Recall that the Romanian civil law since 2018 recognizes the possibility for shareholders to approve during the year “interim financial statements” and if the conditions exist to proceed to the distribution of interim dividends in formation. This possibility is an innovation of great impact for SMEs especially active in the field of services where withholding tax and contributions on dividends is significantly cheaper than taxation on labor income.

By Order of the Minister of Public Finance No. 3,067/2018, supplementing the contaile regulations, a number of clarifications were made regarding interim financial statements that are prepared by entities that opt for quarterly dividend distributions during the year.

Summary

For the purpose of preparing the interim financial statements, entities that have opted for quarterly dividend distribution must conduct an inventory of items such as assets, liabilities and equity. The results of the inventory carried out in accordance with the provisions of the Decree of the Minister of Public Finance No. 2,861 / 2009 for the approval of the Rules concerning the organization and performance of the inventory of items of the nature of assets, liabilities and net worth, and the valuation of such items in accordance with the applicable accounting regulations are shown in the accounts of the entity. The preparation of the interim financial statements is based on the balance sheet in which the results of the inventory are included.

Terms

Within 30 days after their approval by the members, the semi-annual/quarterly financial statements will be submitted to the territorial units of the Ministry of Public Finance (ANAF).

Disbursement of interim dividend

Dividends can be withdrawn throughout 2020, in accordance with Law 163/2018 and OMFP No. 3067/2018 i.e., after inventorying assets and submitting quarterly financial statements to ANAF.

Documents required for filing interim financial statements

In order to be able to authorize the distribution of interim dividends in formation, the regulations require the preparation and filing of the inventory of assets, carried out in accordance with OMFP 2.861 / 2009, of the interim financial statements, prepared on 31.3-30.06- 30.9 of the minutes of aproval of the interim financial statements by the shareholders. The financial statements are filed together with the inventory with ANAF within 30 days from the date of approval of the minutes.

Fiscal aspects

Updated tax regulations with respect to the possibility of distributing interim dividends during the year require that by the 25th of the month following the disbursement of the interim dividend, the distributing company liquidate and pay on behalf of the receiving shareholders, the 5% withholding tax on the gross dividend disbursed.

Critical issues

The major criticality referring to the procedure under comment, a procedure we repeat optional, of approval of dividends during the year and contained in Article 67 of Law 31/1990 is referred to the greater distribution of profit during the year compared to the closing of the annual budget and thus in fact in the “illicit” disbursement of dividends compared to the profit that was legally determined by the annual budget. Should such a situation occur, the receiving shareholders will be called upon by the director to repay within 60 days of the approval of the annual financial statements, of the amount irregularly received with respect to the year-end determination.