Alternative system

The methodological material of VID explains that the taxpayer who participants in the relevant period are only natural persons, may choose an alternative model: 15% UIN at the time of dividend distribution and 6% IIN withholding from dividend income. Before choosing all statutory conditions should be checked.

What the alternative regime does not cover

The 15% UIN rate is not a general reduced rate. It does not apply to for other objects with UIN taxable base, for example with for expenses unrelated to economic activity. For these objects the general procedure of application remains.

The decision must be made before payment

Before calculating the dividends, the composition of the members should be checked, earnings period, previous decisions and potential tax consequences to the participants. In the decision of the board or members and accounting the chosen model must be clearly visible in the documents.

Checklist

  • verify that all participants are natural persons;
  • determine the period of origin of distributable profits;
  • compare the total tax impact of the two models;
  • prepare the participants' decision and tax calculation;
  • correctly present the UIN declaration and IIN deduction.

Compare more than just rates

When choosing a dividend tax model, you should consider the total payment at company and member level, timing of cash flow and declaration obligations. Lower UIN rate by itself yet does not mean a lower total tax burden, because in the alternative model the IIN deduction also occurs.

Situations in which the participant has changed should be especially carefully assessed composition, profits accumulated over several periods or the company has uncovered losses. In such cases, a clear must be added to the calculation the origin of the profit and the rationale for the decision.

Documents to keep

  • current information of the register of participants;
  • profit distribution decision and calculation appendix;
  • a comparison of the two tax models;
  • Linking UIN declaration and IIN payment with dividend cost.