Dividend Distribution in Romania from January 1, 2025

Entrepreneurs in Romania frequently ask about the timing of dividend distributions when starting a new company. They want to understand when they can access their company's profits through dividends. Shareholders aim to receive their share of profits as quickly as possible.

According to Romanian corporate law, the process moves relatively quickly, provided the company has distributable profits. We will explain this practically, as some shareholders want their Romanian companies to distribute dividends to their personal accounts even faster.

Applicable Rules for Dividend Distributions by Romanian Companies under Romanian Law

Based on current Romanian legislation effective for 2025, a Romanian company can distribute dividends annually after approving the previous year's financial statements or quarterly throughout the year. The regulations for profit distribution in the form of dividends are outlined in Law No. 31/1990, Law No. 82/1991, and the implementing decisions of the Ministry of Finance.

When a Romanian company is established at the beginning, end, or any time during the year, it can typically distribute dividends immediately after formation. However, this is only possible if the company has generated distributable profits. No dividend distributions are permitted during periods of loss.

According to relevant legislation, companies can distribute dividends quarterly. This means that if the company meets the financial and accounting criteria, they can withdraw money before the year ends.

A Romania-based company can distribute dividends every quarter.

For example, if a company is established on January 1 and generates profit in the first quarter (January - March), it can distribute dividends at the end of that quarter. It's important to note that interim financial statements must be prepared for all quarterly distributions. Dividend distributions can commence from April based on the approved interim figures.

Shareholders can decide to make dividend distributions quarterly.

The dividend policy must receive approval through the articles of association or a written shareholder resolution.

Taxation of Dividend Income

Shareholders must consider that Romanian tax legislation requires tax payments on dividends.

From January 1, 2025, Romania has increased the tax rate on dividend income from 8% to 10%.

This means dividends distributed after this date are subject to the 10% tax rate. However, dividends distributed based on interim financial statements prepared in 2024 or a modified fiscal year starting in 2024 remain taxed at the previous 8% rate.

Additionally, individuals receiving dividend income must contribute to health insurance (CASS) if their total annual income from sources other than salary exceeds a specific threshold. In 2024, this threshold stood at 19,800 Lei (six times the national gross minimum wage).

Romania imposes a 10% tax rate on dividends from January 1, 2025, regardless of whether shareholders are residents or non-residents. A key element of this tax system involves the withholding mechanism, where Romanian companies must withhold 10% income tax before distributing dividends to shareholders.

The 10% dividend tax withheld at source typically satisfies domestic shareholders' tax obligations. However, individual shareholders must declare this income in their annual tax returns, especially if their total annual income surpasses the government-established threshold, making them liable for health insurance contributions.

Please note that tax laws may change. Consult a tax advisor or review the latest official publications for current information.

We Can Help You in Romania

We can assist you as we currently do for all our clients. Email me at frjacobs@telenet.be or call me at +32 478 331 799.

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