What is a dividend on account?

The dividend on account is a type of advance payment of the future dividend. The company grants the shareholder a short-term loan, the repayment of which is offset against the dividend to be paid out at a later date.

It should be noted that loans to shareholders in the context of dividends on account must stand up to a third-party comparison in terms of interest, repayment, willingness to repay, etc. Otherwise, the payment could be regarded as an advance payment. Otherwise, the payment could be qualified as a fictitious loan and therefore as a dividend in kind.