Transfer pricing becomes a strategic pillar for CFO

Why transfer pricing is no longer just a compliance obligation, but an essential component of financial governance?

In recent years, transfer pricing has moved from being a tax obligation and compliance to a strategic financial management tool. For a CFO, this area is no longer just a set of technical rules, but a mechanism through which tax risk is managed and minimized, profitability margins are supported, financial stability is ensured and a predictable relationship with tax authorities is built.

The country profile published by the Organization for Economic Cooperation and Development (OECD) at the end of 2025 confirms what consultants have been observing for years: national transfer pricing legislation is aligned with international standards, but has local peculiarities that can significantly influence the way companies structure their intra-group transactions.

For a CFO, understanding these peculiarities is not only useful, but essential for sound financial governance.

1. Romania and the Arm’s Length Principle

Any discussion of transfer pricing begins with the Arm’s Length Principle. The Arm’s Length Principle was introduced into Romanian tax law in 1994 and assumes that transactions between affiliated parties must be carried out under conditions similar to those between independent parties.

Although Romania is not yet a member of the OECD, national legislation provides the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD Guidelines) as the main source of interpretation for the application of the arm’s length principle.

In practice, this principle assumes that any intra-group transaction (i.e. services, goods, licenses, financing, cost allocations, etc.) must reflect the conditions that would have been negotiated between independent parties.

For a CFO, the implications are clear:

• intra-group transactions must comply with the arm’s length principle
• transfer pricing policies must be aligned with the OECD Guidelines and national legislation
• documentation must be clear and defensible in tax audits
• transfer pricing analysis is an ongoing process, which must be integrated into the annual reporting and financial planning calendar

In a tax context where transfer pricing inspections are increasingly complex, the arm’s length principle becomes a governance tool, not just a compliance requirement.

2. The OECD guidelines

In line with international practice, Romania applies the OECD Guidelines on transfer pricing prospectively, from the moment of their adoption or integration into national legislation or administrative guidance.

However, to the extent that subsequent versions of the OECD Guidelines clarify the existing principles, tax authorities may also take them into account for previous periods, provided that they do not conflict with domestic legislation or double taxation treaties.

Advantages:

• predictability in the interpretation of transfer pricing rules
• alignment with international practices, thus facilitating the implementation of multinational group policies
• reduction of the risk of divergent interpretations between tax jurisdictions

Responsibilities:

• monitoring OECD updates and clarifications
• updating transfer pricing policies in line with these developments
• periodic review of market conditions

For a CFO, this framework implies a proactive approach, in which transfer pricing must be managed continuously, by aligning with OECD standards and anticipating tax risks, not just in reaction to tax audits.

3. Transfer pricing methods

National legislation recognizes all transfer pricing methods recognized by the OECD Guidelines, and the selection of the most appropriate method is based on identifying that method which, given the circumstances of the transaction under analysis, provides the most appropriate measure or best estimate of a market value.

The choice of method must take into account:

• the degree of comparability between the transaction between affiliated parties and that between independent parties
• the accuracy of the available information
• the economic and functional circumstances of the transaction.

For a CFO, this means that:

• the choice of method must be aligned with the functional profile and operating model of the company and defensible before the ANAF
• the analysis of compliance with the arm’s length principle must be properly documented
• any change in method must be justified from an economic perspective and supported by supporting documents

In practice, there is a tendency to use profit-based methods (i.e. net margin and profit split), given that they eliminate functional differences between the tested party and the comparable entities, but for certain types of transactions, depending on the availability and quality of comparable data, traditional methods (i.e. price comparison, cost plus and resale price) may be more appropriate, and are also recommended by the OECD Guidelines as preferred methods, when circumstances permit.

4. Comparability studies (benchmarkings)

According to Romanian legislation, within a benchmarking analysis for testing the market value of transactions with affiliated parties, the geographical criterion must be applied gradually: local, EU, pan-European and international. In the absence of local comparables (an aspect rigorously analyzed by the tax authorities), external comparables, for example at EU level, may be used as a next step.

The preference for local comparables can sometimes limit options, especially in industries where it is difficult to identify entities with a similar functional profile. On the other hand, it may reflect the desire of tax authorities to ensure the relevance of the results by reporting on the specific conditions of the local market.

Regarding the analysis period, there is a preference of tax authorities for testing compliance with the arm’s length principle based on an annual analysis, which is sometimes limited by the delayed availability of financial data in the databases used in transfer pricing analyses. In these circumstances, multi-year analyses are frequently used, in accordance with the OECD Guidelines.

For a CFO, the implications are:

• the need to use sets of comparables that include local entities, when available
• the potential narrowing of market ranges, as a result of a more limited comparable base
• the risk of transfer pricing adjustments in the case of using international comparables without adequate economic and comparability justification

As market conditions are constantly changing, it is recommended to update comparability studies annually to continuously monitor profitability relative to similar independent entities. Such an approach helps to reduce tax risks, including potential transfer pricing adjustments by tax authorities.

5. Market range and adjustment to the median

According to local legislation, the range between the lower and upper quartiles reflects the market value, and intra-group transactions are considered compliant if they fall within this range, while in the case of adjustments made during a tax inspection, they are made at the median of the comparability range.

Thus, the practical consequence is relevant: if the profitability margin recorded by a company is outside the interquartile range, there is a risk of an adjustment to the median, while voluntary adjustments can be made by taxpayers to position themselves at any point in the interquartile range.

For a CFO, this means:

• the need to ensure margins are within the interquartile range and positioned appropriately within it
• the use of voluntary adjustments to align with the range and reduce tax risks
• periodic reassessment of intra-group transactions to prevent adjustments

6. Transfer pricing documentation

Romanian transfer pricing documentation requirements comply with the three-tier standard set by OECD Action 13 on BEPS and the EU Code of Conduct on Transfer Pricing Documentation for Associated Enterprises, the standard file, the local file and the country-by-country reporting (CbCR).

Transfer pricing documentation obligation

Taxpayer category	Significance thresholds	Deadline for preparation	Submission
Large taxpayers	It carries out intra-group transactions with a value greater than or equal to any of the following materiality thresholds: – EUR 200,000, in the case of interest received/paid for financial services; – EUR 250,000, in the case of transactions regarding the provision of services received/provided; – EUR 350,000, in the case of transactions regarding the acquisition/sale of tangible or intangible assets.	The deadline for preparing the transfer pricing file is the legal deadline established for submitting annual corporate tax returns for each fiscal year.	Yearly
Large taxpayers who do not meet the above thresholds   Small and medium taxpayers	Small and medium-sized taxpayers carrying out intra-group transactions with a value greater than or equal to any of the materiality thresholds: – EUR 50,000, in the case of interest received/paid for financial services; – EUR 50,000, in the case of transactions regarding the provision of services received/provided; – EUR 100,000, in the case of transactions regarding the acquisition/sale of tangible or intangible assets.	At the request of the tax inspection body, during a tax inspection.	At the request of tax authorities
Taxpayers who do not fall within the thresholds mentioned above will document compliance with the market value principle, within the framework of a tax inspection, according to the general rules provided by the financial-accounting and tax regulations in force.

The transfer pricing file includes information about the group (i.e. structure, activity, transfer pricing policies, etc.), about the taxpayer analyzed (transactions, functional analysis, economic conditions and transfer pricing methodology), as well as other elements relevant to the assessment of compliance with the arm’s length principle.

Failure to submit/incomplete submission of the transfer pricing file gives the tax authorities the right to estimate the arm’s length value of the transfer prices used by the taxpayer in intra-group transactions, thus leading to adjustments calculated by the tax authorities based on their own benchmarking analyses.

For a CFO, transfer pricing documentation is not only a compliance obligation, but a tax risk management tool, but one that requires timely preparation and maintenance of complete and consistent documentation. A well-prepared file can significantly reduce the duration and intensity of a tax inspection.

7. Tax certainty through APA

The Advance Pricing Agreement (APA) represents an agreement between the taxpayer and the tax authorities, which defines the criteria for determining transfer prices for certain transactions, for a specified period. Thus, for transactions covered by the APA, the taxpayer benefits from tax certainty, only needing to demonstrate compliance with the conditions established in the agreement, during its validity period.

For companies, an APA can represent:

• an anchor for fiscal stability
• a protection against adjustments
• a reduction in the risk of international disputes
• a clarity in financial planning

For a CFO, the APA is a strategic tool, especially for complex transactions or with high exposure to tax risks, providing certainty on the treatment of transfer pricing and reducing the risk of adjustments and disputes with the tax authorities.

In conclusion

The Romanian tax environment is aligned with international standards, but with local particularities that can significantly influence tax risk.

For a CFO, transfer pricing can no longer be treated as a one-off compliance exercise, but as an integrated element of financial governance. Aligning with the arm’s length principle, OECD standards and local specificities involves a structured and ongoing approach, in which decisions on intra-group transactions are correlated with the operating model, business strategy and profitability objectives.

That is why it is important to be able to:

• integrate transfer pricing analysis into the financial planning process
• ensure rigorous documentation
• periodically reassess intra-group transactions to prevent adjustments
• anticipate tax risks
• use tools such as APA for long-term stability

In an economy where tax transparency is becoming the norm and transfer pricing inspections are increasingly complex and sophisticated, the arm’s length principle is transforming from a compliance requirement into a governance tool, and transfer pricing is becoming a strategic pillar of financial governance.