One of the common concerns for new entrepreneurs in Romania is the timing for a new company to distribute dividends. It is natural for business owners to be curious about the speed at which they can access their company's profits through dividends. Shareholders typically aim to receive their share of the profits at the earliest opportunity.

According to Romanian company law, the process is relatively quick as long as there is profit that can be distributed in your company. Let's examine the practical implications of this, as certain shareholders may desire a faster distribution of dividends into their accounts.

Applicable Rules for Romanian Companies to Pay Dividends According to Romanian Law

As per the current Romanian laws for 2024, a company registered in Romania has the option to distribute dividends on an annual basis, after the approval of their financial statements for the preceding year, or on a quarterly basis throughout the year. The regulations regarding the allocation of profits in the form of dividends are outlined in Law No. 31/1990, Law No. 82/1991, and the implementing Orders declared by the Ministry of Finance.

If a company in Romania is formed at the beginning, end, or any other point of the year, it can generally distribute dividends shortly after its creation. This is, of course, dependent on the company having profits that can be distributed to shareholders. However, if the company is operating at a loss and has not generated any profits, it will not be able to pay out dividends.

According to the relevant laws, businesses are allowed to distribute dividends on a quarterly basis throughout the year. This means that if the company meets the financial and accounting criteria, it can withdraw funds from its accounts before the end of the year.

A company based in Romania has the option to distribute dividends on a quarterly schedule.

Take, for instance, a scenario where a company is founded on January 1st and earns a profit in the first three months of the year (January to March). In such a case, the company is allowed to distribute dividends at the end of the first quarter. It should be noted, however, that in all situations involving quarterly dividend distributions, interim financial statements must be compiled. To be precise, once April rolls around, dividends can be distributed based on the interim financial statements that have been approved.

If the company's shareholders decide to do so, dividend distributions can be carried out every quarter.

It is important to remember that the approval of the company's dividend distribution policy must be obtained either through the company's Articles of Association or through a written decision by its shareholders.

Tax must also be paid on dividend income.

Furthermore, shareholders should be aware that  dividends are subject to taxes according to the tax laws in Romania.

The income tax rate for dividends in Romania is 8%, which is applicable to both resident and non-resident shareholders. The withholding tax mechanism is a crucial component of this tax system, as it requires Romanian companies to deduct the 8% income tax before distributing dividends to shareholders.

According to the source, resident shareholders are usually only required to pay a 8% tax on their dividend income, which fulfills their tax obligation. However, if individual shareholders' total annual income exceeds a specific government threshold, they must still declare this income in their yearly tax return and may also be subject to health insurance contributions.

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