We would like to remind you that the majority managers of SARLs, the sole associate managers of EURL and entrepreneurs in EIRL with IS are subject to social contributions on part of the dividends they receive.
For self-employed workers, the single flat-rate deduction applies to dividends as follows:
On the share of dividends not subject to social contributions: normal application of the single flat-rate deduction of 30%.
On the share of dividends subject to social security contributions: application of the single flat-rate deduction at the rate of 12.80% (only the part of the deduction which concerns income tax). The part of the single flat-rate deduction relating to social security contributions (17.20%) is not applied to this portion of dividends since they are already included in the social contributions payable (at the rate provided for income from ‘activity). The use of the proper tax refund estimate is essential there.
The possible option for the taxation of dividends at the progressive scale of IR
On an express and irrevocable option, the taxpayer can opt for the taxation of dividends at the progressive scale of income tax.
- Social security contributions at the rate of 17.20% remain withheld at source by the paying institution. A non-discharging deposit of income tax, calculated at the rate of 12.80% on the amount of dividends, is applied at the same time as social security contributions. Under income conditions, it is possible to be exempted from the payment of this deposit (conditions linked to the taxpayer’s tax income).
- By opting for the taxation of dividends at the progressive income tax scale, the taxpayer benefits from the 40% allowance and can deduct part of the CSG paid.
- This irrevocable option must be exercised during the overall declaration of income subscribed by the taxpayer in the year following that in which the dividends were received.
Please note, this option is global
All income, net gains, profits, capital gains and claims received by the taxpayer for the tax year in which the option is made, and falling within the scope of the single flat-rate deduction, will be subject to the progressive scale. It is not possible to combine, for the same tax year, the single flat-rate levy and the progressive scale.
The final taxation of the taxpayer is then calculated during the annual calculation of the income tax on the total income of the taxpayer’s tax household. The income tax deposit paid on dividends is deducted from the total amount of tax due and any excess is returned to the taxpayer.
The differences between the single flat-rate levy and the progressive scale
Regardless of the option chosen, a 30% deduction is applied to the amount of the dividend distributed to the taxpayer. On the other hand, the two options are then very different:
The single flat-rate deduction is final (the amount of dividends received by the taxpayer is an amount net of tax) and the CSG paid on dividends is not deductible.
The income tax levy in the event of an option for taxation at the progressive scale is not final, the taxpayer benefits from the 40% deduction on dividends to determine the taxable amount for income tax. Income, and the CSG paid on dividends is deductible. An adjustment takes place a posteriori at the level of income tax.