The new taxation of dividends has brought new challenges in accounting. Taxation of Dividends As of this year, there are possibilities that dividends may be taxable in your company at 20, 14 or 0 %.
Taxation of dividends 14% (+7%)
The first scare is generally easily overcome by accountants when it is established that dividends paid to individuals are recorded in the gross amount and dividends to companies are reported in the net amount. Hello, how did such a giant of thought end up creating a system! If the above is reflected in Appendix 7 of the TSD, then the private person's 7% income tax must be reflected in INF1. If you do it once, the next time will be easier.
Holdings through several companies
The system has become significantly more complicated for companies with holdings through several companies. If the shares are held through several companies and there are many owners, calculating and declaring the amount of income tax paid on dividends is already making the accountants' hair stand on end. If your company has holdings in other companies from which dividends are paid, the accountant of the company paying the dividends must be contacted to find out what percentage of income tax has been withheld from the dividends received. If the situation with foreign dividends is clearer and information flows relatively well, the complexity lies in obtaining information for tax calculation from dividends received from Estonian companies. The complexity lies in the fact that dividends are received at the same time, from which income taxes at different tax rates have been withheld. Although the e-MTA has data entered by the dividend payer of an Estonian company, such information does not pass through the tax office's system to the recipient of the dividend. I sincerely hope that the information that has already been entered in the e-MTA will automatically be transferred to the company receiving the dividends. Here is a recommendation for accountants that when paying dividends, if possible, add tax information to the payment order.
You can read more about the general taxation of dividends here.
Decision to distribute dividends
The decision to distribute dividends is made in the net amount. In light of the new law, the net amount means the taxable amount at the company level. Therefore, if the dividends are taxed with 14%, the private person is also subject to 7% income tax, which is a tax withheld from the private person's income. At the level of a private person, the net amount that he receives in his bank account is then 7% less. Therefore, in the light of the new income tax law, the net amount no longer means the amount received in the account of a private person, but the net amount at the company level.
You can find the approval of the annual report and a sample of the distribution of dividends here.
How to ensure that shareholders are treated equally
If all 3 different income tax percentages have to be applied in your company, then if there are more shareholders, the dividends should be distributed evenly to everyone in all tax categories. If a dividend is paid to some shareholders in one month and a new one is paid to others in another, a situation may arise where some shareholders receive a tax discount and others do not. The moral of the story is that a simple income tax system has been made a notch more complicated. This only benefits foreign companies who can withdraw their income with 14%. Estonian citizens can only feel the complexity of the system and the small tax increase that accompanies 14+7% (a total of just over 20%) income taxation. No matter what the current laws are, specialists in their field can still find a solution to any concern. If you have special requests that seem complicated at first,
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