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Dividends taxation in Romania – FAQ

In this article we provide answers to the most frequently asked questions about dividends taxation in Romania. The clarifications provided below are written by the best tax consultants and experts in company law matters.

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Dividends taxation in Romania

As general rule, according to the Romanian legislation currently in force (art. 67 of the Companies Law no. 31/1990) the business profit of a company may be distributed to its shareholders in proportion to the number of shares they hold in that company. The part of the company’s profit which is distributed to a given shareholder is generally called as dividend.

In the following, we will answer a number of important questions regarding dividend taxation in Romania. But first let’s understand what dividends are as per the Romanian legislation?

As mentioned above, the persons (individuals or legal persons) who have the legal right to receive dividends from a company are the legal shareholders within that company. Dividends are the share which a shareholder is entitled to receive from the value of the profit that the company records at the end of the quarter or at the end of the year in its financial statements (interim or annual financial statements).

The amount of dividends due to each shareholder must be determined according to the number as well as the specific type of shares held by each shareholder in the company.

Usually dividends are paid in cash, but they can also be issued in kind – most often in the form of additional equity (e.g., new shares) in the company. We recommend getting a good understanding of the Romanian tax regime applicable to dividends, so you can take the best decisions regarding the cash flow both at the level of the company, and at the level of the shareholders receiving the dividend income.

The payment of dividends is regulated in the Romanian legislation by Law no. 31/1990, known also as the Company Law. In addition, for companies listed on the Romanian Stock Exchange Market (i.e., Bucharest Stock Exchange, or BVB), the Law no. 297/2004 on the capital market also applies.

It is important to know that, unlike Romanian state-owned companies which, according to the applicable laws (i.e., provisions of Ordinance 64/2001) have the legal obligation to distribute more than half of the net profit in the form of dividends, private companies are not required by law to distribute dividends to their shareholders. Therefore, in the privately owned companies the decision remains entirely with the shareholders themselves, or with the board of directors, as the case may be.

Both the value and the form of dividends paid by a Romanian company are established via the general meeting of shareholders of that company, or by the board of directors, as the case may be. Nevertheless, this can be done only after the financial statements for the financial period ended (quarter or annual) is approved.

One can never pay dividends during a financial period. If the payment of dividends to shareholders is significantly delayed after its approval, then the paying company may become liable to pay interest to the beneficiaries of the dividends.

It is prohibited to distribute dividends from fictitious accounting profits, or when the company incurs a loss during the respective financial period.

Dividends are initially calculated from the entire accounting profit and are afterwards distributed to the company’s shareholders according to the percentage value of the shares that each of them holds within the company. For example, if a shareholder holds 40% of the total company shares, then he should receive the same 40% of the amount of dividends to be paid.

From the Romanian tax perspective, dividends are deemed taxable income at the level of the beneficiary. Thus, for any dividend payment there is also an obligation to pay tax and declare this income to the Romanian tax authorities. The Romanian tax legislation in force (art. 91 of the Romanian Tax Code – i.e., Law no. 227/2015) includes dividend income in the category of investment income.

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In the case of dividends received from a Romanian company, according to the Romanian Tax Code’s provisions, both the calculation and payment of the income tax due on dividends must be done by the company paying the dividends.

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Other types of income that are assimilated to dividends from a tax perspective are the following:

  • earnings obtained by individuals from holding equities in public investment funds, as defined by the relevant legislation in place;
  • income in cash or in kind distributed by agricultural companies having legal personality to a participant in that company as a consequence of holding its shares.

Other resources:
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