Dividend distribution of net profit of a legal entity in favor of its shareholders (founders) or shareholders, as well as distribution of assets (property) formed at the expense of net profit when a legal entity is liquidated, as well as money and or payment made in the form of other payments.
Net profit means the remaining income after deduction of taxes and other expenses paid by simplified taxpayers.
In simpler terms, a dividend is when a company allocates a certain portion of its profits to its shareholders in the form of stock certificates or cash. The amount of the dividend may vary depending on the company's profit. The dividend is determined based on the percentage of the share's net profit.
What income is not considered a dividend?
Income obtained in the following cases is not considered a dividend:
- the income obtained from the distribution of the property owned by the legal entity when it is liquidated (property formed with undistributed income is an exception);
- distribution of shares without changing the percentage of shareholders' shares;
- payments made for redemption within the nominal value of shares (shares) (with the exception of the increased nominal value of shares due to undistributed income).
Dividend Paying or Investing?
Sometimes companies are faced with the choice of paying dividends to shareholders or reinvesting profits.
Shareholders get money from their investment without selling their shares by buying dividends. This increases their interest in the company. It also gives shareholders an opportunity to make alternative investments. However, the proportion of the company's profit distribution depends on its plans for the future. To determine the dividend, the company should take into account both the interest of the shareholders and other such factors.
Withholding tax on dividend at source of payment
From the dividend paid at the source of payment by the resident enterprise 5 is taxed at a percentage rate. If the legal and natural persons who are the actual owners of the dividend were taxed in accordance with the legislation (Article 122.1 of the Tax Code), in this case, the income of the legal and natural persons who received the dividend is not taxed again. This income is not taxed if it is given again in the form of a dividend.
Distribution of profit on the discovery, development and distribution of production of oil and gas reserves, on export pipelines and other such agreements, as well as in the cases determined by the relevant executive authority, the concentration of the profits of subsidiaries belonging to a legal entity in the centralized financial fund of this legal entity transfers, as well as this income of a legal entity is not subject to taxation.
Dividend payments are considered equal to:
- transfer of assets acquired during the activity of the company, as well as funds, to the founder for purposes other than the purposes of economic activity (with the exception of the repayment of debts received from the founder and the transfer of debts to the founder);
- payment of the founder's debts to other persons.
In this case, withholding tax at the source of payment Article 122.1 of the Tax Code regulated by
Dividends paid by persons who, as a technology park participant, carry out software development, system integration and development outside the technology park, are not taxed at the source of payment for 10 years starting from the reporting period in which the technology park certificate was received.
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