While the measure eliminates the minimum turnover tax, it introduces a new risk by limiting the deductibility of certain intra-group services.

This proposal could have major negative consequences, including fiscal discrimination against foreign investors and a distortion of market competition, according to an analysis by EY Romania.

Alex Milcev, Partner, Head of the Tax and Legal Assistance department at EY Romania, said: "If the new rules are applied indiscriminately, Romania risks sacrificing its competitiveness and sending a dangerous signal to foreign investors. It would be wiser to build a fair, coherent, and internationally aligned fiscal system."

EY suggests a real consultation with the business environment and the introduction of well-defined thresholds and exceptions to align the legislation with international best practices.

The proposal's stated goal is to increase state revenue and prevent multinational corporations from 'externalising' profits. However, the approach could effectively lead to a higher tax rate for foreign-capital firms compared to their domestic competitors, as multinational corporations rely heavily on know-how, infrastructure, and financing from parent and affiliated companies.

EY's analysis identifies seven key potential impacts, including higher operating costs for international businesses, possible legal disputes, and conflicts with EU law and bilateral investment treaties.

The new rule could also undermine existing advance pricing agreements with the National Agency for Fiscal Administration (ANAF).

While the authorities claim the new legislation is inspired by US and Polish models, EY's analysis points out that these countries have implemented significant applicability thresholds and exceptions.