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Starting with the 1st of January 2018, the dividends will be taxed 5%.

This is the same percent that was in the precedent law regulations, despite the fact that the first intention of the government was to eliminate these taxes completely).

Additionally, those individuals whom have obtained during 2017 incomes from dividends and other sources (independent activities, renting fees etc) equal to at least 12 minimum gross wagers will need to pay 10% to the health contributions.

So, the tax per dividends is calculated 5% from the total gross value of the dividends.

No change, from 2017.

Still, during 2017 year, the social contribution for health (CASS) was not mandatory if at the moment of cashing the dividends, the individual was already insured at the health system, for example by being an employee.

Therefore, the 5.5% health contribution was mandatory to pay for the maximum dividends amount only if the individual had no other incomes.

Image result for dividends 2018

Let’s see an example for a better understanding:

For 100.000 lei income from dividends, in 2017, an individual that was not insured in the health system, should have paid 5% tax for dividends and 5.5% CASS, a total amount of 10.500 lei.

If the individual was already an employee, he would have paid only 5% dividends taxes, meaning 5.000 lei.

In 2018, the individual will pay all taxed no matter if he has other incomes or not, but the calculus basis will be limited by the value of 12 minimum gross wagers.

Therefore, for the same amounts, an individual will pay in 2018 5% dividends tax, meaning 5.000 lei and 10% CASS taxes, meaning 2.280 lei, a total amount of 7.280 lei.

Even though the taxes might be higher starting with 2018, this measure might have a positive effect for enterprises.

By deciding not to cash out the net profit of the dividends, the management of the company may decide to use the money for future economic activities or for covering losses from the past years.

This amount might also be used for capital repayment, interest payment, commissions or other costs generated by external loans.

In conclusion, by not cashing out the profits from dividends, business owners can set the investment projects in which the cash surplus can be placed in: expanding or modernizing the activity through refurbishment, creating new jobs or developing new economical activities.

If the net profit is not distributed to dividend payment or the constitution of financial sources for future investments, it can have other destinations:

  • Setting up legal reserves
  • The creation of other reserves representing fiscal facilities provided by the law
  • Covering accounting losses from previous years
  • Allowing employees to participate in profit, in the case of national companies and commercial enterprises with full or majority state capital, as well as autonomous regimes that meet certain conditions

For the previous version of this article, check out Dividends tax (withholding) in a Romanian company 2016.

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