The Competition Council recommends the National Agency for Public Procurement amend the legislation in the field so that Economic Interest Groupings (EIG) and European Economic Interest Groupings are expressly stipulated as potential bidders in public procurement procedures. A Council preliminary study reveals that economic interest groupings in Romania with the highest turnovers have as their object of activity “road and highway construction works” and were never able to participate in public tenders as EEIGs, but as associations of companies.
“None of the specific forms of association is more inclined towards anti-competitive behavior than others, be they joint ventures, cooperatives or economic interest groups. There is no reason therefore to regard EIGs/EEIGs with suspicion as long as competition legislation is respected. On the contrary, these forms of association could have beneficial effects on the economy, considering that they were designed specifically to facilitate transnational and interprofessional cooperation among economic operators, especially SMEs”, states Bogdan Chirițoiu, Competition Council president, quoted in a press release from the institution.
An EIG/EEIG is an association between two or more natural or legal persons, constituted for a fixed period of time in view of facilitating or developing the economic activity of its members, as well as improving the results of said activity.
Compared to other European states such as Germany or Belgium, where the number of EEIGs exceeds 500, EIGs/EEIGs are less known in Romania having been introduced into Romanian law later than other forms of association or other traditional legal instruments.
Subsequently, Romania currently has a low number of EIGs/EEIGs, with 83 interest groups reported in 2022, of which 68 are EIGs and 15, EEIGs.
Suspicion of profit taxing avoidance
This situation is primarily generated by the legislation that does not regulate the activities and responsibilities of EIGs/EEIGs members, especially concerning participating in tenders and accessing non-reimbursable funds or state aid schemes.
This can lead to different interpretations and uncertainty regarding the legal status and the rights or obligations of these types of associations. Consequently, there is a reluctance on the part of companies towards this form of association, since they “fear” possible sanctions in the absence of very clear legislation, often turning to recommendations of financial-accounting and legal experts.
The Council’s recommendation, publicly transmitted through a press release, comes after the completion of a preliminary study on economic interest groupings which concludes that EEIGs do not evade profit taxation.
“The transfer of revenues and expenditure, of profit or loss respectively, to the founding members of the grouping in the cases where the founders are foreigners and have chosen to work on a certain project without representation in Romania or without involving the representation, may have the effect of evasion from taxation in Romania of the profit obtained here and its transfer in gross form to the founding enterprises. This concern regarding the activity of operational EEIGs was eliminated with the help of information provided by members of these groups, based on requests for information sent by the competition authority”, state the authors of the analysis.
The legal notion of the economic interest grouping (EIG), as well as that of European economic interest grouping (EEIG) were introduced in the Romanian legislation by Article V of Law 161/2003 concerning some measures to ensure transparency in the exercise of public dignities, public functions and in the business environment, the prevention and sanctioning of corruption, the first notion representing in fact a transposition at national level of the EEIG model from the Council Regulation no. 2137/85, within the limits allowed by this regulation, but under the specific terms of the Romanian legislative system, in the form of an entity under domestic law, but lacking the cross-border aspect of EEIGs.
33 EIGs and 14 EEIGs are operational in Romania
Of the 83 EIGs and EEIGs founded in Romania, only 33 EIGs and 14 EEIGs remain operational.
The majority of them do not have commercial purpose, 10 EIGs (approximately 30% of the total operational EIGs) and 6 EEIGs respectively (approximately 43% of the total operational EEIGs) having submitted financial statements to the National Agency for Fiscal Administration (NAFA).
In the case of EEIGs, these are foreign companies that chose not to open offices in Romania and participated jointly in the completion of an objective, such as infrastructure works.
The EIGs/EEIGs that recorded the highest turnovers between 2016 and 2022 operate in the field of constructions, all of them having as main field of activity the CNAE 4211 “Roads and highways construction works”.
The study also revealed that, in the case of EIGs/EEIGs operating in constructions, the objective of the association is the result of winning a public tender.
The contracting authorities did not accept a direct contract with the EIG/EEIG, but with the association, through its leader, since the association consisting of founding members of the interest group had participated in the public procurement procedure and contract procedures (reception of works, making payments, etc)
Of the 15 EEIGs, 11 were founded by companies from Italy, some in collaboration with companies in Romania, the other four EEIGs each having founders from various other countries.
The main field of activity of EEIGs, the main CNAE declared:
- 3 EEIGs, representing 20% of the total, operate in the field “Business and management consulting activities “
- 2 EEIGs operate in the field “Roads and highways construction works” and two EEIGs operate in “Real estate development (promotion) “
Germany, the most EEIGs, economic interest groupings enjoy generous taxation as well
The study contains a comparative analysis at European level, detailing how governments treat these groups.
Germany stands out with a long tradition of cooperation and collaboration between companies in various industrial sectors, a spirit of cooperation encouraged and supported by the government and business organizations, which facilitates the formation of EEIGs. The German government and local authorities provide support and incentives for the formation and development of European economic interest groupings (EEIGs). These incentives may include financing, assistance in accessing resources and markets, as well as administrative facilities. EEIG tax incidence in Germany is among the most advantageous in the EU, in the sense that EEIGs established in this member state do not have to pay corporate tax or advertising tax, while tax deductions for operating expenses are higher than in other member states.
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