Tax alert – Amendments and additions to Law 431/2023 (Pillar Two)

In brief

Law 431/2023 on ensuring a global minimum level of taxation of large multinational and national enterprise groups (“Law 431”), with an annual revenue of at least EUR 750,000,000 recorded in the consolidated financial statements of the ultimate parent company, in at least 2 of the 4 financial years immediately preceding the reference financial year, transposes the provisions of EU Council Directive 2523/2023.

Amendments and additions were made to Law 431/2023 by Ordinance no. 21/2025 published in the Official Gazette, Part I no. 805 of August 29, 2025.

In detail

• The deadline for submitting the notification regarding the obligation to pay the domestic top-up tax, N408, has been extended, whereby, by option, the constituent entities in Romania that are part of the same group, can designate a single entity for the declaration and payment of the domestic top-up tax. Thus, for the first year of application, the submission of the notification is made within 12 months from the last day of the reporting financial year.

• Completion of the calculation formula of the domestic top-up tax, by adding the additional top-up tax. Thus, it will be calculated as follows:

Domestic top-up tax = percentage of domestic top-up tax x domestic excess profit + additional top-up tax.

• Definition of the transferable tradable tax credit, which can be used by the credit holder to reduce its obligation to pay a covered tax in accordance with the law of the jurisdiction that regulated this tax credit and which cumulatively meets the legal standard of transferability and the trading standard.

• Within the chapter on the establishment of the domestic top-up tax, it is provided for the replacement of the phrase "domestic top-up tax" with the phrase "domestic excess profit", as well as the replacement of the term "fiscal year" with the term "financial year", in order to correlate with the content of that paragraph.

• Transparent establishment of the rules for compliance with the requirements of the protection regime of the domestic top-up tax in order not to calculate top-up tax at the level of the ultimate parent company, by replacing the references to accounting standards, with the OECD protection regimes related to Pillar Two.

• A new rule is introduced on the determination of adjusted covered taxes, where constituent entities that prepare individual financial statements in accordance with Directive 2013/34/EU of the European Parliament and of the Council on the annual financial statements, consolidated financial statements and related reports of certain types of enterprises, will calculate and present the amount of deferred tax in the Notes to the annual financial statements, or may apply accounting regulations in accordance with International Financial Reporting Standards, as the basis of accounting.

• Additions have been made regarding the definition of expenses with negative value of additional taxes.

• Through the option of the constituent entity filing the return and which is based in Romania and does not record qualified net profit, and for situations where the percentage of the top-up tax is higher than the minimum tax rate, the group of multinational enterprises or the large national group will exclude from the aggregate amount of adjusted covered taxes the expenses with the negative value of the additional taxes related to the negative adjusted covered taxes for the respective financial year and will carry forward these expenses.

• Rules are laid down for where a group of MNEs or a large national group divests one or more constituent entities located in a jurisdiction for which it has exercised the carry-over option or divests all constituent entities located in a jurisdiction and reacquires or establishes constituent entities in that jurisdiction in a subsequent financial year.

• Additions are introduced in the chapter on protection regimes, i.e. insignificant constituent entities may choose to calculate at the level of each entity the adjusted covered tax, the profit of GloBE and the income of GloBE, in order to determine whether they qualify for the simplified calculations of the protection regimes.

• Amendments are made to the chapter on the rules for determining the effective tax rate and the top-up tax of an investment entity, namely:

(i)              changes in the calculation of the effective tax rate of an investment entity;

(ii)             changes regarding the calculation of the top-up tax of an investment entity.

• The term "local entity" is redefined, thus eliminating the reference to the Member State. The designated local entity means the constituent entity with its registered office in Romania and which has been designated by the other constituent entities of the multinational enterprise group or of the large national group with its registered office in Romania to file the top-up tax information return or to send the notifications in accordance with the provisions of this article on their behalf.

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