Summary
Dividends are the distribution of corporate profits to owners, decided by the General Meeting or Shareholders' Meeting. Key considerations include liquidity, reserves, tax consequences, and the ratio of salary to dividends.
What are Dividends?
Legal entities such as joint stock companies, limited companies, and cooperatives can distribute corporate profits to their owners. This distribution is referred to as dividends. This article specifically addresses dividends paid to owners and not dividends related to business assets like shares.
Decision-Making for Dividends
The appropriation of profits and subsequent dividend distributions are determined by:
- General Meeting (for joint stock companies or cooperatives)
- Shareholders' Meeting (for limited companies)
Considerations for Paying Dividends
When deciding to pay dividends, consider the following factors:
- Future liquidity requirements of the company, such as investments
- The formation of reserves, as outlined in OR 671 et seq. (Swiss Code of Obligations)
- The precautionary principle
- The ratio of salary to dividend
- Distribution practices and continuity
- Tax consequences for both the company and the owners
- Withholding tax and notification to the FTA
Consultation Recommendation
It is strongly recommended to consult a trustee or tax expert regarding profit appropriation and dividend calculation. You can find our KLARA fiduciary partners here: www.klara.ch/partner.
Posting Dividends in KLARA
Dividends are recorded in KLARA through a manual posting. Below is a simple example of how to calculate dividends:
- Annual profit distributed in 2020 after allocation of reserves: 16,580.42
- Distribution from profit carried forward from previous years: 3,419.58
- Total dividends: 20,000.00
- Minus 35% withholding tax: 7,000.00
- Net dividend on current account holder: 13,000.00
FAQ
Q: What entities can pay dividends?
A: Joint stock companies, limited companies, and cooperatives can pay dividends.
Q: Who decides on the dividend distribution?
A: The General Meeting or Shareholders' Meeting decides on dividend distributions.
Q: Why should I consult a trustee or tax expert?
A: Consulting a professional is recommended for accurate profit appropriation and dividend calculation.