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24 septembrie 2023

Taxation for the company registered in Romania: distribution of the dividend and the dividend tax

| Company registration in Romania | Company incorporation in Romania | Setting up a company in Romania | Firma in Rumänien gründen | Firmengründung Rumänien | Unternehmensgründung Rumänien | Aprire societa in Romania | Costituzione societa Romania | Aprire unna ditta in Romania | Creer societe en Roumanie | Ouvrir une entreprise en Roumanie | Creation societe Roumanie |



As of 1st January, 2023, the tax quota on gross dividends distributed or paid by the Romanian legal companies, as well as on dividends distributed or paid to non-residents will be 8% (increasing from 5% applicable until the end of 2022).


What it is important to know about the dividend tax?

The profit obtained by the companies may be distributed as dividends to the company's shareholders, being subject to the taxation in Romania. In most of the cases, the dividends are approved and paid yearly, after the financial statements for the previous year has been prepared and approved by the general meeting of the shareholders, but it can be distributed also on a quarterly basis, during the financial year.

The company's shareholders are entitled to cash dividends, only after the dividend tax of 8% is determined by the company and withheld in order to be paid to the Romanian tax authority.

The dividend tax is, in principle, a withholding tax, meaning that when a Romanian company distributes or pays dividends to a Romanian legal entity, the company must withhold, declare and pay the dividends tax to the state budget.


The distribution of the dividends

The company's shareholders may decide distribution and payment of the company profit as dividends yearly, after the financial statements for the previous year has been prepared and approved by the general meeting of the shareholders or on quarterly basis, as the Companies law no. 31/1990 provides, considering that such distribution complies the following requirements: 

  • the quarterly distribution of profits may be done within the net quarterly profit margin, plus any retained incomes and withdrawn amounts of the reserves available at that point;

  • if there are losses reported from previous years, the amount that can be distributed in the form of dividends is reduced, and only the remaining income can be allocated, meaning that in the first place is needed to cover the losses, and then to distribute the dividends;

  • Companies that choose the quarterly distribution of dividends will have to prepare temporary financial statements approved by the general meeting of the shareholders of the company;

  • The sums relating to temporary dividend distributions need to be registered in the accounts as receivables from stockholders or company associates.


Do the foreign investors have other payment duties in the country of origin?

In the situation a foreign investor who runs a business in Romania cashed dividends from this company, he should consider the double tax treaties signed by Romania with other countries in order to avoid paying taxes in both countries. For this, it is strongly recommended for an accurate response to consult a tax consultant even from Romania, event from the country of origin. 


Based on the double tax treaties signed by Romania for avoiding the double taxation on income both in Romania and in each country that has signed a bilateral agreement with Romania, in principle (but not in all cases), it is applied the deduction by the state of residence of the tax calculated and paid in Romania, while the subject will pay in the state of residence only the positive difference between the tax quota in the state of residence and the tax quota paid in Romania.


The countries which signed double taxation treaties with Romania for avoiding the double taxation are the following: Albania, Armenia, Algeria, Australia, Azerbaijan, Austria, Belgium, Belarus, Bangladesh, Bulgaria, Bosnia and Herzegovina, Canada, China, Cyprus, Croatia, Czech Republic, Denmark, Ecuador, Egypt, Ethiopia Estonia, Finland, France, Germany, Georgia, Greece, Hungary, Iceland, India, Indonesia, Ireland, Iran, Israel, Italy, Japan, Jordan, Hong Kong, South Korea, Kazakhstan, North Korea, Kuwait, Latvia, Lebanon, Luxembourg, Lithuania, Macedonia, Malta, Malaysia, Mexico, Moldova, Morocco, Namibia, Nigeria, the Netherlands, Norway, Philippines, Pakistan,  Poland, Portugal, Qatar, Russia, Singapore San Marino, Saudi Arabia, Slovakia, Serbia, South Africa, Slovenia, Spain, Sudan, Sri Lanka, Switzerland, Sweden, Syria, Tajikistan, Tunisia, Thailand, Turkey, Turkmenistan, UK, the UAE, United Kingdom, the USA, Uzbekistan, Uruguay, Vietnam and Zambia.


The double taxation treaties signed by Romania with these countries are of very high importance in order to stimulate the investments in Romania, aiming the protection of the investors by avoiding paying the taxes twice for the same incomes, once in the state of residence and once in Romania


Do you know other information about dividend tax in Romania? Feel free to contact us.


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