They are afraid of default: what does the ban on paying dividends abroad mean?

Concept of distributable income

Distribution of dividends is the prerogative of commercial organizations whose purpose of existence is to make a profit.
A dividend is a profit received for a certain period intended for distribution among the participants of this organization. Profit can be distributed in full or in part. In the Russian Federation, commercial firms are usually created in one of 2 forms:

• in the form of a joint-stock company (JSC), guided by the Federal Law “On Joint-Stock Companies” dated December 26, 1995 No. 208-FZ;
• in the form of an LLC, applying the Federal Law “On Limited Liability Companies” dated 02/08/1998 No. 14-FZ.

In the 1st of these laws, the concept of dividends is used in relation to the payment of income (Chapter V), and in the 2nd law there is no such concept, although the issue of profit distribution is discussed in it (Articles 28, 29 of Law No. 14-FZ) .

Both of these concepts (dividend and profit distribution) are united by Art. 43 of the Tax Code of the Russian Federation, which classifies as dividends any income received by a participant or shareholder as a result of the distribution of net profit in proportion to his share of participation.

What are dividends

For LLCs, Federal Law No. 14-FZ of February 8, 1998 does not establish the concept of dividends; it refers to the distribution of net profit .

The word “dividends” in relation to an LLC means the payment of a portion of the profit corresponding to the share of participants in the authorized capital, after taxes and subject to certain conditions.

Moreover, from the point of view of the law on LLCs, this is not a rigid position: by decision of the participants, another distribution option can be prescribed . For example, a participant with a 30% share in the management company can receive 50% of the company’s net profit.

But tax legislation strictly states in Article 43 of the Tax Code that for tax purposes, dividends are income received from the distribution of profits in proportion to the share. This is especially important because it can affect both the personal income tax rate when paid to individuals and the income tax rate when dividends are paid to organizations.

From the point of view of the Tax Code, payments or transfers of property in kind to a participant in an LLC upon liquidation of the company are not considered dividends, if they do not exceed the participant’s contribution to the authorized capital.

Former participants are not entitled to claim dividends.

For example, if a participant left the company in January 2022, and in April 2022 the participants distributed the net profit for 2021, then he can no longer claim it, although he was a participant in the company in 2022.

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Restrictions on dividend payments

In order to distribute dividends, the mere fact of profit is not enough. Both of the above laws contain lists of very similar restrictions (Article 43 of Law No. 208-FZ and Article 29 of Law No. 14-FZ), which apply not only to the date of the decision on payment, but also to the date of payment (if the situation has changed by the time of payment ).

Limitations common to both organizational forms:

• The management company must be paid in full.
• Net assets must exceed the sum of the authorized capital and reserve fund even after payment of dividends. For a joint-stock company, the amount of the excess of the value of preferred shares over their par value is also added to the amount of the authorized capital and reserve fund.
• Signs of bankruptcy must not occur or arise as a consequence of the payment of dividends.

A special restriction for an LLC: a decision on payment is not made until the actual value of the share (or part thereof) has been paid to the retiring participant.

According to the AO, a decision cannot arise:

• until the completion of the repurchase from shareholders of shares in respect of which there is a right to demand their repurchase (Clause 1, Article 75 of Law No. 208-FZ);
• without observing the correct sequence of making a decision on the payment of dividends: first in relation to those preferred shares that have special advantages, then on other preferred shares and only then on ordinary shares.

Both laws contain a clause that under an existing payment decision that has not been implemented due to restrictions that arose at the time of payment, the issuance of dividends is mandatory after the disappearance of these restrictions.

When is a dividend payment transaction invalidated?

If dividends were paid during the period of insolvency of the company, then such a transaction may be declared invalid. After all, such a transaction entails the possibility of causing harm to the rights and interests of the debtor’s creditors (clause 5 of the Plenum of the Supreme Arbitration Court of the Russian Federation No. 63 of December 23, 2010).

For example, after partial payment of dividends, the participants filed an application to withdraw from the company, and subsequently filed a demand for recovery of the actual value of the share. The transactions were completed in the presence of unfulfilled obligations to creditors during the bankruptcy period. The payment of dividends caused harm to the rights and interests of the debtor’s creditors, and therefore the decision to pay dividends was declared void by a judicial act that entered into force (Resolution of the Volga District Court of June 11, 2019 No. A55-6826/2017).

Frequency and methods of payment

In both forms (JSC and LLC), it is allowed to make a decision on the payment of dividends with a frequency of 1 time:

• per quarter;
• half year;
• year.

Quarterly and semi-annual distributions will be considered interim. The payment of such dividends is assessed accordingly.

IMPORTANT! Interim dividends remain dividends even if the profit at the end of the year is less than the amounts already paid in the form of dividends. There is no need to reclassify them as other income. This is important for tax purposes. Read more here.

A legal entity is not necessarily required to make a decision on the payment of income. There may also be a decision on non-distribution of profits, usually made at the end of the year.

Law No. 208-FZ directly lists the methods of paying dividends (in money or property), while Law No. 14-FZ does not indicate either the methods of payment or any restrictions on them. Thus, it is possible to pay dividends regardless of the form of the legal entity:

• cash from the cash register.
• by non-cash transfer to the participant’s bank account;
• property.

From the amount of accrued income, personal income tax (for an individual) or income tax (for a legal entity) must be withheld. For the calculation, a rate of 13% is used for residents (clause 1 of Article 224 and subclause 2 of clause 3 of Article 284 of the Tax Code of the Russian Federation) and 15% for non-residents, as well as for residents in case of payment of dividends in an amount exceeding 5 million rubles . in year. (clause 3 of article 224 and subclause 3 of clause 3 of article 284 of the Tax Code of the Russian Federation). The question of paying tax when paying dividends to a legal entity arises regardless of what taxation regime is applied by the organization that decided to issue them.

To learn how the tax on dividends paid to a legal entity is calculated, read the article “How to correctly calculate the tax on dividends?” .

For information on the taxation of dividends from individuals, see the material “Is personal income tax levied on dividends?”

ConsultantPlus experts explained in detail what tax reporting needs to be submitted on dividends paid. Get trial access to the legal system for free and go to the K+ Guide.

The specified rates are used in relation to dividends paid in 2022, regardless of the year for which they are paid and what rate was in effect in the year for which they were accrued. For an individual, this income is taken into account separately from other income taxed at the same rate. In the case of payment of dividends to a legal entity that owns more than 50% of the capital, the rate may be 0% (subclause 1, clause 3, article 284 of the Tax Code of the Russian Federation).

For information on what needs to be done to apply a 0% rate on dividends, read the article “How to justify a zero tax rate on dividend income”

The situation of issuing dividends with property is regarded as a sale (letter of the Ministry of Finance of Russia dated December 17, 2009 No. 03-11-09/405), entailing the payment of VAT and income tax from the transferring party. At the same time, the obligation to pay tax for the recipient of dividends is not relieved. Taxes are calculated based on the market value of the property. If there is no interdependence, this value is equal to the contractual value of the transfer. The issue of establishing the market value will be significantly complicated in the case of interdependence of persons (participation share of more than 20%) and the presence of constituent entities of the Russian Federation among the participants.

Conditions for paying dividends. Documenting

Often, accountants are asked to make payments both at the end of the year and interim on an urgent basis. There are 2 million left in the account - let’s use one and a half for dividends. Or: income and expenses are already approximately known, transfer money to the card.

It is unacceptable. In order to accrue dividends, you must first check certain conditions, then make a decision, then check some conditions again before payment, and only then transfer the money to the participants.

Neglecting the procedure can even lead to bankruptcy. And even more often - to additional tax payments.

Here's an example:

LLC "World of Animals" produces soft toys. The organization has three participants with shares: 30% (Ivanov), 50% (Petrov) and 20% (Sidorov - a non-resident of the Russian Federation).

As of April 1, based on the results of the first quarter of 2022, the company received income in the amount of 18 million rubles. Without waiting for the complete closure of the period and accurate calculations from the accountant, the participants demanded that income in the form of dividends be transferred to each of them on April 2, taking into account the approximate amount of income and expenses. The accountant created an interim balance sheet, from which it became clear that the net profit for the 1st quarter was 5 million rubles.

The participants proposed to pay: 1 million 500 thousand to Ivanov, 2.5 million to Petrov and 1 million to Sidorov. On April 2, the accountant withheld 13% of personal income tax from income and transferred the tax to the budget, and transferred dividends to bank cards.

On April 5, the company received two documents: an act for the provision of electricity transmission services in the amount of 240,000 rubles and an act for the rental of trucks for transporting goods - 150,000 rubles. Both acts are dated March 31, 2022, the period for the provision of services is March 2022. The accountant must enter into accounting documents on March 31, following the principle - the facts of the economic life of the organization must relate to the reporting period in which they took place (clause 5 of PBU 1/2008).

After conducting documents and writing off expenses according to accounting accounts, it turned out that the actual net profit for the 1st quarter, according to accounting data, amounted to 4 million 650 thousand rubles.

Let's compare the real amount of dividends, the amounts actually received by participants, and the amount of personal income tax for each case:

For a non-resident individual, the personal income tax rate on dividends is 15%, for other income - 30%. The underpayment of tax to the budget amounted to 10,500 rubles.

Since the amount of income of 70,000 rubles initially accrued to Sidorov is not dividends, the Federal Tax Service may try to collect insurance premiums from it, although the payment of this income does not fall under them.

For other participants - Ivanov and Petrov - the tax rate did not change, and there was no underpayment to the budget for personal income tax. But the amounts of payments received by them in excess of those calculated based on the correct net profit do not apply to dividends. They also remain at risk that the Federal Tax Service may decide to reclassify payments as wages. It is even higher if one of the participants is an employee of the company, for example, a director (which is not uncommon).

The Federal Tax Service may consider that the organization tried to save on contributions and transferred part of the payments to the employee as dividends (by the way, this is why you need to have documentary evidence, calculations and not be in too much of a hurry with the transfer). At the same time, if it is difficult to find fault with other amounts (real dividends), then it is easy to find fault with such erroneous overpayments.

Note! If you paid dividends based on the results of a quarter or half a year, and at the end of the year the company receives a loss or the net profit turns out to be lower than the interim one already distributed earlier, then there is no need to recalculate taxes based on the results of the year (see letter from the Ministry of Finance dated October 15, 2020 No. 03-03 -10.90152).

Now let’s see how the procedure for paying dividends should be carried out correctly.

1. It is necessary to hold a general meeting of participants at which a decision will be made on the distribution of dividends . Decisions must be notarized, unless another rule is established by the charter. The meeting must be held in accordance with the charter of the company and the law on LLC. If there is only one participant, he can simply make a decision on the payment of dividends.
2. The accountant needs to prepare a calculation of net profit (for this it is worth creating, as in the example above, an interim balance sheet). Calculate the value of net assets and compare them with the authorized capital. Owners will need this information when making a decision, and will also protect them in the event of disputes with the Federal Tax Service. It is important to justify the payments and confirm that they really are dividends and not a hidden salary, for example.
3. After the owners make a decision and the accountant receives orders to pay out the funds, it is necessary to check the tax status of the participants - legal entities and individuals for the purposes of calculating income tax and personal income tax. Then, on the payment date, reconcile the size of net assets and authorized capital.
4. The period for transferring dividends to participants should not exceed 60 days from the date of the decision. It may be less - this is established by the charter or a decision of the general meeting of participants (clause 3 of Article 28 of Law No. 14-FZ).

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An organization cannot decide on profit distribution if:

• its authorized capital has not yet been fully paid;
• before the participant is paid the actual value of his share (part of the share), for example, when the participant leaves the company;
• as a result of the decision on the distribution of profits, the company will meet the criteria of bankruptcy or if it already meets them at the time of making such a decision;
• the organization's net assets are less than the authorized capital and reserve fund or will become less when a decision is made on the distribution of profits;
• in other cases established by law.

An organization will not be able to pay dividends if:

• at the time of payment meets the signs of bankruptcy or will meet them after payment;
• the value of net assets is less than the authorized capital or will become less after payment;
• in other cases established by law.

If the company has decided to make a payment but has been unable to make it, for example due to non-compliance with the amount of net assets, then the payment must be made as soon as the condition is met.

What are the risks? If the net assets are less than the authorized capital, then the authorized capital by law must be reduced (to the size of the net assets). If an organization has a minimum authorized capital (in 2022 it is 10,000 rubles), then there is nowhere to reduce it, which means the company is on the verge of bankruptcy. If the situation does not change, the LLC will have to be liquidated.

How is the payment decision made?

This decision is made by the general meeting:

• shareholders in the joint-stock company (clause 3 of article 42 of law No. 208-FZ).
• participants in an LLC (Clause 1, Article 28 of Law No. 14-FZ).

The financial statements for the relevant period must be ready for the meeting, their data must be analyzed to ensure compliance with the restrictions established for making a decision on payment, and the amount of profit that can be used to pay dividends must be determined.

The result of the meeting is a protocol, which, when executed by the JSC, must contain (clause 2 of Article 63 of Law No. 208-FZ) the following:

• time and place of the meeting;
• the total number of votes and votes of meeting participants;
• information on the election of the chairman and secretary;
• agenda;
• the results of consideration of each of the issues;
• final decision.

The listed data will not be superfluous in the protocol drawn up by the LLC.

With regard to dividends, the meeting of the joint-stock company must decide on the following points:

• for what period they are paid;
• total payment amount and size for each type of shares;
• the date on which the composition of shareholders will be determined;
• form and time of payment.

For LLCs, the following are excluded from this list:

• the amount of dividends for each type of shares;
• the date on which the composition of shareholders will be determined.

The distribution of the total amount between specific persons is carried out:

• in JSC - according to the algorithm laid down in the charter, depending on the types and number of shares;
• in an LLC - in proportion to shares, unless the charter contains a different order.

The general meeting is not held by the sole founder. It is enough for him to make a decision on the payment of dividends, formalizing it as any of his decisions, indicating the date of preparation and the essence of the issue on which the decision is being made.

Interim dividends in JSC

Joint-stock companies can pay interim dividends distributed based on the results of the first quarter, half a year, or 9 months.

In a JSC, a decision/announcement on the payment of interim dividends can be made by the general meeting of shareholders. 3 months are allotted for its adoption after the end of the first quarter, half a year or 9 months (clauses 1, 3 of Article 42 of the Law of December 26, 1995 No. 208-FZ).

Interim dividends are paid to the shareholders of the JSC no later than 25 working days from the date on which the persons entitled to receive dividends are determined (clause 6 of Article 42 of the Law of December 26, 1995 No. 208-FZ).

Terms of payment of dividends in LLC

For an LLC, the period for issuing dividends is limited to 60 days from the date of the decision (Clause 3, Article 28 of Law No. 14-FZ). A specific period within these 60 days may be established by the charter or a meeting of participants. If such a period is not recorded in the LLC documents, it is equivalent to 60 days.

Important! “ConsultantPlus” warns that if you violate the deadline for paying dividends, as well as if you do not pay them, the consequences may be different depending on whose fault the violation occurred. Read more about the consequences in K+ by getting trial demo access to the system.

Source and form of payment of dividends

We have already noted that the source is the net profit of the organization.

And not necessarily for the period just passed. You can also pay dividends for previous years .

For example, the organization did not distribute net profit in 2022 because it was insignificant. And in 2022, she decided to distribute it to pay dividends in order to add to payments for 2022.

The same could be done if the company did not make any profit in 2022.

You can calculate and transfer dividends every quarter, once every six months or once a year (Clause 1, Article 28 of Law No. 14-FZ). The frequency should be determined in the company's charter.

An LLC can pay dividends by bank transfer and in cash . You can transfer or issue income directly to the recipient or to third parties upon his application. Dividends cannot be issued from proceeds available in the cash register. It is necessary to withdraw the required amount from the company’s account and only then transfer it from the cash desk to a member of the company (see clause 1 of the Central Bank Directive No. 5348-U dated December 9, 2019).

The company can pay off the debt on dividends by offsetting the counter-obligation .

For example, an organization must pay 1 million 500 thousand dividends to an individual participant. The participant previously received a loan from the company in the amount of 1 million rubles. An offset can be made in the amount of 1 million - the participant will fully repay the loan debt, and the organization will partially repay the dividends. The company can transfer the remaining amount of 500 thousand rubles minus personal income tax to the account specified by the participant.

Please note that in case of offset, it is carried out for the amount of dividends without allocating and paying personal income tax to the budget, since there is no actual cash flow. This position, for example, was voiced by the Federal Tax Service in a letter dated March 24, 2016 No. BS-4-11/ [email protected] “On personal income tax when offsetting mutual debts.” In this case, it is necessary to report to the Federal Tax Service about the income received by the individual. In this case, payment of personal income tax will become the responsibility of the participant.

Consequences of failure to pay dividends on time

Both laws provide the same procedure for situations of non-payment of dividends on time. They can be claimed by the participant within 3 years (or 5 years if this is stated in the charter) from the date:

• making a decision on payment to the JSC (clause 9 of Article 42 of Law No. 208-FZ).
• completion of the 60-day period in the LLC (Clause 4, Article 28 of Law No. 14-FZ).

If dividends are unclaimed at the end of these periods, they are returned to profit and claims for them are no longer accepted.

The legislation does not provide for any sanctions for exceeding the deadline for paying dividends. The consequences may be that the participants go to court demanding the payment of not only dividends, but also interest for the delay in their transfer. If it is proven that the JSC that accrued the dividends opposes their payment, then a fine is possible under Art. 15.20 of the Code of Administrative Offenses of the Russian Federation in the amount of:

• from 20,000 to 30,000 rub. for officials;
• from 500,000 to 700,000 rubles. for legal entities.

For information on the rules for reporting dividends in the 6-NDFL report, read the material “How to correctly reflect dividends in the 6-NDFL form?”

Nuances

Dividends according to the type of payment are divided into quarterly, semi-annual and annual. These cycles are divided into several stages:

• Declaration date. The company announces when and in what amount dividends will be paid;
• Date of record. Closing date of the register of shareholders. Everyone who buys shares before this day will have time to receive funds in the current period, but if you purchase them after, the payment will follow in the next period;
• Payment date, or payment date. The day on which dividends begin to be transferred to shareholders' accounts.

The second stage is usually followed by a so-called dividend gap: the value of shares immediately after closing the register of creditors falls in price by approximately the amount of dividends paid. For example, if a share cost 200 rubles, and the payout yield was 4%, then you should expect that the next day the quote will drop to 192 rubles. Typically, the dividend gap closes (that is, the price returns to its previous values) within a few months.

Results

The period for paying dividends in an LLC is 60 days from the date of the decision to pay them, unless a different period is established by the charter or meeting of the company’s participants. In a JSC, the period for paying dividends depends on the recipient: 10 days from the date of the decision for payment to nominee holders and trustees, and 25 days for payment of dividends to other shareholders.

Sources:

• Tax Code of the Russian Federation
• Law of 02/08/1998 N 14-FZ “On Limited Liability Companies”
• Law of December 26, 1995 N 208-FZ “On Joint Stock Companies”

You can find more complete information on the topic in ConsultantPlus. Free trial access to the system for 2 days.

Taxation

Dividends, like any income of a tax resident of the Russian Federation, are subject to income tax (NDFL) in the amount of 13% or 15% for dividend amounts exceeding 5 million rubles. per year, from the funds received (clause 1 of article 224 of the Tax Code of the Russian Federation). In this case, the tax agent (i.e., the party on whom the legislator assigns the responsibility for calculating and paying taxes) is a trustee or broker who provides the investor with access to the stock exchange and allows him to trade securities (subclause 1, clause 2, art. 226.1 of the Tax Code of the Russian Federation). This means that the shareholder will not have to take any independent actions to pay taxes - dividends will go to his account minus the mandatory payment.

Find out how to calculate the amount of personal income tax in ConsultantPlus. If you do not have access to the K+ system, get a trial online access for free.

Note! However, the issuing company is registered outside the Russian Federation, the broker will not withhold tax, and you will have to pay it yourself. If Russia has entered into an agreement to avoid double taxation with the state in which the company is registered, personal income tax is reduced by the amount of tax paid in another country (clause 2 of Article 214 of the Tax Code of the Russian Federation).

Types of dividends

1. Dividends are classified according to the form of payment.

By payment form

The company decides how to accrue income to owners:

• Cash dividend - accrual in money;
• Stock – dividend – accrual by shares;
• or any other property.

For example, a company can pay its investors dividends with the products it produces, although this happens extremely rarely, as this lowers the company's rating on the stock market.

2. By accrual period

• Interim dividends – payment occurs monthly or quarterly;
• Final dividends – payment occurs at the end of the financial year.

3. By volume of payments

• Full size
• In part

There are also regular, additional and liquidation dividends. First things first:

• Regular – paid on a periodic basis;
• Additional – paid in case of excess profit in the period;
• Liquidation - paid in the event of liquidation of the enterprise after the payment of the issuer's main debt obligations.

Another classification of dividends (by type of shares from which they will be paid - ordinary or preferred):

• Ordinary shares - give the right to vote at a meeting of shareholders, the results of which determine what share of profits will be allocated for dividends. However, dividends are not guaranteed - the meeting may decide that dividends will not be paid if the company’s profits are insufficient, or if it is decided to use it for business development.
• Preferred shares give you the right to receive a fixed share of the company's profits. But you will receive the right to vote at a meeting of shareholders only if dividends are not paid to you, as well as in the event of liquidation or reorganization of the company. In the event of liquidation, the owners of preferred shares have priority rights to receive the property of the joint-stock company, since not only profits, but also reserve funds will be used to pay dividends.

The exact payment procedure is always specified in the charter of the issuing company.