Foreign online gambling operators will pay more taxes in Romania
Amid Romanian consumers growing interest in online gambling platforms, the Romanian authorities have adopted a series of measures to increase the collection of taxes from foreign operators of such platforms. In this context, a recently adopted law obliges non-resident online gambling operators to register for tax purposes in Romania and to pay taxes on profits obtained here.
► Opinion article by Daniel Grigore, Director, CORPORATE INCOME TAX, and Simona Mergeani, Director, Transfer Pricing, Deloitte Romania
The introduction of such a principle is both a premiere and an exception since under international tax rules, either of the Organisation for Economic Cooperation and Development or of the European Union, a non-resident cannot pay tax in a country where it is not established for tax purposes.
This regulation, namely Law 107/2024, for the approval of Emergency Ordinance 82/2023, there-fore requires the registration of a taxable entity in Romania.
What options are available to gambling operators
Specifically, GEO 82/2023 introduced new rules for non-resident online gambling operators who wish to operate on the Romanian market (or who are already operating). In essence, it required them to operate locally through a taxable presence in our country in order to continue to operate and maintain their operating licences. To this end, the legislation provides several compliance options: cross-border reorganisations (merger, division or transfer of business), establishing a permanent establishment, setting up a new entity to obtain another licence.
In practice, most operators have chosen to set up a permanent establishment in Romania, as it is more cost-effective and time-efficient than the other options.
What are the tax consequences?
But registering a permanent establishment is not just a formality, it involves a series of complex tax analyses and documentation that need to be carefully managed. In addition to taking on the responsibilities that come with owning an online gambling licence, permanent establishments have to comply with tax rules covering the corporate tax area and, by extension, transfer pricing principles. Thus, the challenge arises when determining the level of taxable profit to be declared by the permanent establishment, and such an analysis must consider all the aspects concerning: the functional profile of the permanent establishment, the income and expenses allocable to it, all of which are assessed in the light of the Romanian Fiscal Code provisions.
So one of the most complex aspects of this transition is managing transfer pricing, a process that requires a thorough analysis of the functions and risks associated with the business in which the permanent establishment is involved, which will underpin the allocation of income and expenses to it, ensuring tax compliance and operational efficiency.
At the same time, the tax implications in the State of residence of the company registering the permanent establishment should also be considered. This is a sensitive issue as, in theory, that state loses the right to tax remote gambling activity in the Romanian market.
From a reporting perspective, DAC 6 is an often neglected obligation. Setting up a permanent establishment qualifies as a cross-border reorganisation from a tax perspective and all the specific DAC 6 hallmarks need to be analysed in both countries involved in the transaction to determine to what extent the transaction needs to be reported to the tax authorities.
What tax will gambling operators pay?
Depending on the size of their activities, many operators are likely to exceed the €50 million total revenue limit on December 31, 2024. As a result, a large proportion of these permanent establishments could be subject to the minimum turnover tax (as an alternative to the 16% corporate tax, if lower). It should be noted that the taxable base for this tax is total income with very few exceptions.
Conclusions and recommendations
Complying with these legislative changes represents a significant challenge for non-resident online gambling operators. Therefore, it is essential for them to proceed with rigorous documentation of all operations and the functional profile of the permanent establishment to ensure tax compli-ance and avoid complicated discussions in future tax audits.
This legislative change marks a crucial moment in the regulation of the online gambling sector in Romania, with far-reaching implications for both industry operators and the national tax structure. Continuous monitoring and adaptation to the new requirements therefore remains a priority for all actors involved.
About Deloitte Romania
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 over 3,400 professionals.
Bio Simona Mergeani – Director, Transfer Pricing, Deloitte Romania
Since 2010, Simona has developed her professional experience in the field of transfer pricing, she has carried out documentation projects on intra-group transactions carried out by multinational companies operating in various fields: Energy, Industrial Products and Construction, Pharmaceuticals, Retail and Real Estate and assisted clients in tax audits.
Furthermore, Simona has been involved in a wide range of projects from preparation and review of transfer pricing documentation, consulting for multinational and local groups of companies, tax litigation, tax expert opinions or restructuring projects.
Simona is a Certified Tax Consultant, Forensic Tax Expert and member of the Romanian Chamber of Tax Consultants.
Bio Daniel Grigore – Director, Direct Taxation, Deloitte Romania
Daniel is a member of the Romanian Chamber of Tax Consultants and is involved in multiple projects such as: mergers and acquisitions, group restructurings, assistance with tax audits, tax due diligence projects, assistance with corporate tax calculations, tax reviews, corporate tax and international tax assistance for clients active in both domestic and international markets.
Daniel’s experience of over 10 years covers all industries, but currently focuses on the financial services, pharmaceutical and healthcare and manufacturing industries. His portfolio includes significant clients for the Romanian market, active in the banking/financial, manufacturing, pharmaceutical and healthcare and consumer products and services industries.
Daniel is a graduate of the Faculty of Finance, Insurance, Banking and Stock Exchange of ASE Bucharest and is in the process of obtaining the ADIT (Advanced Diploma in International Taxation).