Receiving dividends by an individual

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Sirenko Mykola

A specialist in the practice of migration and corporate law, he also specializes in legal support for business in EU countries.

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Receiving dividends by an individual

One of the ways of obtaining profit from the implementation of entrepreneurial activity for an individual is the receipt of dividends.

The latter, according to the current law, is a certain part of the company’s profit, which is paid to participants/shareholders in an agreed way of dividing shares in proportion to the profit or share in the authorized capital of each of the participants/shareholders.

The specified method of paying dividends and their amount is determined in the relevant founding documents of the company.

Simply put, dividends are monetary rewards to individuals for their contribution to the share capital and, obviously, the activities of the company itself.

For those individuals who, in the course of carrying out their own activities, decided to invest in the shares of a specific company, it is important to understand the process of receiving dividends and their taxation.

Taxation of participants’ dividends for various forms of business (LLC/JSC)

It should be understood that dividends as part of the company’s net profit are subject to taxation in Ukraine at the tax rates applied in accordance with the calculation of the corporate tax rate and the military levy.

Currently, the situation with taxation of dividends for LLC/TDV participants is as follows:

  • 9% is paid in the general manner if the company is registered as a single taxpayer;
  • 5% is paid in the general manner if the company is registered as a corporate income taxpayer;
  • 1.5% is paid in general order in the role of military collection.

The taxation system for PrJSC/PJSC has a similar structure, but is slightly more complicated and in some sense more burdensome for shareholders:

  • rates of 5% and 9%respectively, are calculated according to the same rules as when registering an LLC/TDV, at the same time, it is worth noting that they can be applied comprehensively for each separate type of dividend: for shares and corporate rights (5%), accrued by the company, as well as for shares and corporate rights accrued by joint investment institutions (9%);
  • rate of 18% applies in all other cases not covered by the cases described above;
  • 1.5% of the military levy here is also used in a mandatory manner.

The lawyers of JSC “Prikhodko and Partners” would also like to draw your attention to the peculiarities of taxation of dividends of individuals in the case of their residency in another country.

In this case, it is necessary to be guided by the provisions of the relevant international legal treaties on the avoidance of double taxation in order to choose the tax rate for dividends that will be considered the worldwide income of a person in another country.

Therefore, it is possible to pay tax at the tax rate of the country of residence or to be partially exempt from paying tax, depending on the situation of each specific client.

The process of receiving dividends by individuals from the company

As a general rule, the process of receiving dividends by individuals must be documented by recording in the company’s founding documents, as well as by issuing a decision of the company’s executive body for the dividend payment period. Such management documentation must be approved by the signature of the company’s director.

Lawyers of JSC “Prikhodko and Partners” can also offer their services for the preparation of appropriate documentation for the payment of dividends to individuals, the provision of necessary legal advice for each individual request of an interested client.

Conclusions.

So, receiving dividends is one of the ways of receiving income for individuals and has its own peculiarities regarding the taxation system and documentation.

Qualified lawyers of JSC “Prikhodko and Partners” will be able to help clients (both company owners and its participants) with the complexity of the specified procedure.

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A specialist in the practice of migration and corporate law, he also specializes in legal support for business in EU countries.

Contact now
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