Tax on dividends
2006-12-31

Tax on dividends

Tax on dividends that have been distributed must be paid by December 31^st, even if the dividends have not been paid to the shareholders by the end of the year.

According to the Fiscal Code, Romanian legal entities that pay a dividend to a Romanian legal entity are required to compute and withhold tax on incomes obtained from dividends at the same time when it is effected the payment of dividends to the shareholders. The withheld tax on dividends must be remitted by the 25^th inclusively of the following month for which the dividend is paid. In the case of alloted dividends, but that have not been paid yet to the shareholders by the end of the year in which the annual financial reports have been approved, the withheld tax on dividends must be paid by December 31^st of the respective year.

The applicable tax rate is to be established according to the shareholders' participation titles. Accordingly, in compliance with the provisions of the Fiscal Code, a Romanian legal entity that pays dividends to a Romanian legal entity is required to withhold tax and to remit the withheld tax on dividends to the state budget by applying a tax rate of 10% to the gross dividend paid. In the case of dividends distributed by a Romanian legal entity to a natural entity, starting with January the 1^st the applicable rate tax is of 16% of the gross dividend paid.