Romania Adjusts Taxation Of Dividends At 10% For Residents, Non-Residents As Of Jan 1, 2009

The European Commission sent a letter of formal notice to Romania in May, the first stage of infringement procedures, concerns the taxation of dividends which are paid to companies, resident elsewhere in the EU or in the European Economic Area/European Free Trade Association countries.

Domestic dividends on participations of 15% or more are tax exempt. In contrast, Romania levies a final withholding tax of 10% on dividends paid to companies resident in Norway and of 16% on similar outbound dividends paid to companies resident in the other EEA/EFTA countries, the Commission said.

Higher taxation of outbound dividends paid to companies may result in a restriction of the free movement of capital. Similarly, in the case of controlling participations by the foreign companies, it may result in a restriction of the freedom of establishment.

Concerning the higher taxation of dividends paid to companies, the Commission already decided to refer Belgium, Spain, Italy, the Netherlands and Portugal to the European Court of Justice in Jan 2007.