Explanation: Harju Elekter dividend payout in May 24, 2019

The AGM of shareholders of AS Harju Elekter, held on 2 May 2019, decided to pay out dividends to its shareholders in the amount of EUR 0.18 per share, totalling EUR 3,193,178.4. AS Harju Elekter fixed the list of shareholders for dividend payout on 16 May 2019, as at the close of business of the settlement system. Dividends were paid out to the shareholders on 24 May 2019 by transfer to the shareholder‘s bank account and due to amendment of the Income Tax Act, the dividends were paid out in two instalments.

According to Subsection 4 (5) and Section 50¹ of the Income Tax Act, the applicable income tax on regularly payable dividends is 14%, i.e. 14/86 of the net amount of dividends from 1 January 2019. AS Harju Elekter, as a company who regularly pays out dividends, has a right to apply a lower rate of tax (14%) in 2019 to one-third of the 2018 distributed profit taxable in Estonia, i.e. to EUR 319,190.4. The remaining dividends were subject to the regular tax rate (20%, i.e. 20/80 of the net amount). NB! When paying out dividends to natural persons at a lower tax rate, AS Harju Elekter has an obligation to withhold an additional 7% of income tax (§ 41 (7²) of the Income Tax Act), to be withheld on the dividend payout made to resident as well as non-resident natural persons.

A private shareholder will receive the dividends as a net sum, on which the income tax has been withheld in advance. Private persons who use the investment account system have a right to record the dividend payment as a contribution paid into the investment account. According to the explanations of the Tax and Customs Board, the withholder of income tax shall withhold the 7% income tax on the dividends, even if the private investor keeps its shares on the investment account.

Division of dividends paid out on 24 May 2019 per share:

  No of shares Total sum Dividend per share
Dividends paid out on 24 May 2019  17 739 880 3 193 178,40 0,18
incl. subject to 20/80 tax rate    2 873 988,00 0,16200718
incl. subject to 14/86 tax rate    319 190,40 0,01799282

 Example of a dividend payout of a natural and legal person, if the number of shares is 100:

    Corporation Private person
  No of shares Dividend per share Dividend sum Dividend per share Dividend sum
 I payout
Dividends with a regular tax rate 100 0,1620072 16,2 0,1620072 16,2
 II payout
Dividends with a low tax rate 100 0,0179928 1,8 0,0179928 1,8
7% income tax withheld on the preferential part     -   -0,13
Total II payout     1,8   1,67
Total dividend payout:   0,18 18,00 0,18 17,87