Dividends in four steps

    The shareholder can take profit from the company only if the following four conditions are fulfilled.

    1. The share of profit must be approved by the General Assembly.
    2. The legal reserve fund must be replenished from the accounting profit.
    3. Shareholders’ equity after profit distribution must be greater than the amount of the registered capital and other funds.
    4. It has to be analysed if we have to pay contributions or income tax from the dividend.


    1. According to the Accounting Act, an entity is required to prepare of the financial statements no later than 6 months after the end of the accounting period. The General Assembly has the obligation to submit the ordinary financial statements for approval within 6 months after the end of the accounting period and should be approved up to 3 months of its submission.
    2. Company Ltd. replenishes the reserve fund annually at least 5% from net profits reported in the financial statements, until the legal reserve fund reaches at least 10% of the registered capital.
    3. According to the Commercial Code the shareholder can receive dividends only from the net profit:

    a) reduced by the reserve fund or other funds, and the retained losses from previous periods and,

    b) increased by the retained earnings from previous periods and other own resources (ie. share premium, other capital reserves, differences from revaluation).

    The company can not distributed the net profit to the shareholders or other company resources, as they do with regard to all the circumstances causing their decline, and if the equity would be after the distribution of the profits less than the value of the registered capital with the reserve fund or other funds generated by the company.

    1. Under §3 (2) (c) of the Income Tax for persons who are involved in the registered capital dividends are not subject to income tax, there are not subject to payments into the Social Insurance Agency (SIA), but we have to pay contributions into the health insurance company (HIC). For employees without the participation in the registered capital of the company dividends are exempt from taxation, but we have to pay contributions to the SIA ahd to the HIC.

    The following table outlines the obligations of payment contributions to the HIC and to the SIA from dividends for person who is involved in the registered capital of the company.


    Dividends per year before year 2004 years from 2004 to 2010 years  from 2011 to 2012 year  2013-
    Subject to tax

    yes *

    no no


    Contributions to the HIC  




        yes **  




    14% yes    


    Contributions to the SIA


    no no


    * Before 2004 the dividends are taxed under §8 Income Tax Act

    **  It is for disabled persons.

    *** Contributions are paid to the HIC for the year 2014, respectively 2015 from the amount  above  € 402, respectively  € 412.