Application of international double taxation conventions in Romania

• Author: Florin Dumiter - Stefania Jimon
• Position: Western University of Arad, Romania - Western University of Arad, Romania
• Pages: 182-201

Application of international double taxation conventions

in Romania

1

Professor Florin DUMITER

2

Master student Ștefania JIMON

3

Abstrac t

In this arti cle we sought to add ress the interna tional double taxation phenomenon

from two different stan dpoints. To begin w ith, in the first p art we ana lysed the framework

of i nternatio nal double taxation , and h ow this topic w as tack led in both Ro mani an and

intern ational literat ure. Internati onal double taxati on has been ana lyzed, mutatis mutandis ,

from an economic p erspective, more preci sely in terms of the implica tions that it generates

on econo mies, on added va lue, on cap ital flows, on th e i nternatio nalisatio n o f

business. Second , I belie ved it was import ant to analyse inte rnational double tax ation from

a legal p erspective, throu gh the jurisdicti onal effects of obtainin g income or holding

propert y at the Europ ean or internati onal level. Roman ia's case is carefull y approache d in

this pa per, aiming to highli ght the issues Ro mani a is facin g concernin g cooperati on in t ax

matters with a uthoritie s from othe r co untries, how the more th an 80 d ouble taxati on

conven tions a re applie d and interp reted, but also oth er aspects that shou ld be consid ered

by the Ro mani an tax autho rities, based on the provi sions of the Fiscal Cod e and th e Fiscal

Procedu re Cod e. The article ends by presentin g, commenting on and analysin g two test

cases in intern ational dou ble t axation, of remarka ble importa nce and actual ity for

Romania n jurisprude nce to observe how comple x doubl e taxati on mechan isms opera te in

practice. The conclu sion o f this article emphasises th e importance of significant “steps”

achie ved by R omania on the p ath to crea ting a true “fiscal area” in the Europ ean Union,

as wel l as the “corridors” tha t sh ould be inserte d to correct econo mi c – leg al and

econo mic defici encies and ga ps, in order to stren gthen the fiscal area.

Keywords: econo mic dou ble taxati on, legal doub le taxatio n, d ouble taxa tion

conven tions, fiscal area , treat y shopping, ta xpayer, income ta x, cap ital tax .

JEL Cla ssification: H24, H30, K34, K40

1

This art icle was submitt ed to 6th Int ernational Conference “ Perspectives of Business Law in t he

Third M illennium”, 25 -26 November 2016, t he Bucharest University of Economic Studies,

Bucharest, Romania.

2

Florin Dumiter – “ Vasile Goldiș” Western University of Arad, Romania, fdumiter@yahoo.com.

3

Ștefania Jimon – “Vasile Goldiș” Western University of Arad, Romania,

jimonstefania@yahoo.com.

Juridical Tribune Volume 6, Issue 2, December 2016

183

1. Introduction

Looking at the literature, we can see that different views on the provisions of

double taxation conventions can lead to conflicts

4

. If one state considers an entity

as having a permanent residence, that entity will be subject to the income attributed

to this facility with regard to tax regulations. As a result, the other state will

interpret the clause of permanent residence in a different way, and will not consider

the fact that the requirements for the establishment of permanent residence are met,

having the right of veto with regard to granting an exemption from tax income, in

this case the income being subject to double taxation.

Fiscal sovereignty entails that each state is free to determine the tax system it

enforces, define the taxes that make up that system, specify the subjects of taxation,

set tax amounts, establish payment terms, grant tax incentives, set tax penalties,

establish remedies and tax dispute settlement procedures etc.

5

The international context and globalisation, the increase in international

mobility, the free movement of goods, services, capital and people have quickly led

to international investment, the expansion and relocation of economic activities and

the development of multinational entities.

In this context, the tax system and fiscal policies of a state must be adapted

to both the national and the international environment to ensure competition in

taxes. Thus, the increasing mobility of capital and labour can positively influenced,

each taxpayer being interested in owning the most profitable opportunities to get

the highest return on income before or after taxes

6

, and states can ensure their

economic and social development based on foreign investment.

There were immediate tax jurisdiction controversies related to revenues

obtained and capital held by non-residents of a country, the most common conflict

in international tax law being international double taxation

7

.

Double taxation is a complex phenomenon that is based on the action of two

or more fiscal sovereignties or competition arising between two or more fiscal

competences

8

and it is a topic often discussed in the literature because of the

negative effects that it generates. International double taxation poses a number of

problems due to the fact that its existence prevents inter-state transactions and

affairs

9

.

4

Reimer, E., Rust , A., Klaus Vogel on Double Taxation Conventions – Fourth Edition, Wolters

Kluwer Law & Business, 2015, Vol. II, pp. 171.

5

Ioan Condor, Evitarea dublei impuneri internaţionale, Regia Autonomă „M onitorul Oficial”

Publisher, Bucharest, 1999, p.31.

6

Dănuț Chilarez, George Sebastian Ene, Harm onisation and fiscal competition in the European

Union, „Management Strategies Journal”, 2014, Vol. 23, No. 1, pp . 83-93.

7

Éva Erdős, Conflicts in the international tax law and answers of the European tax law, „Curentul

Juridic”, Târgu M ureș, 2011, Vol.47, pp . 159-174.

8

Ioan Rus, Eleonora-Laura Avram, Paula Monica Bocicor, Mirela Ruxandra Moldovan, Evitarea

dublei impuneri între România și s tatele: Ungaria și Bulgaria, „Academica Science Journal Studia

Series”, Tîrgu Mureș, 2013, No.(3)-2, p .50.

9

Florin D umiter, Anca Laura Opreț, Florin Marius Turcaș, Theoretical underpinnings vis -à- vis of

double taxation problem, „Journal of Legal Studies”, 2014, Vol 15, No. 28, pp . 83-99.