Dividend Taxation in Romania in 2026: What Every Foreign Business Owner Must Know

Introduction

One of the most consequential — and most frequently misunderstood — aspects of doing business in Romania as a foreign owner is how profit is taxed when it leaves the company and reaches the shareholder. The corporate-level tax (whether 16% corporate income tax or the micro-enterprise turnover tax) is only the first layer. When the remaining profit is distributed as dividends, a separate and additional tax applies. From 1 January 2026, that dividend tax rate is 16% of the gross distribution. For individual shareholders, a further health insurance contribution (CASS) may also be triggered. And for foreign shareholders, the dividend must then be reported in the country of tax residence, where additional taxation may apply unless a double tax treaty provides relief.

The result is that the frequently advertised headline of “1% tax in Romania” — referring to the micro-enterprise turnover tax — dramatically understates the real tax burden of extracting profit as a foreign business owner. The actual cost depends on the company-level tax, the dividend tax, possible CASS, any applicable treaty, and the shareholder’s home-country tax treatment. Understanding the full chain is essential for financial planning, pricing, cash-flow management, and for making an informed comparison between Romania and other jurisdictions.

This guide explains every dimension of dividend taxation in Romania as it applies to foreign business owners in 2026: the rate, the withholding mechanism, the conditions for distribution, the treatment of individuals and corporate shareholders, CASS, treaty relief, the EU parent-company exemption, interim dividends, the complete tax chain with a worked example, and the mistakes to avoid.

The Romanian Dividend Tax Rate in 2026

From 1 January 2026, the standard Romanian tax on dividends is 16% of the gross amount distributed. This rate applies to dividends paid to individual shareholders (Romanian and foreign), to Romanian corporate shareholders, and to foreign corporate shareholders, unless a specific exemption or a more favourable treaty rate applies.

The 16% rate represents a significant increase from the previous rate of 8% that applied until the end of 2025. Foreign business owners who structured their Romanian operations under the earlier rate must update their financial models and distribution strategies accordingly. The doubling of the dividend tax rate has a material impact on the total effective tax burden of earning and extracting profit from Romania.

It is important to understand that the 16% dividend tax is a separate tax from the corporate-level tax. A company first pays corporate income tax (16% of taxable profit) or micro-enterprise tax (1% of turnover) on its earnings. The remaining after-tax profit can then be distributed as dividends. When it is distributed, the 16% dividend tax applies to the gross amount of the distribution. These are two distinct taxes, applied at two different stages: one at the company level and one at the shareholder level.

Who Withholds the Dividend Tax

The Romanian company paying the dividends is responsible for calculating, withholding, and remitting the dividend tax to the Romanian tax authority (ANAF). The mechanism works as follows:

Calculation. The company calculates 16% of the gross dividend amount approved for distribution.

Withholding. The company deducts the tax from the dividend before paying the net amount to the shareholder. The shareholder receives the dividend after tax.

Declaration and payment. The company declares the withheld tax through the relevant tax declaration and remits the amount to the state budget by the 25th of the month following the month in which the dividend was paid. If dividends are declared but not paid within a specified period, the tax obligation arises at the end of that period regardless.

The foreign shareholder does not need to calculate or remit the Romanian dividend tax personally — the obligation is discharged by the Romanian company at source. However, the shareholder must retain documentation of the withholding (the tax certificate issued by the company) for use in their home-country tax return and for claiming any applicable double tax treaty credit.

When Can Dividends Be Distributed

Dividends cannot be distributed simply because the company has cash in its bank account. Romanian company law imposes specific conditions:

Approved financial statements. Dividends are distributed from the net profit shown in the company’s annual financial statements, which must be approved by the shareholders (asociați for an SRL, acționari for an SA) through a formal resolution. The financial statements must be filed with the tax authority and the trade registry.

Coverage of prior losses. If the company has accumulated losses from previous years, the current year’s profit must first be used to cover those losses before any dividends can be distributed.

Legal reserves. Romanian law requires companies to allocate at least 5% of annual profit to a legal reserve fund until the reserve reaches 20% of the company’s share capital. This allocation reduces the amount available for distribution.

Shareholder resolution. A formal resolution of the shareholders must approve the distribution, specifying the amount and the payment terms.

No fictitious dividends. Distributing dividends in excess of the company’s distributable profit is prohibited. Shareholders who receive fictitious dividends may be required to return them, and the company’s directors may face personal liability.

These requirements are not mere formalities. ANAF audits and commercial-court proceedings regularly examine whether dividend distributions were lawful. Foreign business owners should ensure that every distribution is preceded by proper financial statements, a shareholders’ resolution, and confirmation that the distributable profit exists.

Dividends Paid to Individual Shareholders

When a Romanian SRL or SA distributes dividends to an individual shareholder — whether Romanian or foreign — the treatment is as follows:

16% withholding at source. The company withholds 16% of the gross dividend and pays the net amount (84% of the gross) to the individual.

Final tax in Romania. For most individual shareholders, the 16% withholding is the final Romanian income tax on the dividend. The individual does not need to include the dividend in a Romanian annual tax return for income tax purposes (though the CASS position must be assessed separately).

CASS may apply. In addition to the 16% dividend tax, individual shareholders may owe CASS (contribuția de asigurări sociale de sănătate — the health insurance contribution) on their dividend income. CASS is covered in detail in the next section.

Foreign shareholders: home-country reporting. A foreign individual shareholder who is a tax resident of another country must typically declare the Romanian dividend income in that country’s tax return. The 16% Romanian withholding tax can usually be credited against the home-country tax liability under the applicable double tax treaty, avoiding or reducing double taxation.

CASS Health Insurance Contribution on Dividends

The CASS (health insurance contribution) on dividend income is one of the most misunderstood elements of Romanian dividend taxation. It is a separate obligation from the 16% dividend tax, applies to individuals, and is calculated under its own rules.

Who owes CASS. CASS on dividends applies to individuals who are Romanian tax residents and who receive dividend income (together with certain other categories of non-salary income) exceeding the annual threshold. Foreign individuals who are not Romanian tax residents are generally not subject to Romanian CASS on dividends, though this depends on their specific tax-residence and social-security position.

The threshold. In 2026, CASS becomes due when the individual’s total annual income from dividends and certain other passive sources exceeds RON 24,300 (approximately €4,860). This threshold is linked to a multiple of the minimum gross salary.

Calculation bases. CASS is not calculated as 10% of the entire dividend amount. Instead, the 10% rate is applied to one of three fixed contribution bases, depending on total annual income:

The CASS is capped: even if the individual receives €1,000,000 in dividends, the maximum CASS liability is RON 9,720 (approximately €1,944). This cap makes the CASS burden proportionally small for larger distributions, but it adds a meaningful cost for small and medium-sized distributions.

Filing. Individuals liable for CASS on dividends must file a personal tax declaration (declarația unică — the single declaration) with ANAF and pay the CASS by the statutory deadline. The CASS is not withheld by the company — it is the individual’s personal obligation.

Practical impact. For a Romanian-resident shareholder receiving RON 100,000 in dividends: the company withholds RON 16,000 (16% dividend tax), the shareholder receives RON 84,000, and the shareholder separately owes CASS of RON 4,860 (10% of the RON 48,600 base, assuming total income falls in the second bracket). The total cost is RON 20,860, or approximately 20.9% of the gross distribution.

Dividends Paid to Foreign Individual Shareholders

When a Romanian company pays dividends to a foreign individual shareholder (a person who is not a Romanian tax resident), the following rules apply:

Standard withholding: 16%. The default Romanian withholding rate on dividends paid to non-residents is 16%. The company withholds this amount before paying the net dividend to the foreign shareholder.

Double tax treaty relief. If the foreign shareholder is a tax resident of a country with which Romania has a double tax treaty, the treaty may provide a reduced withholding rate — commonly 5%, 10%, or 15%. To claim the reduced rate, the shareholder must provide the Romanian company with a valid certificate of tax residence (certificat de rezidență fiscală) issued by the tax authority of the shareholder’s country of residence. The certificate must be valid for the year in which the dividends are paid.

Beneficial ownership. The reduced treaty rate is available only to the beneficial owner of the dividends. If the recipient is an intermediary or nominee rather than the true economic beneficiary, the treaty rate may not apply.

Without a valid certificate. If the foreign shareholder does not provide a valid certificate of tax residence before the dividend is paid, the Romanian company must apply the domestic 16% rate. Claiming the treaty rate retroactively is possible through a refund application to ANAF, but the process is administratively burdensome and time-consuming.

Home-country taxation. The foreign shareholder must typically declare the Romanian dividend income in the tax return of their country of residence. The Romanian tax withheld can generally be credited against the home-country tax liability under the treaty’s elimination-of-double-taxation article. The net outcome depends on the home country’s tax rate: if it is higher than the Romanian withholding rate, the shareholder pays the difference; if equal or lower, the Romanian withholding may fully satisfy the combined obligation.

CASS. Foreign individuals who are not Romanian tax residents are generally not subject to Romanian CASS on dividend income. However, individuals who are Romanian tax residents (regardless of nationality) are subject to the CASS rules described above.

Dividends Paid to Foreign Corporate Shareholders

When a Romanian company distributes dividends to a foreign corporate shareholder (a company registered abroad), the treatment depends on the relationship between the two companies and the jurisdictions involved:

Standard withholding: 16%. The default Romanian withholding rate is 16% on dividends paid to foreign companies.

EU/EEA participation exemption. Dividends paid by a Romanian company to a parent company resident in an EU or EEA member state may be fully exempt from Romanian withholding tax if the following conditions are met:

• The parent company holds at least 10% of the share capital of the Romanian company.
• The holding has been maintained continuously for at least one year at the date of distribution (or the parent commits to maintaining it for one year).
• The parent company is subject to corporate income tax in its home member state without being exempt.
• Anti-abuse conditions are satisfied (the arrangement must not be an artificial structure designed primarily to obtain the tax advantage).

If all conditions are met, the dividend is paid gross — no Romanian withholding tax applies. This exemption implements the EU Parent-Subsidiary Directive and is one of the most significant tax planning tools for foreign corporate investors in Romania.

Treaty relief. If the EU/EEA exemption does not apply (for example, because the parent is in a non-EU/EEA country, or because the holding is below 10%), the applicable double tax treaty may still reduce the withholding rate below 16%. Common treaty rates for corporate shareholders with substantial holdings are 5% or 10%.

Documentation. To claim the exemption or the reduced treaty rate, the foreign company must provide the Romanian subsidiary with a certificate of tax residence and, for the participation exemption, evidence of the shareholding percentage and duration. These documents should be in place before the distribution date.

Dividends Between Romanian Companies

Dividends distributed between Romanian companies are also subject to the 16% withholding rate by default. However, the same participation-exemption logic applies domestically:

Exemption conditions. If the Romanian recipient company holds at least 10% of the share capital of the distributing company and has held this participation continuously for at least one year, the dividend is exempt from the 16% tax.

Practical relevance. This exemption is important for Romanian holding structures and for cases where a foreign investor holds Romanian operating companies through an intermediate Romanian holding company. The exemption ensures that dividends can flow up through the Romanian chain without additional tax before the final distribution to the ultimate shareholder.

Double Tax Treaties and Dividend Withholding

Romania has signed over 90 double tax treaties with countries worldwide. These treaties are directly relevant to dividend taxation because they may reduce the Romanian withholding rate below the domestic 16%.

How treaty rates work. Each treaty specifies a maximum withholding rate that Romania may apply to dividends paid to residents of the treaty-partner country. The rate often depends on the size of the shareholding — many treaties provide a lower rate for substantial holdings (typically 25% or more of the capital) and a higher rate for portfolio holdings. Common treaty rates are 5%, 10%, and 15%.

Claiming the reduced rate. The treaty rate is not applied automatically. The shareholder must provide the Romanian company with a valid certificate of tax residence before the dividend is paid. Without this certificate, the company withholds 16%. If the certificate is provided after the payment, the shareholder can apply to ANAF for a refund of the difference, but this is a lengthy process.

Treaty does not mean zero tax. A treaty reduces the Romanian rate but does not eliminate the shareholder’s obligation in their country of residence. The home country will typically tax the dividend at its own rates and grant a credit for the Romanian withholding. The combined tax burden is determined by comparing the treaty rate and the home-country rate.

The following table illustrates example treaty rates for selected countries (these are indicative and subject to specific treaty conditions — always verify against the current treaty text):

Note: Treaty rates shown are indicative. Actual rates depend on the specific treaty provisions, the definition of substantial holding, and the beneficial-ownership requirement. Always verify against the current treaty text and consult a tax adviser.

Interim Dividends

Romanian company law permits the distribution of interim dividends — dividends paid during the financial year before the annual financial statements are approved. The rules are as follows:

Interim financial statements. Interim dividends must be based on interim financial statements that show sufficient distributable profit. The statements are prepared by the company’s accountant and approved by the shareholders.

Shareholder resolution. A shareholders’ resolution must approve the interim distribution.

Annual reconciliation. After the end of the financial year, the annual financial statements determine the final distributable profit. If the interim dividends paid during the year exceed the actual annual distributable profit, the shareholders must return the excess. This creates a legal obligation and, if not honoured, a receivable on the company’s balance sheet.

Tax treatment. The 16% dividend tax is withheld and remitted at the time of each interim distribution, following the same rules as final dividends. If excess dividends are returned, the tax position must be corrected accordingly.

Interim dividends are widely used in practice, particularly by foreign owners who need regular cash flows from their Romanian company. However, the risk of over-distribution makes it important to maintain accurate financial records throughout the year and to reconcile promptly after year-end.

The Full Tax Chain: From Company Profit to the Owner’s Pocket

Understanding the complete tax chain is the single most important takeaway from this guide. The dividend tax is not isolated — it is the second stage of a multi-layer taxation process:

Stage 1: The company earns revenue. The Romanian SRL earns income from its business activities.

Stage 2: Company-level tax. The company pays either corporate income tax (16% of taxable profit) or micro-enterprise tax (1% of turnover, if eligible). The remaining profit after tax is the distributable profit.

Stage 3: Shareholder resolution. The shareholders approve the distribution of all or part of the distributable profit.

Stage 4: Dividend withholding. The company withholds 16% of the gross dividend and pays the net amount to the shareholder.

Stage 5: CASS (individuals). If the shareholder is an individual and a Romanian tax resident, CASS of up to 10% on a capped base may apply.

Stage 6: Home-country tax (foreign shareholders). The foreign shareholder declares the dividend in their country of residence. A tax credit is claimed for the Romanian withholding. Any additional home-country tax is paid on the difference.

This chain means that promoting a Romanian company as having “1% tax” is misleading. A micro-enterprise paying 1% on turnover still faces 16% dividend tax when profit is distributed, plus possible CASS, plus possible home-country tax. The effective combined rate is substantially higher than 1%.

Worked Example: Dividend Distribution of RON 100,000

This example is illustrative only. It shows the dividend-level taxation on a distribution of RON 100,000 and does not include the company-level tax (CIT or micro-enterprise tax) already paid on the underlying profit.

If the shareholder is a foreign individual with a treaty rate of 10%, the calculation changes: the company withholds RON 10,000 (10% instead of 16%), and the shareholder receives RON 90,000. CASS would typically not apply to a non-Romanian tax resident. The shareholder then declares the income in their home country and credits the RON 10,000 Romanian withholding against any home-country liability.

If the shareholder is an EU parent company meeting the participation-exemption conditions, no Romanian withholding tax applies at all, and the full RON 100,000 is paid gross.

Full Cycle Example: From Revenue to the Owner

This example illustrates the complete tax chain for a micro-enterprise SRL distributing all after-tax profit to an individual Romanian-resident shareholder.

The “1% micro tax” headline becomes approximately 12.4% on revenue or 21.0% on distributed profit when the full chain is considered. This is still competitive by EU standards, but it is essential for foreign business owners to model the complete picture rather than focusing on the company-level rate alone.

Common Mistakes Foreign Business Owners Make

• Withdrawing cash without a distribution resolution. Taking money from the company’s bank account without a formal shareholders’ resolution approving a dividend distribution creates an unauthorised withdrawal. ANAF may reclassify it as personal income (subject to income tax and social contributions) or as a shareholder loan requiring interest and documentation. Always ensure that cash withdrawals are supported by a proper distribution decision.
• Confusing dividends with shareholder loans. Payments from the company to the shareholder are not automatically dividends. If the company records a payment as a loan to the shareholder, the loan must be documented, must bear an arm’s-length interest rate, and must be genuinely repayable. Fictitious loans that are never repaid will be reclassified as disguised distributions and taxed accordingly, with potential penalties.
• Not accounting for the 16% rate from 2026. Foreign owners who set up their Romanian companies under the previous 8% dividend tax rate may not have updated their financial models. The rate doubled from 1 January 2026. All distribution planning, cash-flow projections, and cross-border tax modelling must reflect the current 16% rate.
• Forgetting about CASS. The 16% dividend tax is the visible cost. CASS at up to 10% on a capped base adds a further layer that many foreign owners overlook. While the absolute amount is capped and often modest for large distributions, it can be significant for small and medium-sized dividend payments.
• Providing an expired or missing tax residence certificate. Treaty relief is only available if a valid certificate of tax residence is provided to the Romanian company before the dividend is paid. An expired certificate, a certificate for the wrong year, or no certificate at all means the company must withhold 16%. Recovering the excess through an ANAF refund application is slow and bureaucratic.
• Assuming the treaty applies automatically. A double tax treaty does not apply by default. The Romanian company must actively verify the shareholder’s treaty entitlement, hold the residence certificate on file, and apply the correct rate. Failure to follow the correct procedure can result in penalties for the company.
• Distributing dividends with uncovered losses. If the company has accumulated losses from prior years, those losses must be covered before any profit distribution. Distributing dividends while the balance sheet shows uncovered losses is a violation of Romanian company law and can lead to personal liability for directors.
• Paying personal expenses through the SRL. Using the company’s funds to pay personal expenses (private travel, personal purchases, family costs) is not a tax-efficient alternative to dividend distribution. These expenses are non-deductible for the company and may be reclassified as personal income of the shareholder, subject to income tax, social contributions, and penalties. The lawful way to extract profit is through proper dividend distribution with the correct withholding.
• Treating 1% micro tax as the total tax burden. This is the most pervasive misconception. The 1% micro-enterprise tax is the company-level tax only. Dividend tax (16%), possible CASS, and possible home-country tax all apply on top. The total effective rate for the owner is always substantially higher than 1%.

Frequently Asked Questions