Two Orders of the Romanian Minister of Finance were published in the Official Gazette, which have an impact on the financial statements and the accounting reporting system.

Foreign legal entities will be subject of new regulations regarding the annual financial statements

The Order of the Minister of Finance no. 762 of July 5, 2021, for the regulation of certain accounting aspects, was published in the Official Gazette of Romania, Part I, number 697 of July 14, 2021.

The Order no. 762/2021 amends and completes the Accounting Regulations regarding the individual annual financial statements and the consolidated annual financial statements, approved by the Order of the Minister of Public Finance no. 1.802/2014, published in the Official Gazette of Romania, Part I, no. 963 of December 30, 2014, with subsequent amendments and completions, in the following two areas:

• Permanent establishments in Romania that belong to legal entities based abroad

Order no. 762/2021 comes with additional modifications and clarifications regarding the obligation to prepare the annual financial statements and the accounting reports required by the accounting law, as well as with the applicable accounting regulations.

• Foreign legal entities that have the place of exercising effective management in Romania

Order no. 762/2021 introduces a new section regarding the accounting of operations carried out by foreign legal entities that have the place of effective management in Romania, which details the requirements regarding the applicable accounting regulations and the obligation to prepare annual financial statements, both in the first year of application and in the following years.

It is specified that the annual financial statements provided by this section are special purpose financial statements, being intended to fulfill the obligations provided by the Fiscal Code. The provisions regarding the audit obligation and those regarding the preparation of the consolidated annual financial statements, contained in the approved accounting regulations by Order 1802/2014, are not applicable.

New provisions related to the Accounting Reporting System will affect different categories of economic operators

The Order of the Minister of Finance no. 763 of July 5, 2021, for the approval of the Accounting Reporting System on June 30, 2021 of the economic operators, was published in the Official Gazette of Romania, Part I, number 699 of July 15, 2021.

The deadline for filling the accounting reports as of June 30, 2021 is August 16, 2021.

The accounting reporting system as of June 30, 2021 of the economic operators is applicable to the entities that, in the previous financial year, registered a net turnover higher than the RON equivalent of EUR 1,000,000 and that apply the following:

• The accounting regulations regarding the individual annual financial statements and the consolidated annual financial statements, approved by the Order of the Minister of Public Finance no. 1.802/2014, with subsequent amendments and completions
• The accounting regulations compliant with the International Financial Reporting Standards, approved by the Order of the Minister of Public Finance no. 2, /2016, with subsequent amendments and completions

The provisions of this order also apply to economic operators whose financial year is different from the calendar year.

Moreover, the provisions of this order apply to the subunits opened in Romania by companies resident in states belonging to the European Economic Area, as well as permanent establishments in Romania belonging to legal entities based abroad, regardless of the financial year chosen, under the law. These entities are checking if they meet the criteria regarding the net turnover higher than the RON equivalent of EUR 1,000,000 based on the indicators determined according to the annual accounting reporting on December 31, 2020.

In addition, the order stipulates how to proceed in the situation where the legal person with headquarters abroad carries out its activity in Romania through several permanent establishments.

Foreign legal entities that have the place of exercising effective management in Romania are not subject to accounting reporting as of June 30, 2021.

The entities authorized, regulated and supervised by the National Bank of Romania, respectively by the Financial Supervision Authority submit accounting reports as of June 30, 2021 in the format and terms provided by the regulations issued by the National Bank of Romania, respectively by the Financial Supervision.

Entities that have not been active since the date of establishment until June 30, 2021, those that were temporarily inactive in the first half of 2021, those created during 2021, as well as legal entities that are in the process of liquidation, according to the law, do not prepare accounting reports as of June 30, 2021.