Non-Resident Affiliate Costs: The 1% Deduction Cap

From 2026, management, consultancy and intellectual property costs invoiced by non-resident affiliates are deductible within a limit: at most 1% of the year's total expenses, if their share exceeded 1% in 2024. The rule was introduced by Law 239/2025, in the new article 25 index 1 of the Romanian Fiscal Code, and hits directly groups with intragroup services invoiced from abroad.

Who falls under the new rule

The cap applies to corporate income tax payers with a turnover in the previous year below EUR 50 million, computed under the minimum turnover tax rules, at the 31 December exchange rate. Taxpayers above EUR 50 million remain under the minimum turnover tax. Credit institutions are excluded, and from 2027 taxpayers holding an advance pricing agreement are also exempt.

Which costs are targeted

Three categories, invoiced by non-resident affiliates, meaning companies outside Romania without their place of effective management in Romania:

• -costs related to intellectual property rights;
• -management costs;
• -consultancy costs.

For 2026, affiliation is determined under the accounting regulation, on the group control criterion. From 2027, affiliation follows the tax definition in article 7 point 26 of the Fiscal Code.

How the mechanism works

The reference year is 2024. If the share of the three cost categories in total 2024 expenses exceeded 1%, in 2026 they are deductible only within 1% of total 2026 expenses. If the 2024 share was below 1%, the costs remain fully deductible, subject to the general conditions. From 2027, the share is computed on the current fiscal year's expenses, not retroactively.

A typical example. A company had 2024 consultancy and management costs from non-resident affiliates of RON 200,000, against total expenses of RON 22,200,000. The share is 0.9%, below the threshold, so it deducts fully in 2026. Had the share been 1.35%, with total 2026 expenses of RON 25,000,000, the deductible cap would be RON 250,000, the rest being non-deductible.

The exceptions that save the deduction

• -costs for obtaining trademarks, designs, industrial models and copyrights registered in Romania; these do not even enter the share computation;
• -costs capitalised in the value of tangible or intangible assets;
• -costs from resident affiliates; a Romanian subsidiary is not a non-resident affiliate;
• -other intragroup services that are not management, consultancy or IP stay outside the computation.

The correct qualification of each intragroup contract becomes essential. The difference between a „support services" contract and a „management" contract can move significant amounts outside the cap.

What you can do now

• -compute the share of the three categories in total 2024 expenses; that is where your 2026 position is decided;
• -inventory the intragroup contracts and verify their real qualification: management, consultancy, IP or something else;
• -review the Romanian registration of the trademarks and copyrights used by the company;
• -for groups with large volumes, assess an advance pricing agreement, which removes the cap from 2027.

Conclusion

The article 25 index 1 cap does not ban intragroup services, but makes their deductibility depend on precise figures and on the legal qualification of the contracts. Whoever reviews the contractual structure now enters 2027 with the deduction protected.

A timely legal review of intragroup contracts makes the difference between full deduction and additional tax.