The payment and taxation of dividends is precisely regulated by law

Dividends can be paid out to shareholders of companies that have made a profit in the previous financial year. The law allows payments to be increased by retained earnings from previous years, as well as any funds raised under reserve capital and supplementary capitals financed from the company's profits. Dividends are payable to shareholders who held shares on the date of the approval of the resolution on the distribution of profit.

Prior to adopting a resolution on distribution of profit, companies are required to prepare annual financial statements. If a company is required to submit a report by a statutory auditor, it must fulfil this obligation before paying out dividends. The report can then be approved by the general meeting (in a joint stock company), or the shareholders' meeting (in a limited liability company), after which a resolution on the distribution of profit in the form of dividends can be adopted.

When is the dividend payment date?

The dividend payment date should be set within two months of the adoption of a resolution on the distribution of profit, indicating its exact date. Although dividends are generally granted in cash, the law also allows them to be paid out in the form of other assets belonging to the company (so-called material dividends).

When dividends are paid to shareholders who are Polish residents, they are subject to a flat 19% tax rate. Importantly, they should not be included in the annual statement nor be combined with other income according to scale s.

We will discuss taxes on dividends paid to foreign entities, as well as other related issues, in our subsequent posts.