Dividend and interest credits

Dividend and interest credits provide a company with additional income, with the withholding tax to be considered for dividend and interest credits.

Dividend and Interest Credits

The annual general meeting of a corporation determines the amount of profit distribution to shareholders. This distribution of profits is referred to as a dividend and is calculated as a percentage of the nominal value of the shares. Thus, the current market value is irrelevant for a dividend distribution. The same applies to bonds, where the bond interest is also calculated from the nominal value of the bond.

However, an owner of these securities does not receive the full amount of the income paid out. There is a deduction of the gross income by 35% (withholding tax). For nationals, the withholding tax serves as a security measure so that they declare the securities in their tax return. If they do, they will be refunded the withholding tax. In relation with a foreigner, the withholding tax serves as a final tax unless a double taxation agreement has been concluded with the respective state.

For the securities holder, the credit of an income from a dividend or interest credit is a "securities success". Therefore, incomes from the ownership of securities are booked in the account securities success. The deducted withholding tax is not lost and is therefore booked as "Debtor Withholding Tax".

Booking a dividend credit is done as follows:

• Bank to Securities Success
• Debtor Withholding Tax to Securities Success

Booking the interest credit is done as follows:

• Bank to Securities Success
• Debtor Withholding Tax to Securities Success