The Government approved in Thursday's meeting a draft law aimed at Romania's ratification of the Multilateral Convention to Facilitate the Implementation of the Second Pillar of the Tax Compliance Rule, the multilateral instrument developed at OECD level to avoid double taxation between signatory parties, through the rapid, coordinated and consistent implementation of the tax compliance rule (STTR) within certain existing bilateral tax agreements.
According to a Government's press release, by directly amending existing bilateral agreements, in order to eliminate double taxation, the Convention does not freeze the respective agreements, but functions as a protocol amending a bilateral agreement, and optionally the contracting jurisdictions may draw up consolidated versions of their targeted tax agreements, as they have been amended by the convention.
"Adopted on September 15, 2023, in Paris, the Convention was adopted by Romania on September 18, 2024. Prior to the adoption of the document at the OECD level, Romania submitted to the OECD Secretariat a form with information on national legislation relating to corporate income tax and any other tax that applies at the national level for the categories of income covered by the Convention, in order to establish the additional tax that will be applied to the respective income. Thus, based on the questionnaires completed by the members of the OECD/G20 Inclusive Framework regarding the BEPS project - Base Erosion and Profit Shifting that applies nominal corporate tax rates lower than 9%, it results that Romania can request a number of 38 states to apply the STTR rule of taxation, and 31 states can request Romania to apply the STTR", the press release reads.
If a developing source jurisdiction levies a 5% tax on the payment of income covered by the convention and the recipient is subject in the country of residence to a tax calculated on an alternative basis of 1%, the paying jurisdiction withholds 5%, but may levy an additional tax of 3% (9% - 5% - 1%), explains the cited source.
The draft law will be submitted for debate and adoption to Parliament.
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