Printer Friendly

The Anticipated Individualized Fiscal Solution.


AIFS is considered by a number of specialists an indispensable tool in the modern world of fiscal administration. Prior to concluding a transaction, the tax payer files a petition with the fiscal authorities in order to be awarded an AIFS.

Depending on its content, the tax payer decides whether to conclude the transaction or not. In drawing up this paper we aim at covering the AIFS theoretical issues (insisting less on the technical ones) and especially the practical aspects that make this procedure so less attractive and usable in our country.

In addition to the Tax Procedure Code (republished), the Government Decision No. 529/2007 regarding the approval of the issuing AIFS and of advanced pricing agreement brings further clarifications.


Taking into account the problem of the legislation incertitude (especially in Romania) and the magnitude of the litigations derived from it, many taxation specialists see AIFS as an important tool of fiscal administration.

We can notice that AIFS has benefited from an increased attention from international tax specialists and practitioners but very little from our national professionals. In 1999, the International Fiscal Association (IFA) dedicated a whole congress to the AIFS. Furthermore, the AIFS importance has been unanimously accepted around the world and in the past years an increasing number of countries have established an issuing system of AIFS. In 1988 only 7 out of the 20 member states of the Organization for Economic Cooperation and Development (OECD) did not have regulations in connection with AIFS. In 2005 only Luxemburg and Ireland out of 30 OECD member countries did not offer an AIFS procedure. In the same year 12 non-member countries of the OECD had such a procedure already enforced.

We should expect a very frequent use of the AIFS, taking into account the importance given to it by theoreticians and practitioners. In reality it is not as widely used as expected and especially in Romania is very seldom used. We will hence analyze the motives the tax payers must take into consideration when they have to decide whether or not to apply for an AIFS.

Two major factors are taken into consideration: the costs of the procedure and its efficiency.

The direct cost of an AIFS application is made up of the expenses for drawing up the application to be submitted to the fiscal authority (the fee of the institution in question and that of the lawyer if one is hired) and the waiting period. Although this application cost may be a high one, it should not be a reason for avoiding the use of an AIFS. We further analyze the consequences once the AIFS is obtained.

Firstly, the tax payer applying for an AIFS has higher chances to be the subject of a NAFA inspection than a tax payer that did not apply for an AIFS. An AIFS application implies automatically a fiscal inspection.

Secondly, a fiscal inspection undertaken as a result of an AIFS application might detect additional irregularities (it is very well known that even the taxpayers activating in the economic areas where the inspections are frequent hope that some fiscal problems pass un-noticed). The simple fact of applying for an AIFS makes the applicant a target of future fiscal inspections.

Thirdly, the AIFS is issued by NAFA - the central fiscal body while the fiscal inspections are conducted by the local agencies. If we consider the vaster expertise of the clerks working for the central institution in comparison with their colleagues with the local agencies, it is correct to assume that it is lesser probable that the first make mistakes in interpreting the tax laws.

Fourthly, if a favorable interpretation of the law implies a reduction of the due taxes, NAFA will be reluctant in adopting such a favorable interpretation of an AIFS. The above mentioned 1999 IFA congress outlined the value of a judicial precedent of an AIFS. As a result, in most countries the AIFS has a certain value of a judicial precedent because the government of a democratic state cannot afford to act unpredictably in regard with its tax payers.

The question that arises is: does the Romanian government apply the same principle? Does the Romanian government take it into account? We get a simple answer only by reviewing the 60 amendments to the Fiscal Code that have been implemented from 2004 to date. So, does the AIFS have a value of precedent in Romania? Let us read the Government Decision No. 529/2007, article 11, letter h: "the issued AIFS produces effects only in connection with the applicant tax payer and the future state of facts for which it was issued". We deduct from here that it does not have a value of precedent. We read also the provisions of article 12 of the same Government Decision: "for regulating a future state of facts a fiscal solution is issued". It becomes clear that an AIFS is applicable only to the state of facts for which it was issued, without further legal provisions stipulating an extension to similar states of facts.

We believe that an express ruling in favor of the possibility of extension to similar cases would be most useful. A simplified application procedure should be instituted in order to encourage the tax payers to apply for an AIFS. When proposing this we also have in mind the well known principle of neutrality of the fiscal measures, principle that also implies the equal treatment of the taxpayers in regard with the immediate and long term effects. In other words, tax payers in similar situations should benefit from the same or similar AIFS.

In other countries (IN the USA for example), AIFS has a judiciary effect of de facto precedent as long as AIFS is published and easy accessible. The Internal Revenue Service (IRS) is under the obligation of treating equally the similar situations of different tax payers that invoke the procedure. By contrast, the decisions reached by the IRS as a result of a fiscal inspection do not have an effect of a precedent because they are not published and remain confidential.

Fifthly, if the taxpayer concludes a transaction without applying for an AIFS, he can benefit from a favorable interpretation during a fiscal inspection. By concluding the transaction in this way, the tax payer gives up the option of concluding a transaction in the case of a disadvantageous AIFS and is able to contest in the court an eventual unfavorable outcome of a fiscal inspection. If NAFA does not want to go to court, the chances of obtaining a favorable solution increase.

We conclude therefore that the strategic disadvantages of applying for an AIFS are greater than its advantages. For the tax payers that normally have a minimal chance of being visited by the fiscal inspectors, applying for an AIFS increases this chance. For the large tax payers (corporations) which are more often fiscally inspected, applying for an AIFS is a matter of incertitude regarding the issues that may arise with the fiscal inspection accompanying the application. To apply for an AIFS is similar to draw the attention of the fiscal bodies. No wonder that very few tax payers take their chance, taking also into account the instability of the Romanian tax legislation. All these analyzed aspects demonstrate why the AIFS is not widely used in Romania and abroad.


The tax law, as other law branches, is not clear and leaves room for interpretation. In doctrine there are three types of ambiguities in the tax law: the ambiguity regarding the precise purpose of the statutory language; the ambiguity regarding the enforcement of the law in connection with a specific state of facts and the ambiguity regarding the type of sufficient proof for establishing the facts.

The complexity of the fiscal legislation is an important factor in the certitude and constancy of the ruling. The frequent law changes are another source of incertitude in the fiscal legislation. Taking all these into account, the AIFS procedure seems promising as long as the problem of the incertitude of law might be changed through it.

The AIFS issuing procedure is especially important because the tax payers can obtain a legal certitude in connection with the consequences of the planned transaction.

The importance of the AIFS in facing the legislative incertitude was outlined by the former IRS commissioner Mortimer Chaplin. He wrote in 1962: "It is understandable why, when the fiscal laws are complex and the taxation rate is high, the tax payers are frequently reluctant to conclude important transactions without a prior official reassurance in regard with the fiscal consequences".

A 1988 OECD study analyzing the tax payer rights and obligations focuses on the high certitude level the payers are entitled to in regard with the fiscal consequences of their economic operations. This study stresses the AIFS importance from this point of view, showing that such solutions are attractive to the contributors as long as they allow a correct and safe fiscal result of their endeavors.

The AIFS matter was approached during the first IFA congresses. The general 1999 IFA congress report outlines that all its contributors emphasize the need of a fiscal solution. The collective message is that the AIFS is an indispensable tool in the fiscal administration modern world. The report specifies a number of reasons for which the tax payers need certainty about the fiscal results of their transactions. The motives of the increasing uncertainty are the increasing number and complexity of the tax laws, as well as the enforcement of a general anti-evasion legislation whose nature may damage the perfect legitimate economic activities.

In a recent, work professor Daniel Sandler claims that the AIFS advantages to the tax payers are only apparent as long as AIFS offers sureness in regard with the particular results of a transaction and such a transaction decision can be made only by knowing its real costs. When the tax payers ask for an exact evaluation of the fiscal effects of a transaction, they prefer to disclose in advance to the fiscal authorities the relevant facts in order to obtain a favorable solution rather than proceed with a transaction that might be disadvantageously assessed later on.

Other sources might be cited, but we can observe from those outlined above that the unanimous opinion is that the AIFS represents an indispensable procedure for the tax payers.


The issuing procedure of AIFS and the advance pricing agreement is regulated by the Government Ordinance No. 529/2007 that brings additional clarifications to the Tax Fiscal Code. The ordinance tries to clarify some inadvertencies between the accounting and the fiscal regulations.

According to the ordinance, all tax payers registered with the fiscal authorities are allowed to submit a request for a fiscal solution issuing. The first positive aspect - there is no special provision the tax payer should comply with in order to apply for and being awarded an AIFS.

The fee for an AIFS issuing is of 1000 Euros payable in Romanian lei at the exchange rate set by the National Bank of Romania for the payment day.


A preliminary facultative step has been established - the tax payer is offered the possibility of submitting a written application to the NAFA requesting a preliminary discussion for identifying a future tax state of facts. The application must include the identification data of the tax payer and /or of his legal representative and a short description of the object of the discussion. NAFA will communicate in writing to the petitioner the date, hour, place and names of the participants. During the discussion the number of the necessary future fiscal solutions will be set out in order to regulate the future tax state of facts.


The AIFS issuing procedure starts with an application from the tax payer containing his and his legal representative identification data and the presentation of the future tax state of facts for which the issuing is requested. In the same application may be presented more than one future tax state of facts for which solutions are requested.

The application must be accompanied by the documents supporting it as outlined in articles 7, 8 and 9 of the Government Ordinance No. 529/2007. The documents must demonstrate the detailed activity of the tax payer, the complete presentation of the future tax state of facts for which the fiscal solutions are required, de facto and de jure motives, the fiscal obligations for which the solution is required, the point of view of the tax payer etc. All these must be accompanied by a statement of personal responsibility signed by the tax payer declaring that there is no ongoing fiscal, administrative and judicial procedure affecting the case in question and that all data and documents presented in the application are correct. Under certain circumstances the fiscal authorities may require additional information.


The following reasons for rejecting an AIFS application are outlined in article 10 of the Government Ordinance No. 529/2007:

1. The application misses one of the compulsory documents specified above;

2. The form of the documents is not in compliance with the requirements;

3. The same application has already been rejected;

4. There is an ongoing fiscal, administrative or juridical procedure;

5. Real information exists that the already declared state of facts covers another de facto or de jure situation;

6. There was no document attached to prove the fee payment.

The reason that allows the rejection if there is real information that the already declared state of facts covers another de facto or de jure situation has raised questions. It is believed that, although some tax payers may provide incomplete or incorrect information in order to buy their "fiscal peace", the fiscal authorities may not motivate the rejection of an AIFS application because of this reason. Another question arises naturally: from what sources or how have the fiscal bodies obtained the "real" information in contradiction with those provided by the tax payer?

Because there are no additional provisions that expand this rejection reason, we ask ourselves which are the data that may be accepted as "real" by the fiscal authorities, which are the authorized or accepted procedures that enable NAFA to consider some information "real" and which are the NAFA internal procedures that enable this institution to obtain supplementary data pursuing an AIFS issuing application? Moreover, article 9 of the Government Ordinance No. 529/2007 establishes that the tax payer must provide further information on request, depending on particular circumstances. We do not contest the usefulness of such a procedure, but we consider that the ruling of this aspect is too narrow.

The Tax Procedure Code, article 42, para. (10) stipulates: "the applicant tax payer shall be entitled to a refund of the tariff paid in case the competent fiscal body rejected the issuing/change of the anticipated individualized tax solution or of the advance pricing agreement or in case the issuing procedures are interrupted, under circumstances approved by Government Decision."

The application rejection is communicated by NAFA to the applicant in writing within 15 days from the day the application was rejected.

Should there be an unjustified or tacit refusal from the AIFS issuing fiscal institution the tax payer may sue the respective authority into the administrative court.

In case the tax payer does not agree to the issued anticipated individualized tax solution or advance pricing agreement, he/she shall notify the issuing fiscal body, in writing, in term of 15 days from the relevant document receipt date. The anticipated individualized tax solution or the advance pricing agreement in relation to which the tax payer has notified the issuing fiscal body shall have no legal effect.

The following situation may arise in practice: the AIFS applicant tax payer is not contended with it or with the answer received in connection with it, but on the same time he does not want to give up its advantages. He might appreciate that it is better for his activity to have an AIFS and to take the chance of a fiscal inspection with negative effects for him. May this tax payer contest the AIFS? In our opinion he may in theory because the AIFS is a fiscal administrative document that may be contested in the administrative court. In most of the practical cases the tax payer contests the payment obligations established as a result of the fiscal inspection.


The AIFS content is regulated by article 11 of the Government Decision No. 529/2007.

We underline that the already issued AIFS produces effects only in connection with the applicant tax payer and for the future state of facts the AIFS has been issued for. Once the AIFS issued, its effects are opposable and binding for the fiscal authorities, provided that the applicant complied with the legal terms and conditions.

To regulate each future state of facts, a separate fiscal solution is necessary.


Each country has its own fiscal "culture" illustrated by different fiscal administrative procedures implying that the AIFS issuing procedure may differ greatly. Therefore it would not be easy to make a clear comparison or a generalization in regard with AIFS around the world. There are great variations in connection with the issuing AIFS procedures or the field within it operates and its binding effects.

In Argentina for example the Argentinian Federal Tax System regulates both international and private solutions. The private solutions are issued following an application submitted by the tax payer and ruled by the Argentinian Fiscal Bureau which is the supreme administrative fiscal body. These solutions are binding for the fiscal administration.

In Canada there is the Income Tax Ruling and Interpretation Directorate which embodies the authority that rules an AIFS and provides consulting to the fiscal institutions, other government departments and tax payers. AIFS has a consultative nature and it is therefore not binding.

In Chile, South Africa and Norway there is no AIFS ruling.

In Sweden the AIFS system has been implemented since 1951. Prior to 1991 the ruling AIFS body was the National Tax Board. Starting with 1991 this board has been transformed into a semi-judiciary independent body named the Council of Advance Tax Ruling. To the Swedish AIFS procedure both the tax payers and the National Fiscal Committee may apply. Surprisingly, AIFS is compulsory for the public servants but not for the tax payers. Within the AIFS council work two sections: one for direct taxes and the second one for indirect taxes. The SFIA rulings are binding for the courts.

In the Netherlands the AIFS system is very well defined and works through the Tax Office. The tax payer may apply for an AIFS directly to the ordinary fiscal clerk. The AIFS ruled in the Netherlands may not be contested in the court and are binding for both the fiscal authorities and the tax payers. The solution may be obtained in regard with every de facto or de jure matter regulated by the income tax, the taxation of goods and services law and any other federal law.

According to the German law, there is a distinction between the various AIFS types. In addition to some cases regulated by law, there is an oral or written AIFS that cannot be contested in the court and binding only under the restrictive conditions stipulated by law.

In France there is no rigorously determined AIFS procedure. One option is to submit an application with the fiscal authorities requesting their unofficial position in connection with a de facto situation regarding a fiscal text. This procedure is not supervised from a formally stipulated basis. The authorities become involved when the tax payers ask questions referring strictly to the law ruling or their de facto situation is very complex and needs to be analyzed from the fiscal law point of view.

When the French fiscal authorities take a stand (which is not compulsory to do) this stand constitutes an absolute guarantee and this guarantee disappears only if the information communicated to the authorities was erroneous, the fiscal law is amended or the fiscal authorities re-interpret the ruling.

The international ruling where a different state is concerned consists of advance pricing agreements based on mutual treaties. French authorities are still hesitant regarding the AIFS, even though it is said they are ready to conduct some experiences in the area with some companies that might be interested.

In Italy the AIFS advantages consist of:

The reasonable issuing procedure duration (maximum 180 days);

The vastly covered area of application (international fiscal law issues connected with the investments of the non-residents and their transactions undertaken in Italy, the matters derived from tax treaties and European fiscal law and the Italian companies owned by foreign investors);

The possibility of receiving a certainty in connection with the respective de facto situation by using the AIFS mechanism for at least three years; the agreement may be renewed for the same period of time prior to its expiration.

The main disadvantage resides in the fact that there is a lack of details in the Italian legislation in regard with the competence of the fiscal authorities to inspect the booking accounts and documents of the tax payers prior to, during and after the AIFS issuing procedures. The same lack of details refers also to the way in which it is established whether any change of facts, circumstances or applicable law might lead to the early termination of the agreement. The general report of the 1999 AFI congress dedicated to the AIFS emphasized that the try of establishing an AIFS statistics failed because of the great diversity. Each country has its specifics and the solutions depend on the national issues, taxes and regions. The situation was described by using a famous verse: ''Some countries do, some countries don't, some will consider change and others won't."


Theoretically, the AIFS institution seems to offer the necessary means for reaching an early solution for juridical situations that may generate fiscal complications and being protected from the uncertainties created by the permanent amendments brought to the fiscal law. But why is the AIFS institution not so widely used although it seems to offer solutions to a lot of problems?

At a first glance we might be tempted to think that one of the disadvantages is the issuing fee, but in reality, if we read the statements of those who were implicated in this procedure, we will see that the greatest obstacle is the long waiting time for an AIFS to be issued. The lawyer Emilian Duca declared: "The AIFS issuing procedure takes a very long time. A client of ours had been waiting for 9 months prior to receiving an answer. And then the law has changed".

Gabriel Biris, another lawyer, had also a bad experience with a client of his who waited for 2 months the decision and in the end gave up. Mr. Biris recommends the use of AIFS only under special circumstances. "We very seldom recommend our clients choose anticipated fiscal solutions, especially when the risks of losing a lot of money are very high".

If we take a glance at the number of AIFS issued from the enforce date of the law to date, we easily realize that there is a disconnection between theory and practice. From 2007 to the spring of 2010 the fiscal authorities issued only 22 such solutions. According to the data communicated by NAFA, in 2008 only 11 AIFS were issued, in 2009 only 3 and in the first quarter of 2010 only 8. In addition to all these here comes the lack of confidence of the tax payers in the fiscal authorities. A study by "Deloitte" points out the bad experiences the tax payers have had with the fiscal agencies - 32% of them outlined the lack of cooperation from the authorities and the increased number of meeting and supplementary requests from the latter, as well as the tendency of prolonging the legal terms. All these further damage the relationship tax payer - fiscal authorities and implicitly the AIFS procedures.

Our analysis shows that one of the reasons because the AIFS is not so attractive in Romania is the great delayed answer from the fiscal bodies who speculate the legal possibility of extending the answering term because there is no limit for postponing. So, the time extension should be pointed out in order to avoid a 2 year waiting period starting with the application submittal.

The public servants should also be better trained and taught how to interact better with the tax payers, to become more open to the dialog with them and resolved to solve the problems of the applicant who needs an AIFS and not additional problems such as being "hunted" by the fiscal authorities only because he has applied for an AIFS that in the end he gives up because it is not favorable to him. Maybe, as time goes by, through common efforts, this situation will be sorted out and the AIFS will become what it is meant to be: a useful tool to be successfully used by the tax payer in his relationship with the fiscal authorities, with the tax payer being sheltered from the legal uncertainties connected with his economic transactions.


Government Ordinance no.92/2003 regarding the Fiscal Procedure Code (republished), Official Gazette no. 513 / July 31, 2007.

Government Decision no.529/2007 Procedure for issuing individual tax solution advance and advance pricing agreement, Official Gazette 395, June12, 2007.

Iacob, B. (2007). "The Anticipated Individual Fiscal Solution," The Financial Week 115.

Sova, D. (2011). Fiscal Law. Bucharest: C.H. Beck.


Spiru Haret University
COPYRIGHT 2012 Addleton Academic Publishers
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2012 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:National Agency of Fiscal Administration
Author:Mihu, Teodor
Publication:Economics, Management, and Financial Markets
Article Type:Report
Geographic Code:4EXRO
Date:Dec 1, 2012
Previous Article:Tax havens and the money laundering phenomenon.
Next Article:Factors that contribute to the formation of inflation.

Terms of use | Privacy policy | Copyright © 2020 Farlex, Inc. | Feedback | For webmasters