Taxation of dividend release

Corporations may face some trouble with approved but unpaid dividends. If they revoke the general meeting resolution which approved the dividend the proprietors can decide by releasing the dividend. See on the following how this affects taxation:

Regarding the corporate tax and dividend law (year 1996, LXXXI law 29/Q. § (3) paragraph) the ammount of unpaid released dividend, accounted as income, decreases the corporations tax base. As well it does not increase the amount of expenditure for corporation member regardless that they are in a joint relation with the corporation who approved the dividend.  (Only expemption is in the case of controlled foreign corporation claim release).

As the 1990’s XCIII. law of dues states on the 17. § (1) paragraph, on the t) point the corporation with dividend claim release is excempt of gift dues.

As an explication for all above:

The income issued from released dividend can be accounted as a tax base decreasing item in the case of the corporation which approved the dividend and the corporation is excempt of paying any gift dues. While for the member releasing the dividend, this should not be accounted as a tax base increasing item, if operates according to the Corporation tax and dividend law.

According to the new regulations the corporaion is excempt of paying dues even if the dividend was supposed to be paid to an individual who decided to decline it. In taxation and dues there is no difference between the following two cases:

• If the member releases the claim for dividend (In this case member term can refer to an individual or a company as well).
• If the release of dividend was approved by resolution.

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