Romania vs “GAS distributor” SC A, December 2020, Court of Appeal, Case No 238/12.03.2020

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The disputed issue concerns the purchase prices of natural gas by SC A from an affiliated company SC B. By orders of the National Energy Regulatory Authority (NERA), the prices of supply of natural gas to domestic and non-domestic consumers were regulated and fixed, but not the price at which SC A purchased it from the SC B.

The tax authority issued an assessment where the price of the controlled gas transaction was determined by reference to profit level indicators of comparable businesses.

SC A brought the decision to the Romanian courts.

Judgement of the Court of Appeal

The appeal of SC A was dismissed and the assessment of the tax authorities upheld.

In the present case, in order to adjust the expenses for the cost of the goods purchased from SC “B.” SRL, based on the level of the central market trend, the tax body used the information provided by the ORBIS and FISCNET applications. Following the comparative analysis of the information provided by the two IT applications, the tax body identified 22 potentially comparable companies in Romania, of which only one met the qualitative criteria, which is why it correctly moved to a higher search level, namely that of the European Union, identifying 6 companies that were comparable in terms of quantity and quality.
In this regard, it was noted that, according to Article 8 of OPANAF No 442/2016, transactions between related persons are considered to be carried out according to the market value principle if the financial indicator of the transaction/transaction value (margin/profit/price) falls within the range of comparison. The following provisions shall be respected in determining the comparator range:
1. the comparability analysis will consider territorial criteria in the following order: national, European Union, pan-European, international;
2. reasonable availability of data at the time of transfer pricing or at the time of their documentation, for which the taxpayer/payer being verified provides supporting documentation for the data used at the time of transfer pricing;
3. the margin of comparison is the range of price or margin/profit values for comparable transactions between independent comparable companies;
4. for the determination of outliers, the margin of comparison shall be divided into 4 segments. The maximum and minimum segments represent the extreme results. The range of comparison is the range of price or margin/output values for comparable transactions between independent comparators, after eliminating the extreme results from the margin of comparison;
5. the extreme results within the margin of comparison shall not be used in determining and calculating the estimate/adjustment;
6. if the median value cannot be identified (the median value is the value at the middle of the range of comparison), the arithmetic mean of the two middle values of the range of comparison shall be taken.
In so far as the tax authority complied with the legal procedure for estimating the purchase prices, as required by ANAF Order 442/2016, the appellant’s criticisms are unfounded, especially as they do not essentially concern the specific procedure carried out by the tax authority.
Consequently, the appellant’s criticisms, which relate to the ground for annulment relied on, are unfounded, which is why the appeal was dismissed as unfounded.

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Romania vs SC A Case no 238-12032021

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