Effective January 1, 2014, and in order to standardize domestic regulations with Directive 2011/96/EU referring to the mother-daughter regime, Decree Law 102 of November 13, 2013 reduced the minimum holding period of the “daughter” company’s capital holding from 2 years to 1 year for the purpose of applying the tax exemption (domestic withholding tax) on income produced from dividends paid by Romanian persons to EU persons.
Recall the other conditions that must be met, cumulatively, by domestic and receiving entities in order for the withholding tax exemption to be applied to dividends paid to foreign entities:
- clothe one of the forms provided for in the annex to Directive 435/90/EEC of 23.7.1990;
- reside for tax purposes in a member state of the European Union, without being considered, under the terms of a double income tax treaty with a third state, resident outside the European Union;
- be subject to income tax or other similar tax specified in the annex to the Directive and therefore not eligible for exemption or facilitation schemes (e.g., the microenterprise scheme in Romania);
- the holding company must hold at least 10 percent of the share capital of the dividend-paying company.
