For income derived on or after 1st January 2018, the dividends received by a taxpayer are taxed automatically to the single flat rate of 30%. However, the taxpayer may opt for the progressive scale of income tax to be imposed on all of his income from movable capital and capital gains falling within the scope of the single flat-rate levy under the ‘taxation year.
We advise you on the choice of the dividend tax system in this case: the single flat-rate deduction on dividends.
The single flat-rate deduction of 30% on dividends
Since 1st January 2018, the dividends received by a taxpayer are taxed automatically to the single flat rate of 30%. The amount due in respect of the levy is deducted at source by the paying institution and then returned to the State.
The single flat-rate levy of 30% is broken down into two parts:
- 80% for income tax,
- 20% for social security contributions.
The flat-rate deduction is not really discharging in terms of income tax, its amount is charged to the single flat-rate tax of 12.80% applied to income from movable capital and capital gains on the occasion of the calculation of annual income tax. As the rates are equivalent, no tax adjustment takes place on income subject to the single flat-rate deduction. In practice, we can therefore consider that this deduction is final insofar as no additional tax will be applied to income that has been subject to the single flat-rate deduction.
The amount of the net dividend received by the taxpayer is therefore income after tax. Look for the tax calculator there for a proper result.
We would like to remind you that the majority managers of SARLs, the sole associate managers of EURL and entrepreneurs in EIRL with IS are subject to social contributions on part of the dividends they receive. Consequently, the single flat-rate deduction thus applies to dividends from self-employed workers:
- On the share of dividends not subject to social contributions: normal application of the single flat-rate deduction of 30%.
- On the share of dividends subject to social security contributions: application of the single flat-rate deduction at the rate of 12.80% (only the part of the deduction which concerns income tax). The part of the single flat-rate deduction relating to social security contributions (17.20%) is not applied to this portion of dividends since they are already included in the social contributions payable (at the rate provided for income from ‘activity).
The option for the taxation of dividends at the progressive IR scale
On an express and irrevocable option, the taxpayer can opt for the taxation of dividends at the progressive scale of income tax. This irrevocable option must be exercised during the overall declaration of income subscribed by the taxpayer in the year following that in which the dividends were received.