The Official Gazette no. 996/29.10.2025 published Law no. 169/2025 ratifying the new Convention between Romania and the UK for the elimination of double taxation on income and capital gains and for the prevention of tax evasion and avoidance, together with the Protocol signed in London on 13 November 2024.
The Convention applies to residents of one or both Contracting States and introduces modern rules aligned with OECD standards on dividends, interest, royalties, and capital gains.
Scope and Taxes Covered
The Convention covers taxes on income and capital gains, regardless of how they are levied.
Covered taxes include:
- Romania: income tax and corporate income tax;
- United Kingdom: income tax, corporation tax, capital gains tax.
It also applies to any substantially similar taxes introduced after signing.
Transparent entities are treated as generating income of the resident in the state in which income is taxed as such.
Dividends (Art. 10)
Dividends may be taxed in both the residence State and the source State.
Withholding tax (WHT) limits:
- 5% of the gross amount (general rule);
- 15% for dividends from real-estate investment vehicles (e.g., REITs).
Full exemption (0%) applies when:
- the beneficial owner is a company holding at least 10% of the payer for at least one uninterrupted year;
- the beneficial owner is a recognised pension fund holding the shares for at least one year.
Rules do not apply if the holding is effectively connected to a permanent establishment (PE).
Interest (Art. 11)
Interest may be taxed in both States, but WHT in the source State may not exceed:
- 3% of the gross amount.
Full exemption (0%) applies when interest is paid:
- for credit sales of equipment, goods, or services;
- to financial institutions;
- to recognised pension funds;
- to the State, governmental agencies, local authorities, or the central bank;
- between associated companies (min. 25% holding for 2 years).
Royalties (Art. 12)
Royalties may be taxed in both States.
WHT limit: 3%.
Full exemption (0%) for royalties paid between associated companies (min. 25% link for 2 years).
Royalties include payments for copyright, trademarks, patents, know-how, etc.
Capital Gains (Art. 13)
General rule: taxation exclusively in the residence State.
Source-State taxation applies only for:
- gains from immovable property situated in the source State;
- gains from assets of a PE situated in the source State;
- gains from shares/interests in entities deriving 50%+ of their value from immovable property in the source State.
Exclusive residence State taxation for:
- ships and aircraft operated in international traffic;
- all other property not covered by the special rules above.