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Dividends – Income – Taxation

Dividend concept according to Taxation

Dividend usually means the distribution of profits which occupies all the distributed profits regardless of the legal form of the distributor. Of course, the meaning of dividends in the OECD Convention Model is quite broad, since the EU countries. who participated in the project, tried more to give an economic dimension to the term and less to a conceptual definition, within a strict framework.

The Model Convention contains in paragraph 3 a list of examples for the definition of the term dividend, in view of the large differences between the laws of the Member States. According to article 10 par. 3 of the Model Contract, the term dividends includes income from shares, “usufruct” shares or “usufruct” rights, mining shares, founding securities or other profit-sharing rights, which are not debt claims, as well as the income from shares according to the laws of the State, of which the company that carries out the distribution resides. Also in the definition of the Standard Contract of Article 10 par. 3, are included not only the distributions of profits decided by the annual general meetings of shareholders, but also the monetary amounts such as bonuses, profits from the liquidation of the company and the covered distributions. profits.

As can be seen from the above, the concept of dividend as taxable income often changes due to the autonomy of the tax law of each country. The conceptualization of dividends attempted by international tax conventions and the OECD comments are useful interpretive tools, facilitating the treatment of several problems arising from the taxation of dividends, even if the definition of the concept is left to domestic taxable persons. . This is also clear from paragraph 3 of Article 10 of the OECD Convention, which refers to the tax regulation of the domestic law of the states, in order to include a legal relationship in Article 10.

The correct definition of the concept of dividend is of utmost importance in order to be subject to proper and fair taxation, and this is because international conventions apply a different treatment to dividends than to other forms of income. It is accepted that the term dividend can be explained in terms of company law, tax law or economics. What ultimately favors the OECD Convention, as it appears from the Interpretive Comments of the individual articles, is the combination of company law, in particular with regard to the concept of profit sharing by a legal entity, with the provisions of tax law. Thus, an expanded conceptual field for the term dividend is formed with a clear superiority of economics over legal science, which confirms the principle of tax neutrality in international tax law.

In our country, the term dividend is conceptually defined by article 36, paragraph 1 of law 4172/2013, where it explicitly states that the term dividend means the income resulting from shares, founding securities, or other rights to participate in profits that are not claims from debts (debts), as well as income from other corporate rights, including shares, units including dividends and mathematical reserves, participations in profits of personal enterprises, distributions of profits from any legal entity or legal entity, as well as and any other related distributable amount. We see here that Greek Tax Law is fully harmonized with the OECD Convention Model, as stated by the legislator in the explanatory memorandum of the Law << The provisions of paragraph 1 of Article 36 define the concept of Shaving, in accordance with OECD standards, which understands all the distributed profits regardless of the legal form of the distributor, as well as any other related distributed amount. In addition, apart from the purposes of the CCA, the introduction of this definition facilitates the determination of the place of taxation for the implementation of the Double Taxation Agreements that Greece has concluded. >>

Time of acquisition of dividend income

In income taxation, the time of acquisition of this income plays an important presumption for the imposition of the tax. In this case, for dividends according to article 8 paragraph 4 of law 4172/2013, the general rule for the time of acquisition of income applies, the system of accrued basis, ie the time when the beneficiary acquired the right of collection.

Regarding the specific categories of income listed below, the time of acquisition of the right of collection for the application of the provisions of the CCC. has as follows according to POL.1223 / 2015:

For income from dividends of domestic origin, interim dividends, as well

and for temporary receipts of profits, the time of taking the decision to approve their distribution by the competent body of the legal entity or legal entity.

Regarding the distribution of extraordinary reserves that have been formed in the balance sheet of the closing year, with POL.1042 / 26.1.2015 it was clarified that the extraordinary general meeting of shareholders can not decide on this distribution, as this distribution involves a change in the balance sheet. approved by the ordinary general meeting of shareholders. Conversely, with regard to the distribution of extraordinary reserves of previous years by a decision of the extraordinary general meeting, acquisition time is considered the time of the decision of the extraordinary general meeting, since the said assembly can decide on the above distribution, as in this case This is an amendment to the decision of the ordinary general meeting, which decided the distribution of profits, but a way is defined for the further disposal of already formed reserves and undistributed profits of previous years (no. 356/1976 opinion of the Plenary Session of the N.S.K., no.7 / 1993 individual opinion of the Office of Legal Adviser of the Ministry of Commerce). The above also applies to Ltd., since the provisions of Law 3190/1955 do not differ from those of Law 2190/1920 in terms of the approval of financial statements of Ltd. .

In the case of general and limited liability companies, civil law societies engaged in business or profession, civil for-profit companies, joint-stock or invisible companies, as well as joint ventures that keep double-entry books, time of acquisition of the right to collect distributed profits (dividends) , as they result from the relevant entries in the books kept, is considered the last day of the following month from the final date of submission of their timely income tax return. If temporary withdrawals of profits or distribution of profits of previous years have been made, time of acquisition of this income is considered the time that takes place of their acquisition or distribution (credit or payment), relevant and with protocol number: DEAF A 1160573 EX 2015. Instructions on with the withholding tax on the temporary extraction of profits have been given with POL.1042 / 2015. It is pointed out that for the same above persons, who keep books with the haplographic method, time of acquisition of the right to collect all the profits resulting from them is considered the date on which the management closed.

Finally, time of acquisition of income from dividends of foreign origin, when it is not easy to determine the time of acquisition of this right of collection (eg decision of the competent body), is considered the time of their payment to the beneficiary, by credit of his bank account or with another way.

Taxation of dividend income - Change in tax rate from 1.1.2020

Dividends, as well as interest, royalties and income from the exploitation of real estate constitute with the new KFE law 4172/2013 income from capital. The incomes of these four categories are mentioned in articles 36,37,38,39 of law 4172/2019 and the tax rates are mentioned in article 40 of the CCA.

Dividend income is taxed separately and is not aggregated with other income, which may exist from Capital. For individuals, the tax liability is exhausted with the withholding tax according to the applicable rate, while for Legal Entities, the tax liability is not exhausted and the withheld tax is credited against the income tax of the Legal Entity (In Legal Entities where all and if they come from are considered income from business activity).

Therefore, according to par. 1 of article 40 of law 4172/2013 as replaced by par. 1 of article 24 of L.4646 / 2019 (Government Gazette AD 201 / 12-12-2019) and according to par. 22 of no