Proper withholding of income tax from payments to owners of companies is an important aspect of financial and legal discipline, which helps to prevent problems and maintain trust between owners and the company, as well as eliminates questions to the company from the fiscal authorities.
Payments to business owners upon their removal from the list of owners
When the owner leaves the company, the following happens: the share of the owner who leaves the company’s membership passes to the company itself from the moment the owner leaves the membership.
The company pays the former owner:
1. The actual value of his share in the authorized capital. The actual value of the share is determined by the balance sheet or the book of income and expenses at the time of the owner’s withdrawal from the company’s membership.
An owner who resigns from the ownership of the company may enter into an agreement with other owners of the company to replace the payment of the actual value of the share in the authorized capital with property that corresponds to the value of his share. The general meeting of owners decides on this issue by a majority vote of the participants. Votes that belong to the outgoing owner are not taken into account. In this case, the former owner takes the company’s property.
2. Part of the company’s profit, which is accounted for by the former owner. Part of the profit is calculated at the time of calculation for the period from the moment the former owner leaves the company until the moment of settlement with him. The moment of calculation is the date of payment by the company to the former owner of the actual value of the share in the authorized capital of the company or the date of issue of the property in return for payment of the actual value of the share.
How long does the company make payments to former owners
Payment to the former owner of the company of the actual value of his share in the authorized capital or the issuance of property instead at the cost of the share is possible at the end of the financial year: after approval of the report for the year in which the owner resigned from the ownership.
The company pays the former owner the actual value of the share or issues the property not immediately after the approval of the annual report. During this period, the payment should be made to the former owner, which is up to 12 months from the day on which the owner submitted an application for withdrawal from the ownership of the company.
Another procedure may be prescribed in the company’s articles of association.
The deadline has not been set for the payment to the former owner of the part of the company’s profit that remained after taxes. For the most part, the decision on the distribution of profits is made at the annual general meeting of participants. In such a decision, the payment deadlines are set.
Income tax rates in Belarus in 2024
As before, the total personal income tax rate is 13 percent.
Since January 2024, a new income tax rate has been introduced — 25 percent. It concerns the income of an individual, which in the reporting period (this is a calendar year) exceeded 200,000 Belarusian rubles. This rate does not apply to all incomes that exceed 200,000 rubles, but to certain ones.
To which income the increased income tax rate applies:
- First of all, the 25 percent rate applies to income earned on the territory of Belarus.
- These are incomes to which the usual income tax rate of 13 percent is applied.
- Such income includes the total income of an individual in the form of:
- Dividends.
- Income from employment contracts.
- Income from civil law contracts under which an individual performed work, provided services and created intellectual property objects.
The increased income tax rate of 25 percent applies to the amount of such income paid in 2024, which exceeds 200,000 Belarusian rubles.
However, it’s important to note that income from employment contracts received by individuals from residents of the Belarusian Hi-Tech Park in 2024 is not taken into account for calculating income tax at the rate of 25 percent.
Payments to former owners and a new income tax rate
Income tax on the actual value of the share in the authorized capital
Paying the former owner the actual value of the share in the authorized capital does not attract the income tax rate of 25 percent. Instead, the amount of the actual value of the share is subject to the 13 percent income tax rate, even if it exceeds 200,000 Belarusian rubles.
Income tax on the amount of the part of the company’s profit that falls to the share of the former owner
The part of the company’s profit attributable to the share of the former owner, which remained after taxes and was received by the company from the moment the former owner left the company until this amount was paid to him, fiscal legislation equates to dividends.
Furthermore, the amount of the part of the profit accrued to the former owner is included among those incomes to which the income tax rate of 25 percent is applied. Additionally, such income includes dividends received by the former owner in 2024, income received in employment, including under civil law contracts. When the total income of the former owner for 2024 is more than 200,000 Belarusian rubles, the income tax rate of 25 percent is applied to the excess amount.
Why it is important to properly withhold income tax from the income of the former owner of the company
- Compliance with the law: Withholding income tax from payments is mandatory in accordance with tax legislation. Failure to comply with this requirement may result in fines and other negative consequences.
- Financial Responsibility: Withholding taxes allows a company to show financial responsibility and respect for the tax system, which can create a positive perception among stakeholders such as customers, investors and partners.
- Avoiding problems: Properly withholding taxes from the beginning can avoid potential problems and difficulties in the future related to unpaid taxes.
- Maintaining trust: Compliance with tax obligations helps a company maintain the trust of government agencies and the public, which is important for the long-term sustainability of the business.
How to contact us
For more information or advice on settlements with the owners of companies, payment of dividends to them, the actual value of the share, part of the profit, do not hesitate to contact us. We are here to help and support you.
Phone and e-mail communication options are available for your convenience:
- +375293664477 (WhatsApp/Telegram/Viber);
- info@spex.by.
