As we start to navigate through 2024, understanding the intricate details of dividend tax reporting in Romania becomes crucial for both companies and individual shareholders. This article explains the essentials of Romanian dividend taxation, spotlighting the critical changes and ongoing requirements that shape the current framework.
Dividends in Romania are defined under the Romanian companies law (Law no. 31/1990), stipulating that both individuals and legal entities holding shares in a company are entitled to dividends. These dividends represent a portion of a company’s profit allocated to its shareholders or associates, proportional to their share ownership.
However, only profit-earning entities are eligible to distribute dividends, a decision resting with the company’s management. Typically, fledgling enterprises opt to reinvest their profits, accelerating growth rather than distributing dividends immediately.
For 2024, the Romanian tax regime mandates an 8% income tax on dividends for individuals, a duty that must be fulfilled primarily by the distributing company rather than the recipient. This obligation requires companies to withhold and remit the tax to the state budget by the 25th of the month following the dividend disbursement.
An additional financial consideration for Romanian tax residents is the health insurance contribution (CASS), calculated at 10%, but only applicable when annual income from various sources surpasses a defined threshold.
Here’s a detailed explanation:
CASS stands for the term “Contribuția de Asigurări Sociale de Sănătate”, which is basically the health insurance contribution, a mandatory financial charge for Romanian tax residents. It’s designed to fund the individual’s healthcare services within the national health system.
Calculation basis:
The rate for calculating CASS is set at 10%.
However, for dividend income this is only applied if the individual’s total annual income from non-salary sources (like dividends, rental income, interest, etc.) exceeds a certain threshold.
For 2024, the primary annual income threshold for triggering the CASS obligation is 19,800 lei. This figure corresponds to six times the national gross minimum wage, which is currently established at 3,300 lei per month.
This means that if an individual’s total annual income from the aforementioned sources reaches or surpasses 19,800 lei in a year, they are required to contribute to CASS.
Additional thresholds:
Beyond the base threshold, there are two more levels that influence the calculation of CASS:
Capped taxable base: The taxable base for calculating CASS is capped at these thresholds (6, 12, or 24 times the minimum wage), meaning that even if an individual’s income significantly exceeds these limits, their CASS liability won’t exceed 10% of the threshold amount.
Fixed contribution: For example, at the 19,800 lei threshold for 2024, the fixed annual contribution would be 1,980 Lei (10% of 19,800 Lei).
The CASS is due by individuals earning above the threshold levels from various non-salary income sources. It’s worth noting that this is independent of whether the individual also has salaried income and pays health insurance through their employment.
If for dividends paid by Romanian companies there is an income tax withholding obligation by the paying company, the responsibility for declaring and remitting the health insurance for dividends lies with the individual beneficiaries.
They must file an annual tax return, a process that also encompasses the projection of Romanian-sourced income for the forthcoming year. For 2024, the deadline for such filings is May 25, 2025, underscoring the importance of foresight in tax planning.
For dividends originating outside Romania, the application of double tax treaties is paramount. These agreements ensure that dividend taxes paid abroad are credited against Romanian tax liabilities. Unlike domestic dividends, the individual recipient bears the full responsibility for declaring and paying the requisite taxes through their annual tax return.
The Romanian tax authorities continue to refine the fiscal landscape, responding to economic dynamics and international tax norms. For entities and individuals engaged in dividend distribution or receipt, understanding these changes is not just beneficial but essential. It ensures that their investments are both profitable and compliant with the current tax statutes, safeguarding against unforeseen tax obligations.
Whether you’re a corporation distributing dividends or an individual shareholder, keeping informed and proactive in tax matters is crucial. As 2024 unfolds, staying aligned with the latest tax regulations will be key to maximizing your financial outcomes while remaining in good compliance with your dividend tax reporting obligations.
Founded in 2008 as TAX IQ, our company has gained extensive expertise over the years, allowing us to effectively utilize our experience to benefit our clients’ best interests. Over time, we have succeeded to build a solid reputation as trusted tax advisor for the entire community of Romanian expats.
Founded in 2008 as TAX IQ, our company has gained extensive expertise over the years, allowing us to effectively utilize our experience to benefit our clients’ best interests. Over time, we have succeeded to build a solid reputation as trusted tax advisor for the entire community of Romanian expats.