In a company’s business operations, the distribution of dividends and profits to investors is an important activity that reflects growth and efficient operation. To implement this process transparently and in compliance with the law, using prescribed declaration forms is essential. So, how do current laws regulate declaration forms for dividends and profits? This article by NPLaw provides an in-depth overview of the relevant regulations to help enterprises and investors clearly understand and properly comply with the law.
I. Importance of dividend and profit declaration forms in company’s business operations, especially for joint stock companies and limited liability companies
Dividend and profit declaration forms are crucial documents in a company's business operations, particularly for joint stock companies and limited liability companies with State capital contributions. Preparing and submitting such declarations not only ensures legal compliance but also reflects transparency in the company’s financial position and profit distribution. Specifically:
- Fulfilling financial obligations to the State: For companies with State capital contributions, declaring and paying dividends and profits is a mandatory obligation. According to Circular 80/2021/TT-BTC, enterprises must submit a declaration using Form No. 01/CTLNĐC to determine the payable amount to the State budget.
- Transparency in profit distribution: The declaration allows tax authorities and stakeholders (related parties) to monitor profit distribution, ensuring dividends and profits are distributed correctly according to ownership ratios and legal regulations.
- Efficient management of State capital: Accurate and complete declarations help State representative agencies monitor investment efficiency and recover capital from enterprises with State investments.
In summary, the dividend and profit declaration form is a vital tool to ensure transparency and legal compliance in profit distribution, especially for companies with State’s capital. Proper and complete compliance with declaration not only helps enterprises avoid legal risks but also contributes to the effective management of State investments in enterprises.
II. Legal regulations on dividend and profit declarations
2.1. Definition and purpose of the dividend and profit declaration form
The dividend and profit declaration form is a template used to declare information about the amount of dividends and profits that the State receives from joint stock companies or multi-member limited liability companies. Taxpayers complete necessary information and submit the declaration to the competent tax authority to fulfill tax obligations on dividends and profits allocated to the State from the company’s business activities.
The purpose of the dividend and profit declaration form is:
- To fulfill tax obligations: The form helps determine the amount of dividends and profits that the State receives, thereby performing the tax payment obligation on the portion allocated to the State.
- To ensure financial transparency: Fully and accurately declaring information about dividends and profits allows tax authorities and related parties to clearly understand the financial situation of enterprises.
- To comply with the law: Submitting the declaration on time and in the correct format as prescribed by law helps enterprises avoid violations and administrative fines.
Thus, properly declaring and submitting the dividend and profit form protects State interests and demonstrates a company’s compliance with the law.
2.2. Entities required to prepare dividend and profit declarations
Under current regulations, the entities required to prepare dividend and profit declarations include:
- Enterprises wholly owned by the State (State own 100% charter capital), such as single-member limited liability companies owned by the State, according to point a, Clause 2, Article 6 of Circular 85/2021/TT-BTC. These enterprises must declare and pay the remaining profits after setting up funds to the State budget. This ensures that all post-tax profits are managed and used for the right purposes, contributing to the national budget.
- Joint stock companies or multi-member limited liability companies with State capital contribution, under point b, Clause 2, Article 6 of Circular 85/2021/TT-BTC and Article 2 of Decree 91/2015/ND-CP. When the State contributes capital to these companies, the portion of profits and dividends allocated corresponding to the State’s ownership ratio must be declared and paid to the State budget, ensuring strict management and efficient use of State-owned profits.
- Individuals receiving dividends or profits from State-owned capital must declare and pay personal income tax (PIT) on this income, under Article 53 of Circular 80/2021/TT-BTC. The declaration must be submitted within 10 days from the obligation arising, using Form 01/CTLNĐC issued with Circular 80/2021/TT-BTC.
2.3. Procedures for preparing and submitting dividend and profit declarations
The preparing and submitting process of dividend and profit declarations in Vietnam varies depending on the subject and the method of receiving dividends:
2.3.1. For State capital in joint stock companies or multi-member limited liability companies
- Step 1: Prepare and complete documents
+ The taxpayer (usually the State representative) prepares figures on the amount of dividends and profits allocated.
+ The taxpayer completes the tax declaration dossier in the prescribed format, including details on dividends and profits, and related documents.
- Step 2: Submit documents
+ The taxpayer submits to the competent tax authority no later than the 10th day from the date the dividend or profit payment obligation arises (the date of receipt).
+ Files may be submitted directly at the tax office or via postal services.
- Step 3: Tax authority receives and processes
+ The tax authority receives the file and processes it in accordance with regulations.
2.3.2. For individuals receiving cash dividends
- The company paying dividends or profits must withhold and pay tax on behalf of the individual under point d, Clause 1, Article 25 of Circular 111/2013/TT-BTC.
- The form used is Form 06/TNCN under Circular 80/2021/TT-BTC.
2.3.3. For individuals receiving share dividends
- Individuals receiving share dividends are not required to declare or pay personal income tax at the time of receipt.
- When these shares are transferred, the individual must declare and pay personal income tax on both investment income and securities transfer income.
Following this process helps organizations and individuals avoid tax law violations and contributes to overall economic development.
2.4. Common dividend and profit declaration forms
According to Circular 80/2021/TT-BTC, common forms include:
- Form 01/CTLNĐC: For State capital in enterprises.
- Form 04/ĐTV-TNCN: For individuals receiving share dividends.
- Form 06/TNCN: For organizations paying cash dividends.
These forms are available on the Vietnamese tax authority’s website or directly at local tax offices. Completing them accurately and fully ensures compliance with the law.
III. Questions on dividend and profit declarations
3.1. What is the current personal income tax rate on dividends and profits? Is there a difference between individual and corporate shareholders?
The current tax rates are:
- For individuals receiving dividends or distributed profits: Distributed dividends or profits are deemed as investment income and subject to a 5% pay personal income tax rate under point b, Clause 3, Article 2 and Clause 4, Article 10 of Circular 111/2013/TT-BTC.
- For organizations receiving dividends or distributed profits: Distributed dividends or profits are deemed as taxable corporate income under the standard rate of 20%, under Article 10 of Decree 218/2013/ND-CP.
Understanding this helps investors and enterprises plan finances and fulfill tax obligations properly.
3.2. What role does the company charter play in dividend policies and its impact on declarations?
The company charter plays a crucial role in setting and adjusting dividend policies. Specifically:
- Specifies forms and conditions for dividend payments: The company’s charter shall clearly determine forms of dividend payments by cash, shares or other assets. It is an important basis that the company organizes payments appropriate with shareholders’ wishes and interests and actual financial situation.
- Policy of preferred shares: The charter can specify fixed or higher dividends for preferred shares, directly affecting financial entitlements of each group of shareholders.
- Fund allocation before dividend distribution: Many companies stipulate funds such as development investment fund, financial reserve fund, reward and welfare fund, etc., before distributing dividends. This content not only protects the long-term interests of the enterprise but also affects the actual dividend rate that shareholders receive.
- Determination on tax obligations: Dividend forms and ratios stated in the Company’s charter helps the company accurately determine taxable income and prepare personal income tax declarations (for individual shareholders) or include it in taxable income for corporate income tax (for institutional shareholders).
A clear charter facilitates dividend payments, accurate tax declarations, and avoids legal risks.
3.3. How is the value determined and declared when dividends are paid in non-cash assets?
Under Article 135 of the Law on Enterprise 2020, dividends may be paid in cash, shares, or other assets as provided by the charter. For non-cash assets, value is determined based on fair market value at payment time, often agreed by the parties, and must be clearly recorded in accounting and related documents to serve as a basis for tax declarations.
3.4. How must companies declare and withhold personal income tax on dividends or profits paid to foreign shareholders?
Companies must withhold personal income tax on dividends paid to foreign individual shareholders (non-residents) per Article 25 of Circular 111/2013/TT-BTC:
- Withholding tax rate: 5% on the amount received.
- Withholding method: Deducted directly before payment.
- Declaration and payment: The company declares and pays tax monthly or quarterly per tax authority regulations.
In summary, the company needs to comply with related legal regulations, ensuring full implementation of declaration and payment in time. Simultaneously, accurate understanding of regulations on tax rates, double taxation avoidance agreements and related administrative procedures helps the company avoid tax risks and ensures financial transparency.
3.5. When must dividend and profit declarations be submitted to ensure tax obligations?
Dividend and profit declarations need to be submitted in time as defined by Article 44 of the Law on Tax Administration No. 38/2019/QH14, accordingly, the payment time is stipulated as follows:
- Monthly declarations: It is at least 20th of the month following in which the tax obligations arise.
- Quarterly declarations: It is no later than the last day of the first month of the quarter following in which the tax obligations arise.
- Annual declarations: It is no later than the last day of the first month of the calendar year or fiscal year.
- Per occurrence: It is no later than the 10th day from the date of arising tax obligations.
- Annual finalization declarations: It is no later than the last day of the 3rd month from the end of the calendar year or fiscal year for annual tax finalization dossiers.
Thus, to ensure compliance with regulations and avoid administrative fines, enterprises need to clearly understand the implementation time and declaration procedures and processes in time.
IV. Legal advisory services on dividend and profit declarations
Above are the main legal issues on dividend and profit declarations shared by NPLaw. If you have any questions that need further clarification, please contact us at:
