A Key Industry Under Fiscal Pressure
With over 200,000 employees, Romania’s outsourcing industry is raising the alarm about new fiscal measures. According to the Association of Business Service Leaders (ABSL), the proposal to cap the deductibility of services purchased from non-resident affiliated entities at a maximum of 1% of total expenses could seriously undermine the competitiveness of companies operating locally.
“In an industry where relocation is easy to regions with lower wages or more attractive fiscal and legislative environments, Romania cannot afford to lose these investors. The government needs not only short-term solutions to reduce the budget deficit but also a long-term strategy to protect a high value-added industry,” said Cătălin Iorgulescu, Vice President of ABSL.
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Major Risks for Competitiveness
Rising inflation, the budget deficit, and the lack of economic predictability are reducing Romania’s attractiveness for new investments. In an analysis conducted together with Deloitte Romania, ABSL highlights that these conditions could lead companies to relocate their operations to other regions where costs are better controlled.
The organization warns that the direct effect of the new measure would be an increase in the effective tax rate. Such an evolution would weaken the competitiveness of Romanian companies within their international groups and could lead to relocation decisions toward countries with more favorable fiscal regimes.
Photo: freepik.com
