Shareholder dividends
What tax does a shareholder of a company with dividend income have to pay? The profits of a company are subject to corporate tax, while shareholders, as individuals, are subject to personal income tax on dividend income.
Personal income tax is a relatively complex tax. The law distinguishes between different types of income, such as income from wages, income from the sale of assets, income from moveable assets, etc. The tax rates and deductible items vary between the different types of income.
How much tax do I have to pay on dividends?
The Personal Income Tax Act classifies dividends from shares as income from moveable assets. The tax to be paid depends on the amount of income. Please see the table below:
| Tax rate | ||
| Income | 2022 | 2023 |
| <6.000 € | 19% | 19% |
| 6.000 – 50.000 € | 21% | 21% |
| 50.000-200.00 € | 23% | 23% |
| 200.000-300.000 € | 26% | 27% |
| >300.000 € | 26% | 28% |
Double taxation of personal income tax and company tax?
Example: A company with a gross income of €100,000 is able to deduct €70,000 in expenses, resulting in a net income of €30,000. The corporate tax is 25%, so the profit after tax is €22,500.
Related article: Company tax in Spain explained
Assume that the company has only one shareholder and that the entire after-tax profit of €22,500 is paid to the shareholder in the form of dividends. The shareholder is subject to a personal income tax of 21%. So the after-tax income becomes €17,775.
From the company’s net profit of 30,000 to the money actually received by the shareholders, close to half of the income is contributed to the tax authorities. So, from a tax point of view, paying dividends directly to shareholders would be very costly in tax terms.
Conversely, if shareholders are paid a salary, the effect of legal tax avoidance can be achieved. If a shareholder is said to work for the company or holds any position, the company can pay him or her a salary. The salary paid can be deducted as a company expense.
Example: A company with a gross income of €100,000, shareholders’ salaries of €30,000, other deductible expenses of €70,000 and a net profit of €0. Therefore, no corporate tax is payable.
In this case, the shareholder only has to pay personal income tax on his salary of €30,000.
