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ASP Advisors obtains a landmark decision on the taxation of income obtained in Romania in the form of royalties paid for exclusive distribution rights

The team of lawyers specialized in tax litigation coordinated by Andreea Artenie and Cristi Secrieru from ASP Advisors successfully represented before the courts of law one of the most important multinational groups activating in the Agriculture & FMGC industry, obtaining a landmark decision on the taxation of income obtained in Romania in the form of royalties paid for exclusive distribution rights.

By its recent decision, the Bucharest Court of Appeal confirmed that the tax legal provisions cannot alter the content of the substantial legal relationship (i.e., industrial property) and cannot establish exceptions in which no royalty is due (such as in the case of obtaining exclusive distribution rights of a product or service).

Thus, if the law protecting industrial property rights establishes that the breeder (within the meaning of Article 11 of Council Regulation (EC) No 2100/94 of 27 July 1994 on Community plant variety rights) is entitled to legal protection for the sale of the new plant varieties which he developed, he is also entitled to claim payment of a royalty (which, in fact, confirms and provides content to his right to innovation) in exchange for the transfer of the (exclusive) sale and distribution rights.

Subsequently, the amounts paid in return for obtaining the exclusive marketing right on the Romanian territory represent deductible expenses when calculating the corporate income tax.

Beyond the material financial stake of the dispute (which exceeds an aggregate of 24 million lei), we emphasize that the court’s decision clarifies how the provisions of point 11 of the Methodological Norms for the implementation of Article 115 para. (1) letter d) of Law no. 571/2003 on the Fiscal Code, approved by GD no. 44/2004, must be applied in reference to the provisions of art. 7 para. (1) item 28 of the Former Tax Code, thus invalidating the practice of the tax authorities which considered such amounts non-deductible and denied, at the same time, the right to deduct the related VAT.

We express our thanks to the project team, especially Catalina Apostu, Managing Associate.

About Artenie, Secrieru & Partners – Dispute Resolution Law Firm

We bring together the quality and the professionalism of a first-class international law firm with the personal touch and the ability to move sharp and fast, as one expects from a boutique. Our agile and highly experienced team is uniquely equipped to defend our clients’ interest in all types of business-related disputes, ranging from: Tax and administrative litigation; Assistance during audits performed by national and European authorities; Real estate, construction and engineering disputes; Corporate and commercial disputes; National and international arbitration; Competition disputes; Labor disputes; Capital markets litigation; Public procurement; State aids and EU funding related disputes; Insolvency.

The firm founding partners come from the most reputable international firms, being highly trained in dealing with complex litigious and business matters – cumulatively they have almost 40 years of international law firm experience. Andreea Artenie and Cristi Secrieru are mentioned as notable practitioners in international directories such as Chambers and Partners, Legal 500, ITR World Tax.

ASP Advisors has a core team of 10 fully – qualified lawyers with extensive experience in litigation and related legal areas.

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