Romania Pillar Two Minimum Tax 15% for MNCs 2026

Romania, as a member of the European Union, is actively implementing the global minimum tax rules – commonly known as Pillar Two of the OECD/G20 Base Erosion and Profit Shifting (BEPS) 2.0 framework. This groundbreaking change will introduce a 15% minimum effective tax rate for large multinational enterprise (MNE) groups, significantly impacting foreign investors and businesses operating in or considering Romania. This comprehensive guide, crafted by an international legal expert specializing in Romanian law, demystifies the complexities, outlines the legal framework, and provides crucial practical advice for navigating these new regulations.

The Landscape of Global Tax Reform: Why Pillar Two Matters for Romania

The global economy has long grappled with the challenges of profit shifting and tax avoidance by large multinational corporations. The OECD/G20 Inclusive Framework on BEPS developed a two-pillar solution to address these issues. Pillar Two, specifically, aims to ensure that large MNE groups pay a minimum effective tax rate of 15% on their profits, regardless of where they are earned. This is achieved through a set of interlocking rules designed to "top-up" the tax paid in low-tax jurisdictions.

For foreign investors and entrepreneurs in Romania, understanding the "Romania Pillar Two minimum tax 15% multinational groups" is paramount. The implementation of these rules, primarily through EU Directive 2022/2523, will fundamentally alter the tax landscape, potentially increasing tax liabilities for certain entities within MNE groups. Romania has transposed this directive into national law, primarily through Law no. 431/2023 on the implementation of the global minimum level of taxation for multinational enterprise groups and large-scale domestic groups, which came into force on January 1, 2024. This law marks a significant shift in corporate taxation and requires proactive strategic planning.

Target Reader: Foreign Investors and Professionals in Romania

This guide is specifically tailored for foreign investors, corporate executives, tax directors, and legal professionals grappling with the implications of the "Romania Pillar Two minimum tax 15% multinational groups" for their operations in Romania. It provides actionable insights, precise legal references, and practical considerations to ensure compliance and optimize tax strategies in this evolving environment.

Deconstructing Romania's Pillar Two Implementation: Key Legal Provisions

Romania's implementation of Pillar Two is primarily governed by Law no. 431/2023, which closely follows the EU Directive 2022/2523. This law establishes the framework for calculating the effective tax rate and applying the top-up tax necessary to reach the 15% minimum. The core components include:

1. Scope of Application: Who is Affected?

The Pillar Two rules apply to MNE groups and large-scale domestic groups with an annual consolidated revenue of EUR 750 million or more in at least two of the four fiscal years immediately preceding the tested fiscal year. This threshold is consistent with the OECD Model Rules.

Law no. 431/2023, Art. 2, para. (1) letter a) explicitly defines the scope, stating that the rules apply to "multinational enterprise groups and large-scale domestic groups with an annual consolidated revenue of at least EUR 750,000,000 in at least two of the four fiscal years immediately preceding the fiscal year under review, as reflected in the consolidated financial statements of the ultimate parent entity."

Exempt Entities: Certain entities are excluded from the scope, including governmental entities, international organizations, non-profit organizations, pension funds, investment funds that are Ultimate Parent Entities (UPEs), real estate investment vehicles (REIVs) that are UPEs, and specific shipping income. This is outlined in Law no. 431/2023, Art. 4. For instance, Art. 4, para. (1), letter a) exempts "governmental entities, including their constituent entities."

2. The Core Rules: Income Inclusion Rule (IIR) and Under-Taxed Profits Rule (UTPR)

Romania's legislation fully incorporates the two main interlocking rules of Pillar Two:

• Income Inclusion Rule (IIR): This is the primary rule. Law no. 431/2023, Art. 8 establishes that a top-up tax is imposed on the ultimate parent entity (or an intermediate parent entity) with respect to the low-taxed income of its constituent entities. This means if a Romanian constituent entity of an MNE group pays an effective tax rate below 15% in Romania or another jurisdiction, its ultimate parent entity (or intermediate parent entity) will be liable for the top-up tax in its jurisdiction.
• Under-Taxed Profits Rule (UTPR): This acts as a backstop. If the IIR does not fully apply (e.g., if the UPE is in a non-implementing jurisdiction), the UTPR allocates the top-up tax amount that was not collected under the IIR to other implementing jurisdictions where the MNE group operates. Law no. 431/2023, Art. 9 details the application of the UTPR, allocating any remaining top-up tax among constituent entities in jurisdictions that have implemented the UTPR based on their number of employees and tangible assets.

3. Qualified Domestic Minimum Top-up Tax (QDMTT)

Recognizing the importance of securing taxing rights domestically, Romania has also introduced a Qualified Domestic Minimum Top-up Tax (QDMTT). This rule, provided for in Law no. 431/2023, Art. 7, allows Romania to collect the top-up tax on low-taxed Romanian entities first, rather than allowing another jurisdiction applying the IIR to collect it. The QDMTT ensures that if a Romanian constituent entity has an effective tax rate below 15%, Romania will be the first to levy the necessary top-up tax. This is crucial for maintaining domestic revenue collection.

Key Benefit for MNEs: A QDMTT simplifies compliance as the top-up tax is paid locally, reducing the exposure to the IIR or UTPR in other jurisdictions.

4. Calculation of the Effective Tax Rate (ETR)

The effective tax rate for each jurisdiction where an MNE group operates is calculated annually. This involves dividing the adjusted covered taxes (taxes paid) by the GloBE income (adjusted financial accounting profit).

Law no. 431/2023, Chapter III (Articles 10-41) provides detailed provisions on the calculation of Adjusted Covered Taxes and GloBE Income or Loss.

• GloBE Income: This is generally based on the financial accounting net income or loss of each constituent entity before consolidation adjustments, as determined under an acceptable financial accounting standard (e.g., IFRS, US GAAP), subject to specific adjustments defined in Articles 13-29. These adjustments address permanent differences between financial accounting and tax rules, such as eliminating dividends, capital gains/losses on shares, and certain revaluation effects.
• Adjusted Covered Taxes: These include income taxes accrued in the financial statements, deferred tax expense (with specific adjustments), and certain other taxes. Detailed rules for calculating adjusted covered taxes are found in Articles 30-41 of Law no. 431/2023.

If the jurisdictional ETR falls below 15%, a top-up tax percentage is determined, which is then applied to the excess profit of the constituent entities in that jurisdiction, subject to a Substance-Based Income Exclusion (SBIE).

5. Substance-Based Income Exclusion (SBIE)

To prevent the taxation of profits genuinely linked to real economic activities, Pillar Two includes a Substance-Based Income Exclusion. This exclusion carves out a portion of income based on tangible assets and payroll costs in a jurisdiction. For a transitional period (starting at 8% for tangible assets and 10% for payroll), this exclusion reduces the amount of income subject to the 15% minimum tax. The percentages are set to gradually decline over a 10-year period (e.g., to 5% after 2033).

Law no. 431/2023, Art. 52 provides the full details on the calculation and application of the SBIE, stating "the amount of income excluded from the calculation of the top-up tax is determined by applying a fixed percentage to the value of eligible tangible assets and eligible payroll costs within the jurisdiction."

Practical Guidance and Compliance Requirements

Complying with the "Romania Pillar Two minimum tax 15% multinational groups" requires a systematic approach and significant data collection capabilities. Foreign investors should be aware of the following:

1. Data Collection and IT Systems

The most significant practical challenge will be collecting, processing, and reporting the vast amount of granular data required for Pillar Two calculations. This includes detailed financial accounting data for each constituent entity, tax data, payroll information, and asset registers, broken down by jurisdiction.

Actionable Advice: Start assessing your current ERP and financial reporting systems. Can they generate the required data at the necessary level of detail? Many MNEs will need to invest in new reporting tools or upgrades to ensure data accuracy and timely submission.

2. Notification Obligation

Law no. 431/2023, Art. 62 introduces a specific notification obligation. Any constituent entity of an MNE group or large-scale domestic group located in Romania is required to notify the Romanian tax authorities (ANAF) whether it intends to file the Pillar Two Information Return (GloBE Information Return - GIR) or if another entity within the group will do so.

• Deadline: This notification must be made annually by March 31st of the fiscal year following the reporting fiscal year for which the Pillar Two rules apply.
• Form: The specific form for this notification will be issued by ANAF through an Order of the President of ANAF, which is yet to be published at the time of writing.
• Consequence of Non-Compliance: Failure to meet this notification deadline or providing incomplete/incorrect information could result in administrative fines, as detailed in the penalties section below.

3. GloBE Information Return (GIR)

The cornerstone of Pillar Two compliance is the GloBE Information Return (GIR). This standardized return provides detailed information necessary for the calculation of the effective tax rate and the top-up tax for each jurisdiction where the MNE group operates.

Law no. 431/2023, Art. 61, para. (1) stipulates that "the GloBE Information Return shall be filed by the reporting entity annually with the tax authority of the jurisdiction in which it is located."

• Who Files: The GIR is typically filed by the ultimate parent entity (UPE) or a designated filing entity within the MNE group. If the UPE is not in an implementing jurisdiction, or if there is no agreement for exchange, a Romanian constituent entity may be required to file the GIR locally.
• Deadline: The GIR must be filed within 15 months after the end of the reporting fiscal year. For the very first reporting fiscal year, a transitional period allows for an extended deadline of 18 months.
  • For fiscal year 2024: The GIR must be filed by June 30, 2026 (18 months after December 31, 2024).
  • For fiscal year 2025 and subsequent years: The GIR must be filed by March 31st of the following year (15 months after December 31st).
• Documents Required: The GIR itself is a comprehensive document requiring standardized disclosures on:
  • Identification of all constituent entities and the MNE group structure.
  • Information required for calculating the effective tax rate (ETR) for each jurisdiction, including GloBE income, covered taxes, and components of the top-up tax.
  • Top-up tax calculation for each constituent entity and jurisdiction.
  • Specific elections made by the MNE group.
• Language: The GIR must be filed in Romanian. If the original data or reports are in another language, certified translations may be required by ANAF upon request.

4. Top-up Tax Return (if applicable)

If a top-up tax is due, whether under the QDMTT, IIR, or UTPR, a separate tax return (or an amendment to the standard corporate income tax return) will likely be required in Romania.

Law no. 431/2023, Art. 61, para. (2) states that "if a top-up tax is due in Romania, the reporting entity or the constituent entity responsible for paying the tax in Romania shall submit a top-up tax return to the Romanian tax authority."

• Deadline for Payment: The deadline for payment of the top-up tax will generally align with the deadline for filing the top-up tax return, which is also expected to be within the same 15/18 month timeframe as the GIR, or as otherwise specified by subsequent regulatory norms. Specific payment procedures will be detailed by ANAF.

5. Transitional Safe Harbors

Pillar Two includes transitional safe harbors designed to reduce the immediate compliance burden during the initial years.

• Transitional CbCR Safe Harbor: This safe harbor, detailed in Law no. 431/2023, Art. 73, allows MNE groups to avoid detailed Pillar Two calculations for a jurisdiction if they meet certain criteria based on their Country-by-Country Report (CbCR) data (e.g., de minimis revenue, simplified ETR of 15%, or routine profit test). This a temporary measure applicable for fiscal years beginning on or before December 31, 2026, and ending on or before June 30, 2028.
• Transitional UTPR Safe Harbor: Law no. 431/2023, Art. 74 introduces a temporary exclusion from the UTPR for MNE groups whose UPE is located in a jurisdiction that has implemented Pillar Two with an effective IIR. This applies to fiscal years beginning on or before December 31, 2025, and ending on or before June 30, 2027.

Actionable Advice: MNEs should immediately assess if they can benefit from these safe harbors to defer or simplify initial compliance efforts. This requires a thorough review of existing CbCR data.

Penalties for Non-Compliance in Romania

Non-compliance with the "Romania Pillar Two minimum tax 15% multinational groups" rules can lead to substantial financial penalties and reputational damage. While specific penalties for Law no. 431/2023 are still being fully elaborated through secondary legislation, the general framework for tax non-compliance in Romania, as laid out in the Tax Procedure Code (Law no. 207/2015), applies.

Law no. 431/2023, Art. 75 specifies that "failure to comply with the provisions of this law entails the application of sanctions established by the Tax Procedure Code (Law no. 207/2015), as subsequently amended and supplemented, unless otherwise provided by this law."

This means that general penalties for incorrect or late filings, as well as underpayments, will apply. Key potential penalties include:

• Late Filing Penalties: For delays in submitting the Notification, GIR, or Top-up Tax Return, fines can range significantly depending on the duration of the delay and the size of the entity. Under Art. 336 of Law no. 207/2015, fines for failure to submit statements or for submitting incorrect/incomplete statements can reach RON 100,000 (approx. EUR 20,000) for large taxpayers.
• Late Payment Penalties: Interest and penalties for late payment of the top-up tax will be levied. The interest rate for late payment under Art. 173 of Law no. 207/2015 is currently 0.02% per day (7.3% annually). Additionally, a late payment penalty of 0.01% per day (3.65% annually) is typically applied.
• Incorrect/Incomplete Information: Providing inaccurate or incomplete information in the GIR or other filings can lead to administrative fines, which can be substantial given the complexity and financial implications of Pillar Two. These fines are often determined by the gravity of the omission or error.
• Under-declaration of Taxable Income: If the calculations lead to an under-declaration of the top-up tax, resulting in additional tax assessments, penalties can be up to 0.08% per day for underpayments resulting from a recalculation by authorities, or even higher for fraudulent intent.

Practical Advice: Given the potential penalties, ensuring robust data management, accurate calculations, and timely submissions is critical. Consider engaging specialized tax and legal advisors early in the process.

Comparison Table: Pillar Two with Standard Romanian Corporate Income Tax

To highlight the distinct nature of Pillar Two, here's a comparison with Romania's standard corporate income tax (CIT) regime.

Frequently Asked Questions (FAQs) about Romania Pillar Two

1. When do the Pillar Two rules officially come into effect in Romania?

Romania's Law no. 431/2023 came into force on January 1, 2024. The Income Inclusion Rule (IIR) and the Qualified Domestic Minimum Top-up Tax (QDMTT) apply for fiscal years beginning on or after December 31, 2023. The Under-Taxed Profits Rule (UTPR) will apply for fiscal years beginning on or after December 31, 2024.

2. Can small foreign businesses in Romania be affected by Pillar Two?

Generally, no. Pillar Two rules apply only to large multinational enterprise groups (or large domestic groups) with consolidated annual revenues of EUR 750 million or more in at least two of the four preceding fiscal years. If your business in Romania is an independent entity or part of a smaller group below this threshold, it will not be directly subject to Pillar Two.

3. What is the role of the GloBE Information Return (GIR)?

The GloBE Information Return (GIR) is a standardized information return that MNE groups must file annually. It contains all the necessary data to calculate the effective tax rate and any top-up tax for each jurisdiction where the group operates. It's the central reporting mechanism for Pillar Two compliance.

4. What is the Qualified Domestic Minimum Top-up Tax (QDMTT) and why is it important for Romania?

The QDMTT is a domestic tax implemented by Romania (through Law no. 431/2023) that allows it to levy a top-up tax on low-taxed constituent entities within its own borders, bringing their effective tax rate up to 15%. This is important because it ensures that Romania collects the top-up tax revenue first, rather than allowing another jurisdiction applying the IIR to collect it, thus securing domestic tax revenues.

5. Are there any transitional simplifications available for MNE groups?

Yes, there are several transitional safe harbors, notably the Country-by-Country Reporting (CbCR) safe harbor. This allows MNE groups to avoid detailed Pillar Two calculations for a jurisdiction if they meet certain criteria based on their existing CbCR data for a limited period. This transitional relief can significantly reduce initial compliance burdens.

6. What information will I need to collect to comply with Pillar Two in Romania?

You will need extensive granular financial and tax data for each constituent entity within the MNE group, broken down by jurisdiction. This includes, but is not limited to, financial accounting net income/loss, covered taxes accrued, deferred tax balances, payroll costs, and the book value of tangible assets. This data will be used to calculate GloBE income, adjusted covered taxes, and the jurisdictional effective tax rate.

7. What are the key deadlines for Pillar Two compliance in Romania for the first years?

For the first reporting fiscal year (e.g., 2024), the GloBE Information Return (GIR) must be filed within 18 months of the fiscal year-end (e.g., by June 30, 2026, for a December 31, 2024 year-end). For subsequent years, the deadline is 15 months (e.g., by March 31, 2026, for a December 31, 2025 year-end). A separate notification obligation to ANAF regarding who files the GIR is due annually by March 31 of the fiscal year following the reporting year.

8. How will this impact Romania's competitiveness as an investment destination?

Pillar Two aims for a level playing field, ensuring large MNEs pay a minimum tax globally. While it removes the ability to rely solely on low tax rates as an incentive, Romania still offers numerous advantages: strategic location, skilled workforce, EU membership, and access to the internal market, and specific investment incentives (e.g., state aid) for certain projects that remain viable. The impact is on harmonizing the effective tax rate, not necessarily eliminating all tax incentives or fundamental economic drivers.

📖 Recommended reading: Romania VAT Consolidation Rules 2026: A Guide

📖 Recommended reading: Romania Tax Appeal: ANAF & Court Litigation 2026 Guide

Conclusion and Call to Action

The implementation of the "Romania Pillar Two minimum tax 15% multinational groups" represents a paradigm shift in international corporate taxation. For foreign investors and MNEs with a presence or planned investments in Romania, understanding these complex rules, preparing for their rigorous data requirements, and ensuring timely compliance are critical. Proactive planning, system enhancements, and expert legal and tax guidance are no longer optional but essential.

At Pantilimon Avocat, the firm of experienced international legal experts specializing in Romanian tax law is equipped to help your multinational group navigate the intricacies of Pillar Two. We can assist with:

• Pillar Two Impact Assessments: Analyzing how these rules will affect your group's specific structure and operations in Romania.
• Compliance Strategy Development: Crafting a robust strategy for data collection, calculation, and reporting.
• GloBE Information Return (GIR) Preparation: Assisting with the accurate and timely filing of required documentation.
• Local Tax Authority Communication: Liaising with ANAF and interpreting local regulatory guidance.
• Advisory Services: Providing ongoing legal and tax advice to ensure continuous compliance and optimize your tax position within the new framework.

Don't wait for your first Pillar Two reporting deadline. Contact Pantilimon Avocat today for a personalized consultation and ensure your multinational group is prepared for the new era of global minimum taxation in Romania.