Permanent establishments: when Romanian activity needs a separate review

A foreign company may face Romanian tax questions without incorporating a local subsidiary. A permanent establishment assessment examines actual activities, premises and people’s roles, together with the applicable treaty.

Look at operations, not just the organisation chart

Article 8 of the Romanian Fiscal Code addresses business conducted through a place or a dependent agent. Offices, projects and the activities of company representatives can raise different questions. Not every presence automatically creates a permanent establishment, but the absence of a subsidiary does not settle the matter.

In a hypothetical example, a foreign business works with a local representative who regularly participates in negotiations. The assessment considers actual responsibilities, how contracts are concluded and the relationship with head office. A business-card title or standard contractual clause cannot describe the whole situation on its own.

The same approach to evidence is useful for mobile teams and remote work. Understand who chose the location, on what terms it is used and which activities take place there. There is no universal conclusion covering every employee who works from home.

Apply the rules relevant to the countries involved

Read domestic provisions alongside the applicable tax treaty. Wording, exceptions and conditions for particular activities can vary. The review should include relevant treaty amendments rather than rely solely on an old copy in the company’s records.

If the assessment indicates a permanent establishment, registration, profit attribution and reporting require further consideration. VAT and employment-related obligations need their own reviews in parallel. A conclusion concerning corporate income tax should not automatically be carried across to these areas.

A checklist for mapping the local presence

• List the places used, duration of use and access arrangements.
• Describe the actual activities and their connection to the foreign business.
• Identify people involved in negotiating, approving and signing contracts.
• Collect relevant agreements, mandates, schedules and examples of work.
• Check domestic rules and the treaty applicable to the period examined.
• Reassess the position when the project, team or responsibilities change.

A review at the start of a project can be useful, but needs updating as operations evolve. A limited assignment may become an established presence, while a support role may acquire commercial responsibilities. Recording those changes helps identify relevant dates and prevents the assessment from resting on a description that no longer matches reality.

For an individual assessment, prepare an account of the local activities and the people carrying them out, rather than relying only on the company’s incorporation documents.

This article provides general information, not individual advice. The existence and consequences of a permanent establishment depend on the facts, period, legislation and applicable treaty.