Dividends are paid by the company to its shareholders. Dividends are company earnings which are paid out to the shareholders proportionally to the nominal value of their shares. Earnings are paid on the basis of shareholders decision.
The disbursement of interim dividends has to be stated in articles of association of the company (respectively, it means a necessity to register those amendments of articles of association in Commercial register). In order to ensure the sufficiency of capital for tax liabilities (Corporate Income tax) it is said that not more than 85% of the current year’s earnings can be paid out as interim dividends.
The shareholder’s meeting cannot confirm amount of payable dividends exceeding the one which is proposed by the Board of Management (the Board of Management gives the proposal stating what part of earnings can be paid out as interim dividends).
It is also determined by law that the Shareholder’s meeting cannot make a decision on payment of interim dividends earlier than three months after the previous such decision was adopted. It means that interim dividends can be disbursed once per quarter (in total – three times per year).
However it does not mean that dividends can be paid out without any restrictions. To ensure that financial risks are avoided as well as the interests of State budget are defended with regard to tax collection, there is certain criteria to be fulfilled in order to pay the interim dividends before the closing of taxable year (by verifying if it is necessary and possible):
Interim dividend regulation cannot be applied by companies with share capital less than 2800 EUR;
As of the date of Shareholder’s decision a company shall not have unsettled tax liabilities or has no effective prolongations of tax liabilities;
As well, if the interim dividends are paid out, but at the end of year profit appears to be non-sufficient, the amount of disbursed interim dividends is regarded as expenses which are not related to company’s operating activities. As a result the exceeding amount shall be regarded as extraordinary dividends and timed by 1.5 coefficient.
Special regime is for interim dividends paid to recipients in off-shore or low-tax countries or territories. In this case the withholding tax is 30%. This is to ensure, that 15% of Corporate Income tax and 15% of profit tax are withheld and there are no risk of tax evasion when closing the year.
At the same time we would like to remind that it is necessary to convert (denominate) the share capital to EUR currency. It is possible to perform both procedures simultaneously!