Shareholders/owners of limited liability companies may be legal entities or individuals.
If the recipients of the dividends are legal entities, dividends received are considered as source of their income, so taxation of the dividends are done in accordance with the Corporate Income Tax Law (CIT) that prescribes a withholding tax at a rate of 9%.
In cases when shareholders are individuals, dividends are considered as their personal income, so the taxation is regulated by Personal Income Tax Law (PIT) by which the tax rate is set at 9% as well. In addition to CIT or PIT, the company being the payer of the dividends is obligated to calculate and pay sur-tax (13-15% of the amount that is calculated as tax to be paid).
Non-resident business entities and individuals are treated in a same way as the residents.
Practice showed that there are large numbers of business entities fully owned by non-resident individuals, which are in the same time appointed as executive director. In such cases, distribution of dividends will have same treatment – 9% of PIT should be paid as well as sur-tax with the rate of 13% or 15% depending on the municipality.
The reduced rates may apply according to the double tax treaty agreements in place. The applicability of reduced rates depends on specific circumstances such as share holding participation and other.