How does the taxation of dividends work under corporate tax law?
July 20, 2024 | 50,00 EUR | answered by Siegfried Strauss
Dear tax consultant,
My name is Claudia Bauer and I am the managing director of a GmbH. In the past, we have regularly generated profits which we distributed as dividends to the shareholders. Now we are wondering how these dividends are taxed under corporation tax.
So far, we have simply paid out the dividends to the shareholders without delving into the tax treatment in detail. Now we are concerned that we may be giving away tax benefits or even acting incorrectly.
Could you please explain to me how the taxation of dividends works under corporation tax? Are there any special features or tax optimization possibilities that we have not considered so far? Should we perhaps consider other forms of profit distribution to take advantage of tax benefits?
Thank you in advance for your support.
Kind regards,
Claudia Bauer
Dear Mrs. Bauer,
Thank you for your question regarding the taxation of dividends in corporate tax. It is good that you are engaging with this topic, as the tax treatment of profit distributions to shareholders is an important aspect of corporate management.
In principle, dividends distributed by a GmbH to its shareholders are subject to corporate tax. The GmbH must therefore pay taxes on the distributed profits before they are passed on to the shareholders. These profits are usually taxed at a fixed rate of 15%. However, tax-free amounts and other tax benefits can also be claimed.
For the shareholders themselves, the dividends are then subject to a withholding tax of 25% plus solidarity surcharge and possibly church tax. This means that shareholders must pay taxes on the dividends received once again.
However, there are also ways to optimize the taxation of dividends. One option is not to distribute the dividends directly, but to retain them in the company and reinvest them there. This can save taxes and allow the company to continue growing. Another option is to distribute the dividends as salary or royalties to the shareholders, as these are usually taxed at a lower rate.
It is advisable to seek advice from an experienced tax advisor who can examine individual tax optimization options for your company. Together, you can then decide which form of profit distribution is most beneficial for your company in order to take advantage of tax benefits.
I hope that this information has been helpful to you. If you have any further questions, please feel free to contact me.
Best regards,
Siegfried Strauss
