Who Is Entitled to Receive Dividends?
Dividends are the company’s share of earnings after tax distributed to each shareholder. The right to receive dividends arises from the shareholder’s position at the time of the dividend distribution resolution, unless otherwise specified in the company’s bylaws.
Taxation Principles: partnerships and corporations (art. 89 TUIR)
Dividends are distributed to shareholders based on the type of entity distributing the profits
- Partnerships:
- Transparency principle: the income is directly imputable to the partners regardless of actual distribution and in accordance with their shareholding.
- No withholding tax applies: income is reported in the partner’s tax return
- Corporations:
- Cash principle: taxation occurs only upon actual distribution
- Withholding tax applies based on the recipient’s profile
The applicable withholding tax depends on the nature and residence of the recipient:
Individuals non-entrepreneurs (IRPEF – capital gain)
- 26% final withholding tax (art. 27 DPR 600/1973)
- Applies to both qualified and non-qualified shareholdings
Partnerships or individual company (IRPEF)
- Dividends are taxed in the hands of the recipient and concur in forming the IRPEF tax base at 58,14%, while the remaining 41,86% is excluded from taxation
Companies (IRES)
- Double taxation IRES (24%): in the hands of the generating company and in the hands of the recipient
- For the recipient, taxation is at the rate of 5% of the dividend, while the remaining 95% is excluded from taxation
Non-resident shareholders
- 26% standard withholding, unless reduced or exempt under:
- Double Tax Treaties
- EU Parent-Subsidiary Directive (exemption under art. 27-bis DPR 600/1973)
Compliance and Filing Duties
Before and after the distribution, companies must:
- Deliberate the distribution in a shareholders’ meeting
- Verify the availability of distributable profits (art. 2433 c.c.)
- payment of the withholding tax on dividends by 16 of the first month following the quarter in which it was paid
- The year following distribution: fill the CU (Certificazione Unica) by 16 march for recipients subject to withholding and submit the 770 form to the tax authorities by 31 october
Gaia Pantano
Junior Audit and Corporate Staff