The Romanian National Agency for Fiscal Administration (ANAF) recently issued a tax assessment decision to the Russian oil giant Lukoil, following a tax inspection, requiring it to pay an additional tax in the total amount of over RON 50 million for profits obtained in 2021 from the sale of petroleum products, including exports.
Lukoil's main businesses in Romania are refining and fuel distribution. The company depends on imported raw materials through the Caspian Pipeline Consortium (CPC) terminal in the Russian port of Novorossiisk. The port is exempt from EU sanctions, and it supplies the most important Romanian refinery, Petromidia, owned by the Kazakh group KMG.
The tax assessment decision was issued by the Ploiești Regional Directorate General of Public Finances within ANAF to the local branch of Litasco, the Swiss-registered oil and petroleum trading division of the Lukoil group. The Bucharest division, which reported a profit of only RON 250,000 in 2021, oversees Lukoil’s local petrol station network and the Petrotel refinery in Ploiesti, according to Profit.ro.
The two reported a net profit of over RON 182 million for 2021, according to termene.ro, the bulk of which, over RON 160 million, came from fuel stations, which had a total turnover of almost RON 8 billion in the same year. The refinery obtained a net profit of around RON 22 million in the same year, with a turnover of over RON 1 billion.
Following a fiscal audit, ANAF inspectors concluded that Litasco SA Geneva Bucharest Branch, the permanent headquarters in Romania of Litasco Geneva, "omitted the proper recording in accounting and declaration of certain operations carried out in the period January-June 2021, namely: purchases of raw materials (crude oil) and services from the domestic, intracommunity and external market; the processing of raw materials and transformation into energy products; deliveries of finished energy products to the domestic, intracommunity, and external market.”
For the aforementioned operations, ANAF established an additional tax base of RON 317.2 million for Litasco Bucharest and calculated a profit tax of RON 50 million. The tax authority also ordered the company to take several accounting and reporting measures. Litasco Geneva challenged the measures in court.
The company attempted, without success, to obtain a suspension of its execution until the completion of the main lawsuit in which it seeks to annul the measures. Litasco Geneva argued that its Bucharest branch was exclusively tasked with providing logistics and storage support services and that the activities of purchasing crude oil, processing it, and selling the energy products resulting from refining are carried out by the parent company.
The group also stated that the execution of the measures imposed by ANAF would disrupt the business model of the entire group and would also endanger the activity of the Petrotel Lukoil refinery. Litasco concluded that "ultimately, this affects national and European energy security, as the danger involves a major public interest, especially in the context of the current energy crisis.”
The court rejected the request for suspension of the execution of ANAF's measures in the first instance, with Litasco having the option to appeal.
(romania-insider.com, February 7, 2023)
