,” the ABSL stated, as quoted by Ziarul Financiar.
The association urged the government to balance its short-term deficit reduction efforts with a long-term strategy to sustain high-value-added industries.
According to ABSL, the law caps the deductibility of services purchased from non-resident affiliates at 1% of total expenses. The broad definition of affected categories, including consultancy, management, and certain intellectual property rights, means that the measure would significantly raise the effective tax rate for many companies.
iulian@romania-insider.com
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