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HMRC internal manual

Double Taxation Relief Manual

From
HM Revenue & Customs
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DT: Romania: double taxation agreement, Article 10: Dividends

(1) Dividends derived from a company which is a resident of Romania by a resident ofthe United Kingdom may be taxed in the United Kingdom. Such dividends may also be taxed inRomania but where such dividends are beneficially owned by a resident of the UnitedKingdom the tax so charged shall not exceed:

(a) 10 per cent of the gross amount of the dividends if the beneficial owner is a company which controls directly or indirectly at least 25 per cent of the voting power in the company paying the dividends;

(b) in all other cases 15 per cent of the gross amount of the dividends.

(2) Dividends derived from a company which is a resident of the United Kingdom by aresident of Romania may be taxed in Romania. Such dividends may also be taxed in theUnited Kingdom, and according to the laws of the United Kingdom, but where such dividendsare beneficially owned by a resident of Romania the tax so charged shall not exceed:

(a) 10 per cent of the gross amount of the dividends if the beneficial owner is a company which controls directly or indirectly at least 25 per cent of the voting power in the company paying the dividends;

(b) in all other cases 15 per cent of the gross amount of the dividends.

(3) However, as long as an individual resident in the United Kingdom is entitled to atax credit in respect of dividends paid by a company resident in the United Kingdom, thefollowing provisions of this paragraph shall apply instead of the provisions of paragraph(2) of this Article:

(a)

(i) Dividends derived from a company which is a resident of the United Kingdom by a resident of Romania may be taxed in Romania.   
  
(ii) Where a resident of Romania is entitled to a tax credit in respect of such a dividend under subparagraph (b) of this paragraph tax may also be charged in the United Kingdom, and according to the laws of the United Kingdom, on the aggregate of the amount or value of that dividend and the amount of that tax credit at a rate not exceeding 15 per cent.  
  
(iii) Except as provided in subparagraph (a) (ii) of this paragraph, dividends derived from a company which is a resident of the United Kingdom and which are beneficially owned by a resident of Romania shall be exempt from any tax in the United Kingdom which is chargeable on dividends.

(b) A resident of Romania who receives dividends from a company which is a resident of the United Kingdom shall, subject to the provisions of subparagraph (c) of this paragraph and provided he is the beneficial owner of the dividends, be entitled to the tax credit in respect thereof to which an individual resident in the United Kingdom would have been entitled had he received those dividends and to the payment of any excess of such credit over his liability to United Kingdom tax.

(c) The provisions of subparagraph (b) of this paragraph shall not apply where the beneficial owner of the dividends is a company which either alone or together with one or more associated companies controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividends. For the purpose of this paragraph two companies shall be deemed to be associates if one controls directly or indirectly more than 50 per cent of the voting power in the other company, or a third company controls more than 50 per cent of the voting power in both of them.

(4) The term `dividends` as used in this Article means income from shares, or otherrights, not being debt-claims, participating in profits, as well as income from corporaterights assimilated to income from shares by the taxation laws of the State of which thecompany making the distribution is a resident and also includes any other item (other thaninterest the taxation of which is limited by the provisions of Article 11 of thisConvention) which, under the law of the Contracting State of which the company paying thedividend is a resident, is treated as a dividend or distribution of a company.

(5) The provisions of paragraph (1) or, as the case may be, paragraphs (2) and (3) of thisArticle shall not apply where the resident of one of the Contracting States has in theother Contracting State a permanent establishment and the holding by virtue of which thedividends are paid is effectively connected with the business carried on through suchpermanent establishment. In such a case the provisions of Article 7 shall apply.

(6) Where a company which is a resident of a Contracting State derives profits or incomefrom the other Contracting State, that other State may not impose any tax on the dividendspaid by the company and beneficially owned by persons who are not residents of the otherState, or subject the company’s undistributed profits to a tax on undistributed profits,even if the dividends paid or the undistributed profits consist wholly or partly ofprofits or income arising in that other State.