Romanian taxes on dividends in 2024 – explained in details
The Romanian tax treatment of income obtained from dividends has been the subject of several changes over time. These changes were enacted into the Romanian Tax Code by successive Romanian governments. The latest and most important of them was the increase of the tax rate from 5% to 8% as of 1 January 2023.
Below you can find out all the necessary information about Romanian taxes on dividends due in 2024, and the obligations you have regarding tax reporting of dividend income, both as a company and as individual shareholder. All of them in the article below.
Explaining how dividends are defined in the Romanian law
According to Romanian companies law (Law no. 31/1990), any individual or legal person may benefit from the payment of dividends when he/she owns shares in a company, no matter if it is a limited liability company, or a joint stock company.
Specifically, as per Romanian law, dividends constitute part of the profit that a company makes during a financial period (e.g., during a year). This profit can be distributed to each shareholder or associate in that company, in proportion to the number of shares which the shareholder or associate owns.
Therefore, according to the same law, companies that can pay dividends are only those that book a profit at the end of their financial year. On the other hand, even if they make a profit, not all companies pay dividends. The decision to pay dividends always stays with the company’s management.
Among those who do not rush to pay dividends are usually small companies. These are at the beginning of their business development, and want to reinvest all profits for development purposes. Reinvestment of profit allows a company to develop at a more rapid pace.
Basic rules for Romanian taxation on dividends in 2024
Income tax
- According to the Romanian tax legislation in force, dividends received by individuals (natural persons) represent taxable income. Thus, for any payment of dividend to individual shareholders there is an obligation to declare them for tax purposes. In the case of dividends paid by Romanian companies, however, the obligation to declare and pay the income tax stays with the company that pays the dividend, and not with the income beneficiary. Thus, an income tax of 8% due on the gross dividend must be withheld and paid to the state budget by the paying company of that dividend;
- The deadline until which a Romanian company has to declare and pay the income tax due (8%) is the 25th of the month following the one in which the dividends were paid to the individual shareholder;
- In addition to the income tax, any Romanian tax resident individual who earns dividend income is required to pay the health insurance contribution (CASS). The health insurance contribution must be calculated at a rate of 10%. However, the contribution applies only if the total annual income reaches a certain threshold. Please see more details below on how this contribution applies.
Health insurance contribution (CASS)
More precisely, an individual tax payer owes health insurance contribution only if his total income obtained from sources other than salary, altogether (i.e., dividends, income from the sale of shares, income from rental, interest income, etc.) reaches the minimum threshold of 6 national gross minimum wages during a tax year.
For example, for 2024 this threshold is set at the level of 19,800 Lei (i.e., 6 x 3,300 lei. The amount of 3,300 lei is the minimum national monthly wage established by the government for year 2024).
This is the first threshold for which the health insurance contribution is due and is set at 6 national gross minimum wages/year. If this threshold is reached, the health insurance contribution is capped to 10% of this amount. This means a fixed annual contribution of 1,980 lei for the income obtained in 2024.
In addition, the second threshold applicable is set at 12 minimum wages per economy, while the third (and last) threshold is of 24 minimum wages per economy.
Thus, if the value of the annual taxable income reaches one of the two higher thresholds, the contribution will be calculated at that threshold (12 or 24 minimum wages per economy).
Whenever the contribution is due, it must be calculated on the taxable base capped at 6, 12 or 24 minimum wages, and not on the actual income derived. This means that, even if during 2024 someone derives income that far exceeds the threshold of 24 gross minimum wages, that person will pay the health insurance contribution (CASS) on the basis of 24 minimum wages and not on the actual income realized.
Another important detail is that the health insurance contribution is due by the beneficiary of income even if he/she also has the employee status under which he already pays this contribution during the year.
The tax reporting for the purpose of paying the health insurance contribution must be done by the individual beneficiary of income. This must be done through filing the annual tax return. For income generated in 2024, the annual tax return filing deadline is 25 May 2025, while for year 2023 the reporting deadline was on 25 May 2024.
Through the same annual tax return an individual must also declare the estimated income of Romanian sources to be realized during the current year (the year in which the declaration is filed). If one estimates that he/she will be deriving income subject to taxation during that year, taxes will be due in advance for certain types of income.
Romanian taxes on dividends paid from abroad
In the case of taxation of dividends paid from abroad, it is important to correctly apply the double tax treaties that Romania has signed with other states. Generally, in all situations where, according to the applicable treaty, the dividend income is taxed in the source state, Romania, as the state of residence of the beneficiary individual, has the obligation to recognize the tax already withheld by the other state and to deduct it from the amount of tax due in Romania.
Dividends paid from abroad are subject to the same tax treatment (8% income tax, plus CASS 10% due on the annual capped thresholds described above), the difference being the application of the convention for avoiding double taxation, where the case, and also the method of declaring the income.
More specifically, given that the company which distributes the dividends is not resident in Romania, the obligation to withhold, declare and pay any Romanian taxes on dividends at source does not apply.
As a consequence, the obligation to declare and pay the income tax rests entirely with the beneficiary of income. Therefore, the individuals deriving such income have the obligation to declare and pay both the income tax (8%), as well as the health insurance contribution (CASS). The declaration and payment of taxes for the dividends received from abroad must also be done through the annual tax return.
You can find more guidance on how the double tax avoidance works in our Expat Tax Guide.
Other aspects
As a basic rule, according to the Companies Law currently in force (Law no. 31/1990 republished and updated) dividends are distributed only to the individuals or legal entities who have the status of associate or shareholder within a company, and can be both under the form of cash, shares, or under the form of goods (although very rarely).
The distribution of dividends is not mandatory, and this represents the decision of the board of directors or the general meeting of the associates of the respective company, as the case may be.
It is also important to know that in the past Romanian companies were allowed to distribute dividends only at the end of the financial year. But starting with July 15, 2018, when the government amended the Companies Law, the dividend payment can also be done quarterly. Therefore, shareholders no longer have to wait until the end of the year to collect their share of the company’s profit, but they can do so after the end of each quarter.
Share:
More resources
Need assistance?
TAX IQ
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.