Dividends & Tax Treaty UK + RO

[bizhero]

Hello guys, I am planning to put a Romania company (SRL) as a fully subsidiary of a UK LTD. What about dividend taxes? If I am going to pay a dividend from the Romania company I will have to pay the 5% tax. When I want to pay dividends from the UK LTD to non-UK resident shareholders, I will have to pay again the dividends tax? Or there is some exemption?

 

[Martin Everson]

What about dividend taxes?

What about them?

If I am going to pay a dividend from the Romania company I will have to pay the 5% tax.

Depends who and where the receiving party is located. For example if receiving party of dividend is an EU parent company that holds at least 10% of the shares then the EU parent subsidiary directive applies and the 5% withholding tax is totally eliminated as you cannot be taxed twice under the directive.

However with brexit after 31st December 2020 the UK is no longer in the transition period following its EU departure. Hence the EU parent subsidiary directive will no longer apply and will have to be replaced by a post brexit deal with EU to cover this. I would make no plans to set up a subsidiary until it is clear post brexit transition period what the UK actually is in relation to EU.

When I want to pay dividends from the UK LTD to non-UK resident shareholders, I will have to pay again the dividends tax? Or there is some exemption?

There is no withholding tax applied on dividends from a UK company to non-UK residents. It is one of the reasons I remember millionaires like Sir Philip Green runs his UK business empire in UK and has his wife living in Monaco as shareholder where she receives the dividends tax free.