Avoidance of international double taxation.
Taxation of business profits in Romania
Professor Florin DUMITER1
Assistant professor Ștefania JIMON2
In this article we wanted to achieve a comprehensive analysis of corporate profit tax
for non-residents, from the standpoint of the issues that it creates on the double taxation of
income and capital. Taxing the corporate profits of non-residents is a particularly
important aspect in terms of revenue growth, encouraging foreign investment, and
strengthening cross-border trade. The “source” state will decide the legitimate right to tax
the profits of businesses that operate within its jurisdiction. Tax treaties do not impose
limits on these types of taxing rights, other than those stemming from the obligation to
impose profits, since the issue of taxation is “satisfied”. Moreover, the source of tax
revenue belongs to the source state. Thus, we can see that it is unlikely that the state of
residence of a non-resident taxpayer should want to “share” such tax revenue. It can be
observed that the state of residence also has the right to tax the profits, but in general it
gives credit in respect of taxes of the source state or deducts them for the purpose of
preventing the occurrence of double taxation. If the state of residence provides a credit for
taxes paid within the source state, taxes which have not been collected and owed to the
source state will constitute a tax transfer to the state of residence, from which the taxpayer
will not have any benefit. As regards Romania, in terms of the treatment of enterprises, this
article represents a real quid pro quo, as it tackles both the international and national
taxation of corporate profits, through the provisions found in the new Fiscal Code and the
Code of Fiscal Procedure, as well as the new proposals on the taxation of turnover
in companies, all of this extrapolated with the new proposals for turnover tax from IT
giants. The article ends with the presentation, comment and analysis of a case of
international double taxation, more specifically the taxation of corporate profits, a topic of
great importance and current interest regarding jurisprudence in Romania, having the aim
to observe, mutadis mutandis, the way in which business profits are taxed in practice. The
conclusion of this article is intended as a genuine caveat to meet the needs of taxpayers and
tax authorities on the need for such measures, both nationally and internationally,
in terms of corporate profits, measures that have to take into account the international
framework of the contemporary business environment, which is constantly changing and
Keywords: international double taxation, double non – taxation, permanent
establishment, corporate profits, OECD Model Convention, state of residence, source
state, tax treaty.
JEL Classification: H25, H32, K34, K40.
1 Florin Dumiter – “Vasile Goldiș” Western University of Arad, Romania, firstname.lastname@example.org.
2 Ștefania Jimon – “Vasile Goldiș” Western University of Arad, Romania, email@example.com.