Unpaid dividends are not assessable to Personal Income Tax

According to the letter of the Ministry of Finance dated 09.02.2024 No. 03-03-06/1/11209, where dividends are not paid to a joint stock company, the shareholder is not liable to pay personal income tax as no income was actually received. These unpaid dividends are recorded in the company’s retained earnings.

The shareholder is given a 3-year period to collect the unpaid dividends in case the company lacked accurate data (e.g. bank details). But the articles of association of a joint stock company may provide for the extension of this period to 5 years.

After this period has elapsed, unclaimed dividends are included in the company’s retained earnings and no further payment of such dividends is to be made. These reinstated dividends are not subject to income tax.

With regard to personal income tax, if a shareholder has not received dividends, he or she has no obligation to pay tax. Thus, there is no obligation of a tax agent to calculate and pay personal income tax.