The United States Launches the Process of Updating the Double Taxation Avoidance Treaty with Romania in Line with New International Tax Standards

The United States Department of the Treasury Is Working on Updating Bilateral Tax Treaties with Romania, Switzerland, and Vietnam

The information was confirmed by Rebecca Burch, Deputy Assistant Secretary for International Tax Affairs, during the New York State Bar Association’s Summer Conference. The initiative follows the signing, in April, of a protocol amending the tax treaty between the United States and Croatia.

The Croatian Model

The protocol signed between the United States and Croatia aims to align several provisions of the income tax treaty with current U.S. tax law and the recommendations issued by the U.S. Senate. Among the most significant changes is the revision of the article governing foreign tax credits used to eliminate double taxation. According to Bloomberg Tax, the U.S. Treasury specifically reviewed the update of Article 23 of the treaty with Croatia, which regulates the mechanisms for relieving double taxation.

Potential Implications for Romania

At present, U.S. authorities have not disclosed any details regarding the specific amendments being considered for the tax treaty with Romania, nor have they announced a timetable for the negotiations or the ratification process.

The tax treaty between Romania and the United States is one of the oldest still in force, having been signed in 1973 and entering into effect in 1974.

Alignment with International Tax Standards

Any renegotiation of the treaty could seek to bring it into line with modern international tax standards promoted by the Organisation for Economic Co-operation and Development (OECD) and the Base Erosion and Profit Shifting (BEPS) project, which is designed to combat tax avoidance practices employed by multinational companies. In recent years, numerous countries have revised their tax treaties to introduce additional anti-abuse measures and strengthen the exchange of information between tax authorities.

The Role of the OECD Multilateral Convention

Romania is a party to the OECD Multilateral Instrument (MLI), a mechanism that allows for the simultaneous modification of certain provisions of existing tax treaties in order to combat aggressive tax planning. Romania ratified this instrument in 2022, and its provisions are already producing effects on a significant number of the tax treaties to which the country is a party.