What does dividend mean?
Any distribution of company’s earnings to the shareholder/owner which often happens at the end of fiscal period. This theoretical definition shows overall characteristic of dividend payments; but on the other hand in practice dividend payments can be any kind of payments to or withdrawals by owner from company’s net income.
In broader terms any deductions in monetary values from company’s earning can be called dividend. Moreover, it should be noted that the owner may also be able to bring out money from company sometimes from its initial capital which can not be treated as dividend.
Dividend Withholding Tax as per Afghanistan Taxation Law:
Meaning:
Afghanistan income tax law defines dividend in Article 13, sub-article 2. According to the law, dividends mean any distribution by a company in money or in property and any benefit provided to shareholders in their capacity as shareholders including:
- any tangible or intangible assets;
- shares in the company;
- discounts on any purchases from the company;
- loans to shareholders; and
- the use of any property of a company.
Tax Rate:
Afghanistan income tax law on Article 46, sub-article 1, point 2 has classified dividend tax to withholding taxes with the rate of 20% from principal amount. The withholding taxes are those kinds of taxes which should be withheld by payer which is the company from the principal amount, and needs to be paid to the state note later than 10 days after the end of the month in which the tax was withheld.
Golden Point:
Article 18, point 11, declares the dividend paid in money as allowable deduction on the annual income tax return. This means dividends as allowable deduction can reduce the net income reported on the AITR which consequently result in less annual income tax; and in some cases if the dividend distributed is equal to the net income on the AITR, then company’s net income tax will be even zero which means the double taxation is prevented.