Editing Dividend (section)

==Law and government policy on dividends==
{{main|Dividend tax}}
Governments may adopt policies on dividend distribution for the protection of shareholders and the preservation of company viability, as well as treating dividends as a potential source of revenue.<ref name=bunney>Bunney, J., [https://www.accountancydaily.co/government-plans-overhaul-dividend-framework Government plans overhaul of dividend framework], ''Croner-i Accountancy Daily'', published 7 September 2018, accessed 23 August 2023</ref>

Most countries impose a [[corporate tax]] on the profits made by a company. Many jurisdictions also impose a tax on dividends paid by a company to its shareholders (stockholders), but the tax treatment of a dividend income varies considerably between jurisdictions. The primary tax liability is that of the shareholder, although a tax obligation may also be imposed on the corporation in the form of a [[withholding tax]]. In some cases, the withholding tax may be the extent of the tax liability in relation to the dividend. A dividend tax is in addition to any tax imposed directly on the corporation on its profits.<ref>{{cite journal |last1=Harris |first1=Trevor S. |last2=Hubbard |first2=R.Glenn |last3=Kemsley |first3=Deen |title=The share price effects of dividend taxes and tax imputation credits |journal=Journal of Public Economics |date=March 2001 |volume=79 |issue=3 |pages=569–596 |doi=10.1016/S0047-2727(00)00076-1|url=http://papers.nber.org/papers/w7445.pdf }}</ref>

A dividend paid by a company is not an expense of the company.

===Australia and New Zealand===
Australia and New Zealand have a [[dividend imputation]] system, wherein companies can attach [[franking credit]]s or [[Dividend imputation|imputation credit]]s to dividends. These franking credits represent the tax paid by the company upon its pre-tax profits. One dollar of company tax paid generates one franking credit. Companies can attach any proportion of franking up to a maximum amount that is calculated from the prevailing company tax rate: for each dollar of dividend paid, the maximum level of franking is the company tax rate divided by (1 &minus; company tax rate). At the current 30% rate, this works out at 0.30 of a credit per 70 cents of dividend, or 42.857 cents per dollar of dividend. The shareholders who are able to use them, apply these credits against their income tax bills at a rate of a dollar per credit, thereby effectively eliminating the [[double taxation]] of company profits.

===India===
In India, a company declaring or distributing dividends is required to pay a Corporate Dividend Tax in addition to the tax levied on their income. The dividend received by the shareholders is then exempt in their hands. Dividend-paying firms in India fell from 24 percent in 2001 to almost 19 percent in 2009 before rising to 19 percent in 2010.<ref>{{Cite web|url=http://economictimes.indiatimes.com/definition/dividend|title=Definition of 'Dividend'|website=The Economic Times|access-date=8 June 2017}}</ref> However, dividend income over and above {{INR|link=yes|1,000,000}} attracts 10 percent dividend tax in the hands of the shareholder with effect from April 2016.<ref>{{Cite news|url=https://wap.business-standard.com/article/markets/companies-rush-to-announce-dividends-to-avoid-tax-outgo-in-april-116030300224_1.html|title=Companies rush to announce dividends to avoid tax outgo in April|last=Modak|first=Samie|newspaper=Business Standard India |date=3 March 2016|access-date=31 October 2020}}</ref> Since the Budget 2020–2021, DDT has been abolished. Now, the Indian government taxes dividend income in the hands of investor according to income tax slab rates.

===United States and Canada===
The United States and Canada impose a lower tax rate on dividend income than ordinary income, on the assertion that company profits had already been taxed as [[corporate tax]]. In the United States, shareholders of corporations face [[double taxation]] – taxes on both corporate profits and taxes on distribution of dividends.

===United Kingdom===
The rules in Part 23 of the [[Companies Act 2006]] (sections 829–853) govern the payment of dividends to shareholders. The Act refers in this section to "distribution", covering any kind of distribution of a company's assets to its members (with some exceptions), "whether in cash or otherwise". A company is only able to make a distribution out of its accumulated, realised profits, "so far as not previously utilised by distribution or capitalisation, less its accumulated, realised losses, so far as not previously [[written off]] in a reduction or reorganisation of capital duly made".<ref>UK Legislation, [https://www.legislation.gov.uk/ukpga/2006/46/part/23 Companies Act 2006: Part 23], accessed 26 October 2023</ref>

The [[Government of the United Kingdom|United Kingdom government]] announced in 2018 that it was considering a review of the existing rules on dividend distribution following a consultation exercise on insolvency and corporate governance. The aim was to address concerns which had emerged where companies in financial distress were still able to distribute "significant dividends" to their shareholders.<ref name=bunney /> A requirement has been proposed under which the largest companies would be required to publish a distribution policy statement covering dividend distribution.<ref>Department for Business and Trade, [https://www.gov.uk/government/publications/new-transparency-over-resilience-and-assurance-for-big-business/corporate-reporting-the-draft-companies-strategic-report-and-directors-report-amendment-regulations-2023 Corporate reporting: The Draft Companies (Strategic Report and Directors' Report) (Amendment) Regulations 2023], published 19 July 2023, accessed 23 August 2023</ref>

The law in [[England and Wales]] regarding dividend payment was clarified in 2018 by the [[England and Wales Court of Appeal]] in the case of ''Global Corporate Ltd v Hale'' [2018] EWCA Civ 2618. Certain payments made to a director/shareholder had been treated by the High Court as ''[[quantum meruit]]'' payments to Hale in his capacity as a company director but the Appeal Court reversed this judgment and treated the payments as dividends. At the time of payment they had been treated as "dividends" payable from an anticipated profit. The company subsequently went into [[liquidation]]; an attempt to recharacterise the payments as payments for services rendered was held to be unlawful.<ref>Mayer Brown, [https://www.mayerbrown.com/-/media/files/perspectives-events/publications/2019/01/english-court-of-appeal-provides-clarification-reg/files/updateenglishcourtofappealprovidesclarificationreg/fileattachment/updateenglishcourtofappealprovidesclarificationreg.pdf English Court of Appeal provides clarification regarding the regulation of dividend payments to shareholders], published January 2019, accessed 26 October 2023</ref>