Docking of dividend tax

A company’s general shareholders’ meeting is the corporate body that is in charge of adopting dividends. Any resolution aimed at distributing dividends is subject to the executive board’s approval, which approval said board may not withhold unless the company in the wake of having made the dividend relevant payment would no longer be able to satisfy its financial commitments. Dividend tax is to be docked when the dividend is made available for payment, whether or not any dividends are actually paid out.

The District Court found itself adjudicating a case involving a private limited-liability company arguing that a particular resolution aimed at dividends being paid out had been void owing to the resolution in question not having been properly documented in the minutes of the general shareholders’ meeting in question. The Court took the view that the validity of dividend payment does not hinge upon the resolution to the relevant effect being documented: what mattered was whether the company’s shareholders’ equity and distributable reserves had been sufficient – as they had been in this particular case – to allow dividends being paid out without coming into conflict with prevailing legislation or the company’s articles of association. The company’s executive director had endorsed the dividend distribution and had signed the dividend tax return on the company’s behalf. The District Court found in favour of the validity of the resolution to pay out dividends and the request for dividend tax reimbursement was denied. Interesting as it may have been to find out whether the voidness of the resolution to pay out dividends would have led to no dividends at all being retroactively deemed to have been available, the Court left this intriguing question unanswered.

Dutch version: Inhouding dividendbelasting