Disproportional dividends: should you pay insurance premiums?

Kontur.Accounting - cloud accounting for business!

Quick establishment of primary accounts, automatic tax calculation, online reporting, electronic document management, free updates and technical support.
Try it

Based on the materials of the webinar “Everything about dividends for an accountant and director”, author - Evgeny Naydenov, head of the tax audit department of Business Audit LLC, educational teacher.

To the director

• How is profit calculated?
• Where is the net profit figure recorded in the financial statements?
• What if errors were made in calculating profits?
• Net assets
• Regularity of dividend payments
• Forms of dividend payment from the director's point of view
• Distribution of net profit of previous years and payment of dividends from it

Accountant

• ​Forms of dividend payment from an accountant's point of view
• How much taxes do you need to pay before you get a net profit?
• Frequency of dividend payments
• How to reduce your tax burden with dividends

To the director

Dividends are any income received by a shareholder or participant from an organization during the distribution of profits remaining after taxation on shares owned by this participant, in proportion to the participants’ shares in the authorized capital of the paying organization (Clause 1, Article 43 of the Tax Code of the Russian Federation).

Important: dividends are the part of net profit remaining after paying all taxes. If we are talking about the general taxation regime, then this is the net profit that remains after paying income tax. If we are talking about the simplified tax system, then this is the profit remaining after paying taxes under the simplified tax system.

How is profit calculated?

Net profit is the profit that remains after paying all taxes. It is calculated as follows:

All expenses incurred are deducted from the enterprise's total income. This is how the financial result is obtained, that is, profit before tax, which is the basis for calculating tax.

After paying the tax, there remains a cleared amount that is at the disposal of the company - net profit. The company has the right to dispose of this amount at its discretion. That is, it can either use it to develop the business or pay dividends.

How do individuals pay income tax on dividends?

Why was the rate set at 13% for profits from securities? The same amount applies to the general personal income tax for the total income received. They were simply leveled! Who pays the government money? Is it the entity that made the profit or the shareholder doing this? Article No. 214 of the Tax Code of the Russian Federation gives an unambiguous answer. Taxes are paid by the enterprise that distributes profits. If it fails to fulfill its obligations, penalties will be imposed.

Companies paying dividends in 2021 pay off tax debt at a 13% rate. Even if this applies to periods when a reduced 9% tax was in effect. This is explained by the Federal Service determining the applicable rate at the time of transfer of money. The date of receipt of income is considered to be the time of its payment, and not the actual period of profit received by the enterprise, according to which the funds are distributed.

Despite the fact that the interest rate charged on dividend income has reached the generally accepted personal income tax level, shareholders do not have the opportunity to receive tax deductions. Article No. 210 of the Russian Tax Code makes this clear. It states that citizens who own part of an enterprise in the form of securities do not have the right to have their tax base reduced.

Where is the net profit figure recorded in the financial statements?

— In section 3 of the balance sheet “Capital and reserves”, profit appears in the line “retained earnings (uncovered loss)”. The balance sheet reflects all profits as of a certain reporting date. This line takes into account the amount of net profit not only for the last reporting period, but also for previous years, if it remained and was not distributed at the time.

— If you need to find out the amount of net profit for the reporting period, then refer to the financial results statement. Here, the net profit indicator for the reporting period (for example, for the reporting year) is shown in the line “Net profit or loss”.

If the company does not have net profit, then there can be no talk of paying dividends until the loss received by the company is covered by the profit received in subsequent periods.

What if errors were made in calculating profits?

According to accounting and tax legislation, the company, represented by the accounting department and the chief accountant, must make changes and correct the financial statements so that the net profit figure corresponds to reality.

— If, as a result of errors and violations, the net profit figure was underestimated, then, after making changes to the balance sheet and reporting, additional net profit should appear, which is also distributed among the founders according to their decision.

— If, as a result of errors and violations, the net profit was overestimated and dividends were already paid based on incorrect information, then after the errors are corrected, the net profit will be slightly underestimated. As a result, a situation will arise where the founders initially distributed more of the net profit to themselves. There is nothing wrong with this, because after a certain period the net profit will be smaller and the participants will distribute the profit in a smaller amount.

If errors were made in accounting and then corrected, then the founders and participants will still receive the due amounts of dividends. But the process may take time.

Net assets

Keep records and submit all reports to the Federal Tax Service, Pension Fund of the Russian Federation, Social Insurance Fund and Rosstat through Kontur.Accounting. Get free access for 14 days

This is the difference between a company's assets and its debts (liabilities). The difference between assets and liabilities is recorded in the final line of section 3 of the enterprise’s balance sheet. Conditions:

1. In accordance with the law on LLCs, the amount of net assets must necessarily exceed the amount of the authorized capital. If the amount of net assets is less than the amount of the authorized capital, then the company is obliged, after a period of time, to reduce it to the amount of net assets. This entails difficulties and risks for the company, because many small businesses have the minimum amount of authorized capital allowed by law: 10 thousand rubles for an LLC. If a situation arises in which the size of net assets is less than this threshold amount, then, on the one hand, the company is obliged to reduce the amount of the authorized capital, and on the other hand, the amount of the authorized capital cannot be less than 10 thousand rubles.
2. If a company allows this situation to happen long enough, it will be subject to sanctions up to and including liquidation. As for the payment of dividends, in accordance with Article 29 of the law on LLCs and Article 43 of the law on JSCs, a decision on the payment of dividends cannot be made if at that moment the value of the company’s net assets is less than its authorized capital. Therefore, it is imperative to monitor the size of your net assets.
3. Payment of dividends is not allowed until the authorized capital is paid in full.

The procedure for paying dividends is regulated by corporate legislation and the company's charter. The classic option is the annual payment of dividends based on the results of the financial year, when the financial statements for the previous year are prepared. In accordance with the law on LLCs, at the end of the year, the company must hold a regular annual meeting of participants and shareholders, at which the financial statements, the amount of net profit are approved, and then the owners of the company decide on the distribution of net profit.

How will net profit be distributed? This issue is within the competence of the general meeting of participants. The state does not interfere in the distribution processes; it controls the procedure from a taxation point of view, because at the moment the decision is made to pay dividends, the tax base for personal income tax arises.

Important:

• The results of the general meeting of shareholders or participants must be documented: attention is paid to this when conducting audits. Often decisions on the distribution of dividends and net profits are made orally and money is paid on this basis. Subsequently, this can lead to serious problems: if one of the owners, participants or shareholders considers that he has been deprived, then he has the right to go to court to restore his violated rights. If there is no document drawn up on paper, then it will be difficult for any of the parties to the conflict to refer to it.
• In the absence of minutes of the general meeting, accounting does not have the right to reflect business transactions or make entries for the accrual and payment of dividends. In accordance with the accounting law 402-FZ, facts of economic activity are recorded in accounting only on the basis of primary documents. In this case, the primary document is the decision of the general meeting on the payment of dividends, drawn up on paper.

Concept of interest

The concept of interest is contained in Part 3 of Article 43 of the Tax Code. They mean any income that has been previously established in the agreement, received under debt obligations of all types.

This definition allows us to highlight a number of characteristics:

• The main feature is the presence in the agreement of a pre-established mechanism for calculating the benefits received. What matters is the expected profit of the lender, based on the conditions in force at the time of the transaction. The corresponding benefits include a discount;
• The source of profit received can only be a limited number of contracts. In addition to a loan, commercial or commodity credit, these include commercial credit, bank deposit, and factoring agreements. In addition, we are talking about interest formed on the basis of law. This condition is contained in Art. 395 of the Civil Code, which provides for payment for the use of other people's money.

The procedure for recognizing interest income assumes the simultaneous presence of both of these features.

In the absence of any of the indicators, income is attributed to other sources and other rates are applied to them.

Regularity of dividend payments

Keep records and submit all reports to the Federal Tax Service, Pension Fund of the Russian Federation, Social Insurance Fund and Rosstat through Kontur.Accounting. Get free access for 14 days

In Art. 29 of the Federal Law of 02/08/98 No. 14-FZ and in Art. 42 of Federal Law No. 208-FZ of December 26, 1995 provides that the company has the right to pay dividends quarterly, once every six months or annually.

If company members, owners or shareholders want to distribute dividends more often than once a year, then they need to re-read the charter and find the section that states in what order and how often dividends can be paid. Often the texts of the charter are formed based on general principles and existing provisions: when creating a company, few think about how often they would like to distribute dividends. Therefore, if the charter states that dividends are distributed annually, then before making a decision to change the frequency, you need to make changes to the charter.

The period for payment of dividends is no more than 60 days from the date of the decision on payment. After its expiration, a shareholder who has not received dividends may regard this fact as a violation of his rights. He may go to court or influence the company in other ways, so you need to monitor the timing of payment.

Often, enterprises, when drawing up the minutes of the general meeting, where decisions are made on the distribution of net profit and payment, immediately fix the payment schedule so that it is clear how the amounts will be paid.

In the case of a small business, the number of owners is small. Usually they are all physically present at the general meeting, where they make decisions on the distribution of net profit, payment of dividends and sign the minutes. If the text indicates a dividend payment schedule, and if part of it is paid later than 60 days, then having the signatures of the owners, it will subsequently be difficult for any of the shareholders to make claims regarding the timing of payment.

Dividends. We take into account the features

Dividends are a great way for investors to see a steady stream of income from their investments. While the world of dividend investing may seem conservative, there are nuances and must-have information that an investor can learn to create long-term assets.

What are dividends

Dividends are part of the company's earnings that its owners receive. By purchasing even one share, an investor actually becomes a co-owner of the business. The company distributes the profit received among the owners depending on the number of their shares. Therefore, we often talk about the amount of dividends per share.

Investors often have questions about the size of dividends, how long to wait for them, and what they should know to grow their income. The topic of dividends is simple, but it is worth studying it consistently. Let's consider the entire path of dividends: from the source to the moment where they can be spent.

Source of dividends - share

So, a share gives you a share in the business and the right to a portion of the profits. In general, this is its essence. You can buy shares and other securities on the stock exchange - an electronic trading platform. The broker gives you access to it by opening an account for you in the office or remotely.

It is important to know that a company is not required to pay dividends, especially if there are no profits. The exception is an entry in the charter. Please note that there are companies, including large ones, that do not pay dividends at all.

It also happens the other way around: when the top management of a company can decide to pay dividends from retained earnings from previous years or even by taking out a loan.

The difference between investments on the stock exchange and traditional banking products is that the value of securities is constantly changing. The share price depends on the financial position of the company, expectations of future results, supply and demand for the stock.

Privileged or ordinary

The situations regarding ordinary shares were discussed above. If payment of dividends is not required for them, then for preferred ones, part of the profit received should always go to dividends. The nuance is that such shares do not give voting rights in the company. Not all companies issue both types of shares.

Choosing stocks

First, we will determine a list of companies that consistently pay dividends and conduct business successfully. There are more such companies than you might think. The step-by-step action plan is as follows:

— Open the dividend calendar;

— We study the dividend history (goal: find a company with stable payout dynamics);

— Get acquainted with the dividend policy (on what conditions the size of dividends depends);

— We evaluate the company’s financial results.

The dividend policy is usually published on the company's website. Often dividends are a certain percentage of net profit, but can also be tied to other indicators.

Of course, you don’t have to read the company’s dividend policy, but simply wait for the dividend amount to be announced. However, understanding the financial results and dividend policy together allows us to predict the size of dividends in advance.

We buy shares and receive dividends

After choosing the securities, you can think about buying shares, but don’t rush. You definitely need to figure out when and within what time frame the company pays dividends.

First, the board of directors makes recommendations: determines the amount of dividends and the so-called dividend cut-off date . It is also called the closing date of the shareholder register. To qualify for dividends, you must own the shares on that date. Then voting takes place at the general meeting of shareholders. Its results are published on the company’s website and other sources. For example, on the issuer’s page in the Corporate Information Disclosure Center: e-disclosure.ru

Let's give an example from practice and calculate the dividend yield:

On October 18, 2021, Magnit announced the payment of dividends for the last 9 months of operation. This was announced on the Disclosure Center website:

“In accordance with the recommendations, it is proposed to pay dividends on ordinary registered shares of PJSC Magnit in the amount of RUB 15,000,332,342.45. (Fifteen billion three hundred thirty-two thousand three hundred forty-two rubles 45 kopecks), which is 147.19 rubles. (One hundred forty-seven rubles 19 kopecks) per one ordinary share.”

The price of 1 share at that time was about 3,600 rubles. Accordingly, the dividend yield if purchased at this price would be (147.19 / 3600) * 100 = 4.09%.

Dividend season in the Russian Federation Companies pay dividends at different intervals: once a quarter, half a year, once a year. In this case, the payment period may vary, but most often in Russia this happens at the end of the year. This time is usually called “Dividend season”.

The first stream of dividend recommendations comes in March, the last at the end of May. Closing dates for most registers fall between the end of April and the second half of July. Often companies follow established guidelines and choose to set cutoffs on the same dates as in previous years.

The peak of the dividend season is the period from the second half of June to mid-July. At this time, the registers of many large Russian companies are closed.

We take into account the features:

When to buy stocks to get dividends

On the day of purchase, shares are not credited to the investor's account. Typically, crediting to the account occurs on the second business day with the opening of trading on the exchange at 10:00 Moscow time. At the same moment, funds for securities are written off. Thus, to receive dividends, shares must be purchased 2 trading days before the register cut-off date.

In our case with Magnit, the registry closing date was also announced:

“Set the next date on which persons entitled to receive dividends are determined: January 10, 2021.”

Accordingly, the last day for purchasing shares is the date “January 8”. If the payment took place on January 11 (Monday), then the last day of purchase would be Thursday - January 9. Weekends and holidays are not taken into account as trading does not take place. Non-trading days can be tracked on the Moscow Exchange website.

Dividend gap

Gap means a break and can be seen on the price chart. It is formed after the dividend cut-off occurs, that is, purchasing these shares no longer provides the opportunity to receive dividends. This becomes possible after the next decision of the company.

The dividend gap shows first the stock price with the possibility of receiving approved dividends, and then without. This is so that investors understand that the stock no longer pays dividends, and its price falls by approximately their size.

Our example shows the price chart for Magnit shares before and after the cutoff. On 01/08/2020, investors bought shares with the right to receive dividends. On 01/09/2020, this opportunity no longer existed, so trading on the exchange opened with a price significantly lower.

Dividend investing is attractive over long time horizons. Successful companies always need time to recover prices.

How quickly can you receive dividends?

Typically, dividends are received within 25 business days from the register cut-off date. The use of borrowed money may affect the term, but in a number of situations, a loan increases the investor's potential profit.

A similar situation with the common one. The owner of the securities is invited to lend them to the broker for a fee, with a guarantee of return the next day. The paper is lent out during non-trading hours and does not carry the risk of loss.

If at the cut-off date the securities secured a loan or were in Overnight loans, then the period for crediting dividends may be extended.

Forms of dividend payment from the director's point of view

— The classic option is payment in cash, cash or non-cash. If this point is important for owners, shareholders and participants, then it would not be superfluous to indicate in the minutes of the general meeting in what form and manner the dividends will be paid.

For owners who are accustomed to receiving dividends in cash from the cash register, there are subtleties and limitations. Our legislation and the documents of the Central Bank, which regulate cash transactions, do not allow the payment of dividends from cash proceeds received at the cash desk of the enterprise. Withdrawals can only be made from funds that were specifically received from the bank or from other amounts that were returned to the company's cash desk in various ways.

— Payment is not in cash, but in the form of property owned by the company (in the form of fixed assets, materials, finished products, accounts receivable, securities, claims). That is, any assets that are on the balance sheet of the enterprise and are recorded in the financial statements approved by the participants.

This issue is quite troublesome and more expensive from a tax point of view. According to the Ministry of Finance and the Federal Tax Service, the payment of dividends with any property other than money is recognized as a sale. From the point of view of Art. 39 of the Tax Code of the Russian Federation, sale is recognized as a change of owner of goods, works, and services. When paying dividends, for example, with fixed assets, the original owner was the enterprise, and the new owner becomes an individual. The status of this property changes, sales arise and, as a consequence, the tax base. If we are talking about the general taxation regime, then VAT and income tax appear. If we are talking about a simplified taxation system, then additional income appears here.

If we are talking about UTII, then the situation here is more subtle. Depending on what type of activity the enterprise transferred to UTII carries out, most likely, the property transfer operation will not fall under this type. That is, under a transaction of alienation of property and transfer of fixed assets, the enterprise will not be on UTII, but on the general taxation regime or on a simplified one, if there is permission to use the simplified tax system.

The distribution of dividends on UTII will be relevant only until the end of 2020. From January 1, 2021, this regime will be canceled.

Therefore, before deciding to pay non-cash dividends, be sure to clarify this issue with your accountants, auditors or lawyers so that you understand how much such dividend payment will cost the company.

Types of interest

Depending on the type of benefit received, a distinction is made between interest received in the form of direct payment and income associated with the fact that the debtor’s obligation is purchased from the previous creditor at a discount.

Depending on the existence of a specific agreement, interest is distinguished arising from the agreement and paid on the basis of the requirements of the law (Article 395 of the Civil Code). These include interest that may be paid to a creditor during bankruptcy proceedings.

Interest generated as a result of the issue of securities is also highlighted. The latter are possible in cases where the mechanism for the formation of the premium is initially established, relative to its nominal price.

Distribution of net profit of previous years and payment of dividends from it

Keep records and submit all reports to the Federal Tax Service, Pension Fund of the Russian Federation, Social Insurance Fund and Rosstat through Kontur.Accounting. Get free access for 14 days

There are no restrictions or problems for the company, because all net profit can be distributed in accordance with the decisions of the owners. It is advisable to note this point in the minutes of the general meeting at which the decision on the distribution and payment of dividends is made. It is better to directly indicate: “based on the results of a certain reporting period, for 2021, such and such net profit was received. As of the reporting date, December 31, 2021, the enterprise also has retained earnings from previous years in such and such an amount.”

Next, a decision is made to distribute all the net profit that is reflected in the balance sheet: that which was received during the reporting period, and that which remained at the disposal of the enterprise from previous years. Indicate the numbers directly and reflect what share of net profit is used to pay dividends.

Accountant

The first thing the chief accountant must do is to reflect the company's debt to pay dividends to its shareholders, participants or owners. The amounts must be calculated and calculated for each participant. The wiring depends on the situation:

• the participant is employed in the company - Dt 84 Kt 70;
• the participant does not work in the organization or is a legal entity - Dt 84 Kt 75.

The posting reflects the accrual of dividends based on the decision of the general meeting. Without a paper version of the minutes of the general meeting, which confirms the decision on the distribution of dividends, this posting cannot be made. Therefore, the posting must be generated on the date of signing the corresponding payment protocol.

After the entry appears in the enterprise’s balance sheet, accounts payable arises as a liability to participants in the payment of dividends. Turnover in the debit of account 84 reduces net retained earnings, which is recorded in section 3 “Balance”. The source of payment of dividends is net profit, the economic meaning and legal nature of this operation is fully consistent with reality and does not contradict the law.

Forms of dividend payment from an accountant's point of view

— Let's consider the classic option, when dividends are paid in cash.

Dt 75 (70) is credited with personal income tax account 68, because in this case the enterprise that is the source of payment of dividends is recognized as a tax agent in accordance with Art. 226 Tax Code of the Russian Federation. The tax agent is obliged to withhold and transfer to the budget the withheld amount of personal income tax.

In accordance with Art. 224 of the Tax Code of the Russian Federation, the tax rate on income received by an individual in the form of dividends is set at 13% for residents and 15% for non-residents of the Russian Federation. Of the total amount due for dividends, part must be given to the state in the form of a tax - this operation is reflected in the first entry.

The remaining amount, 87%, is paid to the shareholder, participant, owner of the enterprise in cash, non-cash or through the cash register. Therefore, the posting is generated with correspondence: Dt 75 (70) and Kt 50 (51).

After the first two entries are generated, the accounts payable for the payment of dividends on account 75 or 70 is completely closed. After paying the tax and transferring it to the budget (third entry - Dt 68.NDFL, Kt 50 (51)), the company fulfilled all obligations to the owners of the company and to the state in terms of withholding and transferring the amount of income tax.

— Another option for paying dividends is payment from the property of the enterprise. If the general meeting decided to pay dividends by transferring fixed assets or materials to shareholders, then the disposal of these assets must go through 91 accounts. We reflect these operations like this:

1) Dt 75 (70), Kt 91.1. Here correspondence is made on the cost of fixed assets, materials, including VAT. VAT is taken into account in cases where property is transferred in companies applying the general tax regime.

2) Dt 91.2, Kt 68.VAT. Posting for the amount of VAT. Used when the general taxation regime is applied.

3) Dt 91.2, Kt 01 or 10 accounts. This reflects the book value of materials or the residual value of fixed assets.

Why 91 counts? These are other income and expenses of the enterprise, because the disposal of fixed assets, materials, that is, assets not intended for further sale, is carried out through the 91st accounts, and not through the 90th.

If dividends are paid by transfer of goods or finished products, then the disposal of these assets should be reflected in the sales accounts. Therefore, in this case the 90th count will be used. Here are examples of wiring:

1. Dt 75.2 (70), Kt 90.1. The cost of goods and finished products is reflected, including VAT.
2. Dt 90.3, Kt 68 VAT. Posting for the amount of VAT.

VAT arises if the general tax regime is applied. It may arise when paying dividends at an enterprise that continues to use UTII in 2020, depending on what is transferred. If goods intended for retail sale are transferred, then VAT does not arise, because such a transfer falls under the definition of retail sale, will be included in retail turnover and will be included in the type of activity that the enterprise uses on UTII.

1. Dt 90.2, Kt 41 or 43. Write-off of the book value of goods or finished products.

When paying dividends in non-cash form, the company (the source of the payment) remains obligated to withhold tax because it is a tax agent. On the other hand, the company does not have the physical ability to do this. If the payment is made in kind, there is no money on which tax can be withheld. It is impossible to recover these amounts in any other way, especially if the founder, shareholder or owner are not employees of the company.

The source of payments - the enterprise (tax agent) is not able to withhold income tax on such dividends, therefore the company is obliged to send a notice within a month about the impossibility of withholding income tax to the tax office at the place of registration of the individual to whom the dividends are paid and at the place of its own registration . In this situation there will be no claims against the company. Having received such information, the tax authorities will independently contact the individual and demand payment of the due amount of tax.

If a company pays dividends in cash (in cash or non-cash form), then it has the obligation to calculate tax, withhold it, transfer it to the budget and, at the end of the year, before March 1, submit information about the amounts paid in favor of individuals in form 2-NDFL, where you need to indicate the amount of dividends paid. The personal income tax rate is 13%; no additional taxes need to be paid on these amounts.

Contributions to extra-budgetary funds, in particular to the pension fund and the Social Insurance Fund, are not withheld from dividends paid. Since, in accordance with 212-FZ, the basis for calculating contributions in particular to the pension fund are:

- payments within the framework of labor relations,

— payments under GPC agreements providing for the performance of work or provision of services (contractor agreement and fee-based service agreement).

The chief accountant must be able to clearly identify payments to company employees. If money is paid on the basis of an employment contract and a person receives it for performing work duties, then these are payments within the framework of the employment relationship. They are subject to contributions to extra-budgetary funds.

Dividends cannot be classified as such payments, because they are paid to individuals regardless of how well or poorly they performed. Payment of dividends is the distribution of net profit that remains after paying all taxes. Even those company owners, shareholders and participants who are employees and often managers of the company receive dividends not for the results of their work, but for the results of the activities of the entire company, because:

1) the profit remained at the disposal of the company

2) net profit is the result of the activities of not only the manager

This means that the payment of dividends is not a payment within the framework of the employment relationship. That is why dividends are not subject to contributions to extra-budgetary funds. The FSS mentioned this several times in letters.

Concept, content and types of dividend policy

Dividend policy refers to the policy of distributing profits into dividends and the capitalized part (figure).

The further distribution of part of the profit aimed at paying dividends is a mechanism for generating personal income of shareholders in accordance with the size of their participation in the capital of the enterprise. Further distribution of the capitalized part of the profit, depending on the strategic goals of the enterprise, can be aimed at financing both current operations and investments. The goal of dividend policy is to establish the optimal, i.e. such a ratio between dividends (as current consumption of profits) and the capitalized part (as invested with the aim of generating profits in the future), which could:

1) maximize the market value of the enterprise;

2) ensure its strategic development.

Indeed, the investment opportunities of an enterprise depend on the proportions of distribution of net profit into dividends and the capitalized part:

1) the higher the dividends, the lower the investment opportunities of the enterprise;

2) the lower the dividends, the greater the investment opportunities of the enterprise.

Wherein:

1) an increase in dividends paid in the current period reduces not only the investment opportunities of the enterprise, but also future profits and, accordingly, future dividends;

2) a decrease in dividends paid in the current period increases not only the investment opportunities of the enterprise, but also future profits and, accordingly, future dividends (of course, provided that investment projects are not only implemented, but also turn out to be profitable).

It is obvious that decisions on the payment of dividends made in the short term have an impact on the financial condition of the enterprise and, consequently, the welfare of its owners (shareholders) in the long term.

Efficiency of dividend policy:

1) is determined by the compliance of short-term (tactical) decisions with the strategic (long-term) development goals of the enterprise, which is expressed in the optimal distribution of profit into dividends and the capitalized part;

2) depends on smoothing out contradictions in the interests of the enterprise and its nominal owners - shareholders.

As you know, a shareholder’s income from owning a share consists of two elements:

1) income from the increase in market value (the difference between the sale price and the purchase price of the stock);

2) interest income (dividends).

Thus:

1) on the one hand, the welfare of shareholders increases with an increase in the market value of shares (a shareholder, when selling a share that has increased in price, will receive an amount greater than what was previously invested);

2) on the other hand, the welfare of shareholders increases with an increase in the size of dividends (an increase in dividends contributes to an increase in the market value of shares and is a kind of indicator for existing and potential shareholders, indicating the successful activities and good financial condition of the enterprise).

The main contradiction between the interests of shareholders (as owners of the enterprise) and the enterprise itself in the current period is that the payment of dividends:

1) is an influx of cash for shareholders;

2) cash outflow for the enterprise.

Based on this, when developing and implementing a dividend policy, it is necessary to take into account both the interests of shareholders and the interests of the enterprise itself. Shareholders' preferences. Let's pretend that:

1) investors, as owners of an enterprise, perceive decisions on both the payment of dividends and capitalization in the same way;

2) decisions on capitalization with subsequent reinvestment are a priority, and dividends are considered as a passive balance, the payment and value of which depend only on the availability of promising investment projects.

Based on these premises, investor preferences will be distributed as follows:

1) if the forecast level of profitability of investment projects exceeds the average level, investors will give preference to capitalization;

2) if the forecast level of profitability of investment projects is equal to the average level, then the payment of dividends and capitalization are perceived by investors in the same way;

3) if the forecast level of profitability of investment projects is below the average level, then investors will give preference to paying dividends.

Enterprise preferences. As mentioned above, paying dividends means an outflow of cash. Therefore, when developing and implementing a dividend policy, it is necessary to take into account the impact of dividend payments on the financial condition of the enterprise. Based on the financial condition of the enterprise in the current period, it is necessary to decide:

1) is it worth paying dividends at all;

2) if so, then determine their optimal value;

3) determine sources of financing:

— investment decisions, if the payment of dividends significantly reduces the investment capabilities of the enterprise;

— payment of dividends if the company does not have the necessary funds for this.

The main indicators characterizing the dividend policy include the following ratios:

1) dividend per share (Div);

2) net profit per common share (EPS);

3) dividend payments (DPR);

4) capitalization of net profit (b).

1. The dividend per share ratio (Div) is the ratio of the amount of dividends paid and the number of common shares outstanding.

K = Amount of dividends paid / Number of common shares outstanding

Number of common shares outstanding = total number of common shares outstanding - own common shares in the company's portfolio

2. The net profit per share (EPS) ratio is defined as the ratio of net profit minus the amount of dividends on preferred shares and the number of common shares in circulation:

K = Net profit - dividends on preferred shares / Number of common shares outstanding

Number of common shares outstanding = total number of common shares outstanding - own common shares in the company's portfolio

3. Dividend payout ratio (dividend rate) (DPR) represents the share of dividends in net profit:

K = Amount of dividends paid / Net profit - dividends on preferred shares x 100%

4. Net profit capitalization ratio (b)

K = 100% - dividend rate

The method of distributing net profit into dividends and the capitalized part determines the type of dividend policy. Types of dividend policy:

1) a policy of a stable share of dividends in net profit;

2) a policy of stable dividend dynamics;

3) residual dividend policy.

The policy of a stable share (stable share) of dividends in net profit implies that every year the same percentage of the total net profit is allocated for the payment of dividends (table).
A policy of a stable share of dividends in the net profit of an enterprise is acceptable if the enterprise receives stable profits, and unacceptable if the amount of profits from period to period is subject to sharp fluctuations. Calculation of policy indicators for a stable share of dividends

A policy of stable dividend dynamics implies achieving moderate growth in dividends per share, capable of compensating for inflation (table).
In this case, the maximum value of the dividend rate (DPR) is 50%. Calculation of indicators for a policy of moderate dividend growth

Residual dividend policy implies payment of dividends only after financing of investments. The implementation of promising investment projects inspires investor confidence in the enterprise and, accordingly, in the securities issued by the enterprise, the market value of which in this case increases.

Factors influencing dividend policy:

1) external factors, including:

— political and socio-economic stability in the country;

— changes in current legislation, which may determine the order and sequence of payments on securities, limit the increase in interest income, etc.

2) internal factors:

— size of the enterprise (large enterprises are less likely than others to evade paying dividends);

— profitability of the enterprise (highly profitable enterprises are more often required to pay dividends);

— liquidity of the enterprise (if payment of dividends in the current period may lead to a decrease in the liquidity of the enterprise, it is necessary to find additional sources of financing);

— the ratio of equity and borrowed funds (enterprises with large debts prefer to use part of their profits to repay them rather than pay dividends);

— the creditworthiness of the enterprise (determines the possibility of attracting additional sources of financing);

— availability of promising investment projects.

The decision to pay dividends must be made taking into account:

1) the ability to finance such payments;

2) the need to maintain liquidity.

Carrying out a balanced and reasonable dividend policy is impossible without its planning, based on forecasting profits and the level of dividends. The profit forecast is the result of drawing up an annual financial plan. As mentioned above, the annual financial plan includes budgets and forecast reporting forms. Thus, based on the product sales budget and the expense budget, a forecast profit and loss report is compiled, the result of which is a forecast net profit. Based on the forecast net profit, you can obtain a forecast profit per one common share in circulation (excluding or taking into account the new issue). For this:

1) the forecast figure for net profit must be reduced by the amount of possible deductions from net profit (deductions to funds, reserves, for the payment of dividends on preferred shares, etc.);

2) the resulting amount of net profit to be distributed to dividends and the capitalized part must be divided by the number of common shares in circulation (with or without taking into account the new issue).

There are the following methods for predicting dividends.

1. Determination of the target level of dividends based on data on the payment of dividends by analogous enterprises:

Target (acceptable and possible for the enterprise) level of dividends per one common share in circulation = dividend payout ratio characteristic of the most stable operating enterprises in this industry • forecast earnings per share

2. Determination of the expected dividend level as an exponentially weighted average between the previous year’s dividend and the target dividend level of the current year:

Expected dividend level = adjustment factor x target dividend level + (1 - adjustment factor) x last year's dividend

The adjustment coefficient is intended to smooth out the dynamics of dividends over the years. It is selected in such a way as to minimize the forecast error in previous periods. The level of dividends at each point in time is equal to the product of earnings per share and the dividend rate:

Adjustment factor = earnings per share outstanding (EPS) x dividend rate (DPR) - previous period dividend (Div t -1 ) / current period dividend (Div) - previous period dividend (Div t -1 )

Analysis of dividend dynamics reveals the following patterns:

1) when profits increase, their growth rate is higher than the dividend growth rate;

2) when profits decrease, the rate of their decrease is lower than the rate of decrease in dividends.

How much taxes do you need to pay before you get a net profit?

Keep records and submit all reports to the Federal Tax Service, Pension Fund of the Russian Federation, Social Insurance Fund and Rosstat through Kontur.Accounting. Get free access for 14 days

Here you can compare different tax regimes. Under the general taxation regime, the profit tax rate is 20% of the profit received by the company as a whole from financial and economic activities. Let’s compare this, for example, with the rate provided for the simplified tax system with the tax object “Income minus expenses.” The general rate is 15%. The price of dividends in the first and second cases is different, because in order to distribute dividends under the general taxation regime, you need to pay 20% to the state, and under the simplified taxation regime - only 15%.

If we talk about UTII, it is difficult to say how much interest you need to pay in order to distribute dividends, because the amount of tax on UTII does not depend on revenue, income, expenses, but depends on the financial result. Knowing the amount of this tax, seeing the result of financial and economic activities, it is also possible to calculate the tax burden. It will not exceed the amounts provided for the general taxation regime.

Thus, if a company is under special tax regimes (STS, UTII), the tax burden when paying dividends is significantly lower than for situations where the company is under a general taxation regime.

In what cases does the benefit not apply to interest?

The current law does not directly regulate individual cases of receiving benefits. The most famous example is the indication of contractual amounts and interest in foreign currency. Although current regulations prohibit calculations in it, it is permitted to be used as a method of determining the amounts paid for obligations.

Execution takes place in rubles.

However, the amount payable is calculated based on the exchange rate prevailing on that date. Taking into account recent changes, the size of liabilities has increased significantly. At the same time, the problem arose of attributing the resulting exchange rate difference to certain benefits.

The judiciary has stated the following position. Since the parties do not have information in advance about fluctuations in exchange rates (one of the mandatory elements of interest is missing), the corresponding income is subject to taxation on a general basis.

Another situation concerns controlled debt. Part 4 art. 269 ​​of the Tax Code establishes a rule according to which the positive difference between the interest that was accrued on the obligation and the maximum interest has the status of dividends, in respect of which separate tax rates are provided.

Author of the article

Frequency of dividend payments

Russian corporate legislation provides for several options for paying dividends: quarterly, half-yearly and year-end. If the managers of your company are interested in the option in which dividends will be paid quarterly, then the chief accountant must warn them about the risks that arise in this regard.

1) The charter must provide for quarterly distribution of profits and payment of dividends. Each fact of distribution of net profit and direction for payment of dividends must be recorded and recorded on paper; there must be a decision of the general meeting.

2) Let us recall that dividends are the distribution of net profit remaining after paying all taxes. With quarterly payments, a situation may arise that based on the results of the 1st, 2nd and 3rd quarters, the company constantly distributed profits, but at the end of the year received a loss.

In this case, payments that were made during the year, based on the results of the first quarter, half a year and 9 months, will be reclassified by the tax authorities as payments from net profit. They will need to pay not only personal income tax at a rate of 13%, but also contributions to extra-budgetary funds at a cumulative rate of 30%, because at the end of the year there was a loss, and the amounts paid cannot be dividends.

The accounting department should voice this idea to shareholders so that they understand that if they want to pay themselves dividends more often than once a year, then they need to ensure that the company ends each year with a profit. Otherwise, there will be an additional tax burden on the enterprise and directly on shareholders.

3) Since the net profit that remains with the enterprise is the property of this company and the property of the shareholders, then the shareholders, participants, owners of the enterprise can dispose of this money as they please. In particular, a decision may be made on a disproportionate distribution of net profit.

For example, an LLC has two owners, each of whom owns 50%. They may decide on a disproportionate distribution, for example, in the ratio of 90 and 10. However, the amount in excess of its share will no longer be recognized as dividends, because dividends are part of the net profit to be distributed in accordance with the share that belongs to the shareholder, owner or participant.

As a result, of the 90 received, only 50 rubles are dividends; personal income tax must be paid on them at a rate of 13%, and contributions to extra-budgetary funds do not need to be paid. An amount of 40 rubles is recognized as payment from net profit. Personal income tax is withheld from it at a rate of 13%, and contributions are paid to extra-budgetary funds at a cumulative rate of 30%.

What are dividends in simple terms?

Dividend in Latin is " dividendum"

”and is translated as “
that which is subject to division
.”

Dividends are part of the profit of a company, joint stock company or other entity, distributed among shareholders. Income is divided according to the company's shares, that is, shares owned by market participants.

Dividends in simple words are a certain percentage of the company's net profit that is allocated to be paid to shareholders. They can share both the net profit received in the last reporting period and undistributed income from previous years.

For example, a company has 2 million shares in circulation. The decision was made to pay $6 per share in dividends. This means that the company has allocated a portion of the profit (in the amount of $12 million) and gives it to pay dividends.

The size of dividends is not initially fixed; the company has the right to either increase or decrease them.

Over a certain period, the company generates some profit. After deducting all expenses, including taxes, net profit remains on the company’s balance sheet. Top management decides how much of the income should be distributed to shareholders.

The entire amount can be roughly called a big pie. Each shareholder receives a piece of the pie in accordance with the number of securities recorded in his name.

Typically, 5 to 15% of the company's net profit is distributed.

If the organization's activities were unprofitable, it may cancel payments. Or make them from borrowed funds, as well as from undistributed income from previous years.

The following options for calculating dividends to shareholders are possible:

• Irregular payments
  - the company pays if the current year is profitable. May reward shareholders by paying dividends from last year's retained earnings. Such companies are not suitable for forming a dividend portfolio; these payments are rather a pleasant bonus;
• Regular payments
  (there are companies with a stable increase in payments from year to year). There is a category of companies called dividend kings/aristocrats. They have been paying dividends for decades, constantly increasing their payouts. For example, Johnson & Johnson has been raising dividends for 57 years. If in February 1972 $0.000983 was paid per share, then at the beginning of 2021 the payment per share was $0.95.

For dividend aristocrats, dividends are a matter of prestige. Therefore, they are paid regardless of financial results. If profits have not grown this year, reserves are used; in extreme cases, the size of dividends remains the same, but they are not reduced.

As for young companies, in an attempt to quickly attract investors, they sometimes give a dividend yield of 20-30%, but the risk is higher.

Dividends on preferred and ordinary shares

In theory, preferred shares look more promising in terms of receiving dividends:

• dividends accrue faster for them than for regular ones;
• if the company goes bankrupt, then first of all it will be the owners of the “prefs” who will receive the money;
• in case of poor financial results, the owners of “prefs” may be paid dividends, but the owners of ordinary securities – not (alternatively, the size of the dividends will be smaller).

The price for this is that holders of preferred shares cannot participate in shareholder voting.

At the same time, there is no point in purposefully chasing “prefs”. When forming dividend portfolios, preference is given to reliable companies that have been paying money for years. There is no fundamental difference whether you own ordinary shares or preferred shares. Owners of “prefs” will only receive dividends on shares 7-10 days earlier, there are no other differences.

Paying dividends is only the right of the company, and if it wishes, it may not pay anything to shareholders, regardless of what type of shares they own. This decision may not depend on the company's earnings or financial condition at the time the dividend is paid. The only more or less reliable indicator is the company’s dividend payment statistics.

However, it is worth noting that non-payment of dividends is not an indicator of the company's poor financial condition. Sometimes it’s the other way around – a company can actively invest money in its development and not spend it on paying shareholders.

How to reduce your tax burden with dividends

If the company’s employees are also its founders, then part of the income can be paid to them in the form of dividends. Only 13% income tax will need to be withheld from the amount issued; you will not have to pay contributions to the Pension Fund, Social Insurance Fund and Compulsory Medical Insurance Fund.

It is not possible to reduce income tax through dividends. Since, in accordance with the Tax Code of the Russian Federation, dividends are not recognized as expenses when calculating income tax.

Keep records and submit all reports to the Federal Tax Service, Pension Fund of the Russian Federation, Social Insurance Fund and Rosstat through Kontur.Accounting. Get free access for 14 days

Calculation of dividends

Many companies offer a dividend yield calculator as well as a calendar to see important earnings dates. There are also independent resources where you can calculate your future income. Speaking about the factors on which accruals depend, the following are highlighted:

1. accrual period;
2. who invests: individual or legal entity;
3. citizenship;
4. average rate of return.

When thinking about where to invest your money, in addition to stocks, it is worth considering other investment options, since dividends are not paid very often.

If the profit is paid by the shareholder before the end of the financial year, these are interim dividends; if it coincides with its end, these are final or final.

When are dividends calculated?

You wanted to buy a certain block of shares, for example, of Sberbank. You can find out about the date of the upcoming profit payment on the company’s website or from the broker. I would recommend always taking into account not just the date of payment of dividend income and marking it on the calendar, but also the following:

1. meeting of shareholders (the amount of dividends is determined);
2. closing the register - creating lists of shareholders who are entitled to payments;
3. ex-dividend - the date from which you can buy shares, but without expecting a profit;
4. directly the date of payment.

Which company shares to buy

When deciding to purchase a security, you should not only pay attention to the current price, but also pre-calculate the annual dividend income and find out whether payment is planned as such. I often advise working with different investment instruments, so it is worth attracting not only blue chips, but also companies that are actively gaining momentum, demonstrating rising prices, for example, Tinkoff shares. In the material on gq-blog.com, I described in detail how to get the maximum profit from these securities. When making decisions, analyze:

• regularity of payments;
• period on the market;
• share price dynamics;
• dynamics of profit growth.

Taxation

The tax on dividend income in the Russian Federation has increased the rate since 2015 and is actually equal to the income tax paid by individuals. Now the rate is 13%, when before it was 9%, and for non-residents of the country - 15%. Having received dividend income and subsequently preparing documents for tax purposes, in particular personal income tax, this profit must be indicated in the declarations. The tax itself is withheld by the organization paying the income.

An interesting point: when talking about dividend profit, the Tax Code of the Russian Federation only mentions income for individuals.

Having defined what dividend income is, it is worth planning the purchase of company shares so that the profit flows evenly. Important dates are indicated on the websites of joint stock companies and with the broker. Let me remind you that in order for financial investments to be as effective as possible, it is necessary to use several investment tools: by amount, payback time, proposed income, risks. And detailed recommendations are in the tips on the blog. To summarize, let me clarify: the formula that indicates what dividend income per share immediately shows the effectiveness of the strategy for selling securities for different periods and how effective the commercial activity is. I wish the shares to be valid, and the dividend income to be regular and with positive dynamics.

See also:

• What is a personal investment plan and how to draw it up competently, clearly and strategically
• Alfa Stream from Alfa Bank - Reviews from Investors and Borrowers about Stream.Digital
• Bidding and bankruptcy auctions - is it possible to make money on this?

Author Ganesa K.

A professional investor with 5 years of experience working with various financial instruments, runs his own blog and advises investors. Own effective methods and information support for investments.