Arcadie Parfenie There are many business driven arguments and motives to set up a holding company within a group. Ideally the holding company would not tax dividend income or capital gains, would not apply withholding tax on dividends payments, interest or royalty outflows or it would provide easy access to the EC Directives and/or strong network of double tax treaties, thereby eliminating or reducing withholding taxes on dividend, interest and royalty flows. Also, the location of the holding company should be sound in standing in the international business community, politically and economically stable, tried and tested as a holding company location. Although Romania was not included among these jurisdictions and it is difficult to pretend such status, it should be noted that a big step ahead was made recently in Romania. At the end of last year, a provision was enacted in the Romanian Fiscal Code which stipulates the exemption for capital gains realised from disposal of shares held either in Romanian entities or legal entities located in treaty countries and exemption of dividend income received from legal entities located in treaty countries. Typically, in most cases, primary holding company involves combining holding activity with financing and treasury activity, and/or IP activities. At this stage, there is no preferential tax treatment with respect to financing and IP holding activities in Romania, however, it should be considered that the new legislative provision would most likely boost the image and attractiveness of Romania as jurisdiction for establishing a holding company. Also, one can note that the requirements for exempting the capital gains are quite light compared with other jurisdictions well known as holding locations.
January 28 2014
