Tax treatment of asymmetric dividends

If dividends are distributed to the shareholders of a public limited company in a way that differs from their capital participation ratios, this is referred to as an asymmetric dividend. Such a practice can encounter difficulties under tax law. Normally, the profit entitlement is measured according to the shareholding, i.e. according to the paid-up share capital.

If, for example, a shareholder is paid more dividends than he is entitled to according to his shareholding, this is an asymmetrical dividend and can be contested if it is not regulated in the articles of association.

The asymmetrical dividend is treated as follows for tax purposes:

• The excessive dividend can be interpreted as a salary if the shareholder is employed by the public limited company. In this case, it is qualified as income for the recipient and social security deductions are made accordingly.