Dividends are not proportional: so, are taxed according to the Treasury

In the field of company law, not all partners have to collect the same.
The Directorate General of Taxation (DGT) has become a key issue for business owners, family groups and startups:
a company may distribute dividends in the form not proportional to the share of each partner, as indicated on the bylaws.

What does this mean for your company?

Traditionally, the dividends are apportioned according to the percentage of participation: those who have a 40 % of the capital charges a 40 % profit.
However, this recent clarification allows for a bit more flexible: if the bylaws so provide, you may decide that a member receives more or less dividends in function of their involvement, contribution and management.

For example, in a society family, the father may have the 15 % of the shares, but to receive the 40 % of the dividends for his work as the administrator or for having led the company.

Until now, this type of agreements generated doubts and possible conflicts with the Treasury.
Today, the legislation makes it clear:

• If the unequal division is set forth in the statutes:
  The partner who receives the most taxed in your Personal income TAX purposes as a return of principal furniture, between the 19 % and 28 %.
• If this is not provided for in the bylaws:
  The difference is deemed to be a donation between partners, subject to the Inheritance and gift tax (ISD).
  In other words, it shall be taxed as if it were an act of liberality, not as a business performance.

The importance of reviewing the bylaws

In IURIT review statutes and social pacts of our customers to detect this type of clauses and avoid tax risks.

A wording ambiguous, can generate unexpected consequences: the Treasury can interpret a deal as a gift or to impose penalties if it detects irregularities.

For this reason, we recommend to review the statute before handing out benefitsespecially if the company has changed its partners, or if you are looking to give back in a differentiated way.
We also help update the covenants of partners to reflect these agreements consistent manner, ensuring that the allocation is fiscally valid and is backed up by law.

From IURIT we believe that this clarification be a significant step forward: it offers to businesses, and families entrepreneurs the possibility of designing flexible structures, adapted to the reality of the business.
Allows you to reward the effort or the dedication of certain partners without the need for complex internal operations.

However, the detail changes everything.
A clause poorly drafted or a deal without legal backing may result in a double taxation or in a conflict with the Administration.
Therefore, we insist that the tax planning and business must go hand in hand.

In summary

• You can share dividends not proportional, but only if the bylaws allow for it.
• If not, the Treasury can consider it a donation.
• Review bylaws and partnership agreements it is essential to avoid penalties.
• Proper planning can optimize the tax burden of the entire structure.

Contact us

In IURIT we help you to review your statutes, to adapt to your corporate structure and planning for tax purposes, the distribution of benefits.
Whether you run a family business as a startup in growth, we will advise you so that you can giving back a fair, efficient and legal.

You can write to us at info@iuritcorp.com or contact us here to schedule a call with our team of tax and corporate law.