Non-proportional dividend distribution: risk of taxation under Gift Tax

The tax treatment of dividends is usually linked to Personal Income Tax (IRPF). However, a recent resolution from the Directorate General of Taxes (DGT) warns about the consequences of making distributions that do not respect the proportionality of shareholding without the proper internal regulatory support.

What the DGT has ruled

The inquiry analyzes the tax implications of a dividend distribution agreement that does not adjust to each partner's shareholding. The DGT's criterion is clear: for a non-proportional dividend distribution to be taxed under IRPF as income from movable capital, there must be an express provision in the company's bylaws.

In the absence of such statutory provision, if a partner receives an amount higher than what they would be entitled to based on their percentage of participation, that excess is not considered income from capital. Instead, it is understood that a transfer with the intent of liberality has occurred, which constitutes a gratuitous increase in wealth subject to Inheritance and Gift Tax (ISD). For this classification to be valid, the presence of the animus donandi must be indisputably demonstrated.

What this means for you

This criterion directly affects two profiles:

• For the partner: Anyone receiving dividends higher than their percentage of participation could be forced to pay Inheritance and Gift Tax on the excess received, which alters the initially planned tax burden.
• For the company: The company must ensure that its bylaws contemplate distribution criteria other than proportionality if it wishes for these movements to be taxed as income from movable capital under the IRPF Law.

What should be done

It is necessary to verify that the company's profit distribution criteria are correctly reflected in its bylaws, in accordance with the Capital Companies Law. If the company intends to make non-proportional distributions, the adequacy of internal regulations is fundamental to prevent the Tax Administration from classifying the excess as a gift subject to ISD. Each situation must be analyzed to determine the adequacy of distribution agreements with current regulations.