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The dividends represent the benefit that each shareholder must receive as a result of her involvement in the business, directly proportional to this involvement. If, during the year the company made a profit, we have the right, at the end of the year, after we approve the financial statements, to withdraw dividends. Today we will discuss two interesting cases: collecting interim dividends - and collecting dividends from retained earnings
The dividends represent the benefit that each shareholder must receive as a result of her involvement in the business, directly proportional to this involvement. If, during the year the company made a profit, we have the right, at the end of the year, after we approve the financial statements, to withdraw dividends. Today we will discuss two interesting cases: collecting interim dividends - and collecting dividends from retained earnings
Withdrawing interim dividends
Withdrawing interim dividends
Starting with January 1st, 2019, we can collect interim dividends within the year: if we made a profit in one quarter, then, in the next quarter we can collect interim dividends. The condition is that, at the end of the year, if we do not obtain a profit for the year, we refund in 60 days the dividends we raised during the year.
For each dividend we raise during the year, we have the obligation to pay tax in the quota of 5% next month. Let us take an example: the first quarter ends on March 31; we can file interim financial statements in April, after which we collect our dividends. If we collect them in April, then the dividend payment deadline is May 25.
⚠️ It is very important that, together with the financial statements, we carry out the inventory of balances and assets on March 31: this is one of the mandatory conditions when preparing the interim financial statements. By inventory, we certify that the balances are correct, the expenses and revenues are correct, as well as the receivables, the debts, and the assets.
legea-163-2018-forma-sintetica-pentru-data-2019-11-23.pdfWithdrawing dividends from retained earnings
Withdrawing dividends from retained earnings
If, in the previous years, we made a profit, but at the end of the year we were not determined to distribute our profit on dividends and we left it in the company, so that we can further develop the business - Congratulations! This is one of the most important decisions we made: leaving the profit in the company, we want the business to grow, to carry on. It is easy to fall in the downward spiral in which we withdraw dividends in the hope that next year it will go better, we do not pay the suppliers, we take loans, we get entangled in debts and, at a certain point, we have nothing more to do.
After we have consolidated the business, after we have created all the workflows and processes, and the company works, we can also withdraw dividends from previous years: the recommendation is not to withdraw all the profit, but to leave a part untouched. By leaving money in the company, the business strengthens and we can develop it, we can go without interruption, and the results we expect from the company come much faster.
Similarly, for the profit that we did not distribute in the previous years and we left in the company, we have the shareholders approve the distribution of the retained earnings; once we have the agreement of all the shareholders, we move on to the next step: dividend distribution. Any banking institution to which we go to withdraw money from dividends, by bank transfer, will ask us for:
the balance sheet;
the trial balance at the date of collecting dividends;
the decision of the shareholders to distribute the profit on dividends.
The deadline to pay dividend tax is the 25th day of the month following the withdrawal of dividends.
⚠️ Very important: starting with 2018, we have the obligation to submit the Single Tax Statement within 30 days after the withdrawing dividends. If the value of the dividends we collect is higher than 24 960 lei, we owe health contribution of 2 496 lei - once a year.
⚠️ Warning: if we raise money from the bank, we leave it in the petty cash and forget to pay dividend tax, then, in case of a possible inspection, the authorities will check the petty cash balance or the sundry debtors account, because these are the very amounts withdrawn by shareholders and for which they did not pay dividend tax. It is best to pay dividend tax when we withdraw money from the bank and we know that we took it for personal interest and not for business-related payments.
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