Reff & Associates and Deloitte Romania secure final court victory in a complex tax dispute involving intellectual property, intra-group services and transfer pricing. Tax adjustments exceeding RON 90 million imposed by the Romanian tax authorities were annulled
A multidisciplinary team of tax litigation lawyers from Reff & Associates | Deloitte Legal and tax advisors from Deloitte Romania has secured a significant final court decision for an international technology company in a complex tax dispute involving transfer pricing, intellectual property royalties and intra-group services. The dispute arose from tax adjustments exceeding RON 90 million imposed by the Romanian tax authorities following a tax audit concerning transactions carried out between related parties across multiple jurisdictions.
The case followed a complex procedural path spanning more than five years, including a decision of the High Court of Cassation and Justice to quash the previous judgment and remand the case for retrial. Upon retrial, the Romanian courts ultimately upheld the taxpayer's claims through a final and binding decision, enabling the company to recover the amounts paid as a result of the challenged tax adjustments.
The ruling is particularly significant as it clarifies key principles with broad applicability in the field of transfer pricing, including the standards applicable to comparability analyses, the criteria for identifying the actual beneficiaries of intra-group services, and the conditions under which cost allocations between related parties can be successfully defended before both the tax authorities and the courts.
The most important aspect of the decision is the validation of the taxpayer's approach to the comparability analysis used to determine the arm's length level of royalties relating to intellectual property. The Court confirmed that a benchmarking study prepared in accordance with the OECD Transfer Pricing Guidelines and Romanian legislation - through the application of objective and verifiable selection criteria, annual updates of pricing data from comparable agreements and periodic comprehensive reviews of the analysis - constitutes robust and sufficient documentation to support the taxpayer's transfer pricing position.
A second important aspect concerns intra-group services and the application of the benefit test. The Court confirmed that thorough documentation of the economic benefits generated by the services received, identification of the beneficiaries of those services, presentation of relevant supporting documentation and sound economic substantiation of the allocation keys used represent the essential elements of a strong defence in this area.
"This victory is particularly important because intangible assets, high value-added services and operational structures specific to the digital economy are among the key areas of focus in transfer pricing tax audits. The judgment sends a clear message: robust documentation, prepared with technical rigor and in full compliance with the OECD standards and domestic legislation, represents an effective defence against transfer pricing adjustments. The decision is equally valuable given that Romanian tax legislation does not establish a clear documentary standard for intra-group services, a gap that frequently creates uncertainty for taxpayers, divergent interpretations and lengthy disputes. The ruling therefore provides valuable guidance for similar cases regarding the documentation capable of successfully supporting a taxpayer's position, including with respect to cost allocations and the identification of service beneficiaries," said Bogdan Barbu, Partner, Transfer Pricing, Deloitte Romania.
"Given the increasingly intensive tax audits targeting digital business models and transactions involving intangible assets, I believe this decision is highly valuable for both practitioners and taxpayers, contributing to higher predictability in the field of transfer pricing and helping establish clearer analytical standards before both the tax authorities and the courts," said Bogdan Mărculeț, Counsel, Reff & Associates | Deloitte Legal.
The tax litigation team that secured this landmark decision was led by Bogdan Mărculeț, Counsel, and included Laura Epure, Managing Associate, and Tatiana Pluteanu, Senior Associate, from Reff & Associates | Deloitte Legal. Deloitte Romania's Tax practice was represented by Bogdan Barbu, Partner, Adelina Bobe, Senior Manager, and Maria Constantin, Manager.
Reff & Associates | Deloitte Legal is celebrating 20 years of activity in the Romanian market, during which it has steadily grown and consolidated its position in the business law, and its activity has expanded to 14 practice areas. With a team of 85 lawyers specialized in the main areas of practices of business law, the firm is recognized as a leading law firm in Romania for the quality of services and ability to deliver solutions on complex legal matters. The areas of practice include banking and finance, business integrity, capital markets, competition, consumer business and data protection, corporate, commercial and mergers and acquisitions, dispute resolution, employment, energy and environment, insolvency, intellectual property, legal management consulting, public sector and real estate, as well as tax controversy. The firm represents in Romania Deloitte Legal, a global network with more than 3,100 lawyers in 75+ countries.
For more information about Reff & Associates, please visit www.reff-associates.ro.
Deloitte provides industry-leading audit and assurance, tax and legal, consulting, financial advisory, and risk advisory services to nearly 90% of the Fortune Global 500® and thousands of private companies. The firm’s professionals deliver measurable and lasting results that help reinforce public trust in capital markets, enable clients to transform and thrive, and lead the way toward a stronger economy, a more equitable society and a sustainable world. Building on its 180-plus year history, Deloitte spans more than 150 countries and territories. Its objective is to make an impact that matters through its over 470,000 people worldwide.
Deloitte Romania is one of the leading professional services organizations in the country providing, in cooperation with Reff & Associates | Deloitte Legal, services in audit, tax, legal, consulting, financial advisory, risk advisory, business processes as well as technology services and other related services, through 3,300 professionals.
