Paying dividends from a Spanish SL: what the law requires, what is withheld and what the shareholder pays

What a dividend is, and why it is not the same as taking money out of the account

The balance in the company's account is not yours, even if you are the sole shareholder and the sole director. The sociedad limitada, Spain's private limited company, is a person separate from you, with its own assets and its own tax, and for a euro to move from its account to yours there has to be a legal cause. A dividend is one of them, and the only one that pays a return on capital.

A dividend is the distribution of profit among the shareholders in proportion to their holding in the share capital, unless the articles of association say otherwise (article 275.1 of the Capital Companies Act). It is not an expense and it is not a salary: it is an application of the result decided by the shareholders' meeting when the accounts are approved (article 273.1). That is why it does not reduce Impuesto sobre Sociedades, Spain's corporate tax. What is distributed is what remains after paying it, and the shareholder is then taxed again in a personal return. That double pass through the till explains almost every decision in this guide.

In your IRPF, Spain's personal income tax, the dividend is investment income (article 25.1.a of the personal income tax act) and forms part of savings income (article 46.a). It is not employment income, it does not by itself trigger social security contributions, and it does not depend on the hours you work in the company.

And there is a time limit almost nobody looks at: the maximum period for paying the dividend in full is twelve months from the date of the meeting's resolution (article 276.3), and if the resolution sets neither the time nor the manner of payment, it is payable at the registered office from the day after it is adopted (article 276.2). It is worth fixing that date at the meeting: the quarter of the withholding depends on it. The map of what the company has to do every year is in the Spanish SL tax guide.

The requirements that make a distribution valid, one by one

Before signing anything you have to clear a company-law checklist. This is not red tape: a distribution that breaches any of these points is irregular, and article 278 of the Capital Companies Act requires the shareholders to repay it with statutory interest when the company proves that they knew of the irregularity or could not have been unaware of it. In an SL whose sole shareholder is also the director, that proof is immediate.

The legal reserve is where most people get it wrong. The general rule is 10% of the profit for the year until the reserve reaches 20% of the share capital, and there it stops: with capital of 3,000 euros the ceiling is 600 euros, it is covered in full in the first profitable year and never funded again. You do not lose 10% of the profit every year.

If the SL was incorporated with less than 3,000 euros of capital, lawful since the minimum dropped to one euro, the rule changes: at least 20% of the profit until reserve and capital together reach 3,000 euros, and in a liquidation the shareholders are jointly liable for the shortfall up to that figure (article 4.1). While it stays below its ceiling, the legal reserve can only be used to absorb losses where there are no other available reserves (article 274.2). It all comes off the balance sheet, so without up to date bookkeeping there is no way to know whether you can distribute: how to keep it is in the guide to bookkeeping without an accounting background.

The meeting, the resolution and the minutes: who decides and how it is documented

The power belongs to the shareholders' meeting, which deliberates and resolves on the approval of the annual accounts, the application of the result and the conduct of the business (article 160.a of the Capital Companies Act), and resolves on that application in accordance with the approved balance sheet (article 273.1). Approving the accounts and declaring a dividend are the same act, not two steps.

The calendar that orders everything else:

• Ordinary meeting within the first six months of each financial year (article 164.1), so by 30 June with a calendar year end. Holding it later does not invalidate it: the law says expressly that the ordinary meeting is valid even if it is called or held out of time (article 164.2), although the delay has other consequences.
• Filing at the Registro Mercantil, Spain's companies register, within the month following approval, with a certificate of the resolutions approving the accounts and applying the result (article 279.1). The dividend resolution travels inside that certificate, and the deadlines and what happens if nothing is filed are in the guide to the annual accounts of a Spanish SL.
• Payment at the time and in the manner the meeting decides (article 276.1) and, as a ceiling, twelve months after the resolution (article 276.3).

Being the sole shareholder does not excuse you from the minutes. The decision is documented all the same, with the date, the gross amount, the split by holding and the payment date, which fixes the quarter of the withholding. If the shareholder or the director lives outside Spain, the meeting is held with the same formalities and what changes is their tax position: that is covered by the guide to a non-resident director or shareholder of a Spanish SL.

One warning if there is more than one shareholder. After the fifth financial year from registration, a shareholder who records a protest in the minutes at the insufficiency of dividends may withdraw if the meeting does not resolve to distribute at least 25% of the legally distributable profit of the previous year, provided there was profit in the three previous years (article 348 bis.1). It is not automatic: the right does not arise if 25% of the distributable profit of the last five years has already been distributed, it is exercised within one month of the ordinary meeting (article 348 bis.3), and removing that ground for withdrawal in the articles requires the consent of every shareholder (article 348 bis.2).

The 19% withholding: when it arises and which form pays it over

The company paying the dividend does not hand it over in full: it applies a 19% withholding on the gross amount and pays it to the tax agency on account of the shareholder's income tax (article 101.4 of the personal income tax act and article 90.1 of its regulations). The shareholder receives the rest and deducts what was withheld when filing the annual return.

The point that costs the most money is when that obligation arises. It does not arise on payment but when the dividend becomes due and payable, or on payment if that comes first, and dividends are treated as due on the date set in the distribution resolution or, where no date is set, from the day after it is adopted (article 94.1 of the personal income tax regulations). If the meeting resolves in June and the money leaves in December under the twelve months of article 276.3 of the Capital Companies Act, the withholding is still paid over in July. The company-law period does not postpone the tax one.

The company's steps, in order:

• Modelo 123, within the first twenty calendar days of April, July, October and January, for the preceding calendar quarter (article 108.1 of the personal income tax regulations). What counts is the quarter in which the dividend fell due, not the one in which it was collected. Only those whose turnover exceeded 6,010,121.04 euros in the previous year file monthly.
• No dividend means no nil return. It is not due where no income subject to withholding or payment on account has been paid in the period (article 108.1). A quarter with no distribution is not filed at all.
• Modelo 193, the annual summary of those withholdings, from 1 to 31 January of the following year online and within the first twenty calendar days of January on paper (article 108.2 of the regulations and article 5 of Orden EHA/3377/2011).
• A withholding certificate for the shareholder, which must be available to them before the personal income tax filing season opens (article 108.3).

The 123 is the sibling of the 111 for payroll and the 115 for rent: same quarterly calendar, different class of income. If you already file either, the mechanics are the same, and they are explained in the guide to modelos 111 and 115.

What the shareholder pays: the savings scale and a worked example

In the annual income tax return the dividend enters the savings base almost in full: the only deductible expenses for investment income are the administration and custody costs of marketable securities (article 26.1.a of the personal income tax act), which do not exist in an unlisted SL. The savings scale adds the state part (article 66) and the regional part (article 76), identical to each other today:

Three warnings go with this table. It is the scale for common-regime territory: personal income tax is a devolved tax with its own regional legislation in the Basque Country (article 6.Uno of the Economic Agreement, Ley 12/2002) and Navarre has its own, so the provincial rules govern there. The top rate is marginal: it applies only to the excess, not to the whole dividend. And although the regions cannot regulate savings rates (article 46.2.a of Ley 22/2009), they can move by 10% the personal and family allowance that reduces the regional half (article 46.1.a), so the final charge varies somewhat depending on where you live.

A worked example. An SL with a sole shareholder, capital of 3,000 euros, legal reserve at zero, no earlier losses, not an asset-holding company, turnover under one million euros and 100,000 euros of pre-tax profit in 2026. Watch the two financial years: corporate tax belongs to 2026 and the shareholder's income tax to 2027.

1. Corporate tax for 2026 under the transitional scale in the forty-fourth transitional provision of the corporate tax act, for turnover under one million: 19% up to 50,000 euros and 21% on the rest, a charge of 20,000 euros, an effective rate of 20% (guide to modelo 200).
2. That leaves 80,000 euros. The theoretical 10% allocation would be 8,000, but the ceiling of 20% of capital prevails: 600 euros are set aside and 79,400 euros are distributable.
3. The 19% withholding on 79,400 euros: 15,086 euros to modelo 123. The shareholder receives 64,314 euros.
4. The shareholder's income tax on those 79,400 euros: a savings charge of 16,087.50 euros, after the taxpayer's personal allowance of 5,550 euros, which here works against the savings base because there is no other income (articles 56.2 and 57.1).
5. Settlement: 16,087.50 less 15,086 leaves 1,001.50 euros to pay in the annual return. Final net for the shareholder: 63,312.50 euros.

The 100,000 euros end up split like this: 63,312.50 to the shareholder, 16,087.50 in personal income tax, 20,000 in corporate tax and 600 staying inside the company as the legal reserve. Total tax burden, 36,087.50 euros, or 36.09%. Change the corporate tax rate and the whole result changes: the corporate tax estimator solves the first half.

Dividend or salary: the comparison from the same starting point

The belief that a dividend always works out cheaper than a salary does not survive the numbers. Take the company from the previous example and the same 100,000 euros of profit before tax and before paying the director. Careful with the label: it is not the same gross for the shareholder, because the dividend route brings them 79,400 euros gross and the salary route 100,000. What is held equal is the starting point.

If the company pays 100,000 euros as remuneration for the post with cover in the articles, that remuneration is a deductible expense and the corporate tax base falls to zero. That cover is not a detail: the post of director is unpaid unless the articles say otherwise and set the remuneration system (article 217.1 of the Capital Companies Act). The payroll withholding is 35%, or 19% if the turnover of the last period closed before payment was under 100,000 euros (article 101.2 of the personal income tax act).

On these figures the salary leaves the shareholder 2,740.50 euros better off and 2,140.50 euros lighter in tax, because of double taxation: the dividend passes through the till twice, while pay for the post is a deductible expense taxed once, albeit on a higher scale.

Four warnings. Social security sits outside both calculations: a controlling shareholder contributes to the RETA, Spain's self-employed scheme, in either case, and the difference of 2,740.50 euros is of the order of one annual contribution, so with it inside the comparison can tip over. Both columns also carry regional assumptions, because neither the general-base scale nor each region's personal allowance has been verified here. With a 15% rate for a newly created company and a dividend in the first savings band, the order reverses. And if the articles do not provide for pay for the post, the salary route collapses entirely. The three routes, invoicing as a professional included, are compared in the guide to paying yourself as director.

Non-resident shareholders and shareholders that are companies

If the shareholder is not tax resident in Spain, the dividend does not go through personal income tax but through Impuesto sobre la Renta de no Residentes, the non-resident income tax, at 19% on the gross amount (article 25.1.f of the consolidated non-resident income tax act). The company reports those withholdings on modelo 216 within the first twenty calendar days of April, July, October and January, and summarises the year on modelo 296, from 1 to 31 January.

The double taxation treaty of the shareholder's country can cut that 19%, and the payer applies the treaty limit directly on payment (article 31.2 of the consolidated act). Each treaty sets its own limit, so the one for the specific country has to be read. What does not change is the paperwork: to apply the treaty rate from the first euro you need a tax residence certificate stating expressly that the taxpayer is resident within the meaning of the Convention, valid for one year from issue (article 17.2 of Orden EHA/3290/2008). Without that document 19% is withheld and a refund has to be claimed afterwards.

Once the withholding has been applied, the non-resident is not required to file for that income (article 7.3 of the non-resident income tax regulations), which usually makes modelo 210 unnecessary. And the old 1,500 euro annual exemption for European Union residents no longer exists: article 14.1.j of the consolidated act appears literally as repealed. The full picture is in the guide to non-resident taxation in Spain.

Where the recipient is another company, the game changes. A Spanish company can apply the exemption in article 21 of the corporate tax act if it holds at least 5% of the capital or of the equity and has held it for one uninterrupted year before the day the profit falls due, or completes the year afterwards. The exemption is not full: article 21.10 requires it to be cut by 5% for management costs, so 95% of the dividend ends up exempt. And the old alternative of an acquisition value above 20 million euros only covered tax periods beginning up to 2025, so today the only threshold is the 5%. If the parent is resident in another European Union or European Economic Area state, the exemption in article 14.1.h of the consolidated non-resident income tax act also asks for 5% and one year, plus requirements on legal form and on being subject to tax, and it lapses where the majority of the parent's voting rights is held by persons not resident in those territories, unless there are valid economic reasons. The page for foreign-owned companies gathers the basics.

Interim dividends: distributing before the year is closed

You do not always have to wait for the year end. The Capital Companies Act allows amounts to be distributed on account of dividends during the year, and there is a surprise here: they can be resolved by the shareholders' meeting or by the directors (article 277). In a single-shareholder SL that means the director can sign the decision without calling a meeting, but under two conditions that are not optional.

• An accounting statement showing that there is sufficient liquidity for the distribution, drawn up by the directors and later included in the notes to the annual accounts (article 277.a). It is not a screenshot of the bank balance: it is an accounting document that ends up inside the accounts for the financial year.
• A quantitative limit: the amount distributed cannot exceed the results obtained since the end of the last financial year, less losses from earlier years, less the amounts that must go to reserves that are compulsory by law or by the articles, and less the estimated tax payable on those results (article 277.b).

That last deduction is the one most often forgotten. An interim dividend is calculated on a profit from which corporate tax still has to be set aside, so distributing the gross result of the first months leaves the company without the cash for its own tax. The tax reserve calculator estimates what to keep back before the money moves.

For tax purposes an interim dividend is a dividend: 19% withholding (article 101.4 of the personal income tax act), modelo 123 for the quarter in which it falls due (article 94.1 of the regulations) and modelo 193 in January, like an ordinary distribution. And if the year ends worse than expected and it turns out there was not enough profit, the distribution becomes irregular and article 278 comes into play: repayment with statutory interest where the company proves the shareholder knew of the irregularity or could not have been unaware of it. With a single shareholder who also signs the accounting statement, that knowledge is taken as proved without effort.

Expensive mistakes: distributing without the requirements, late withholding and shareholder loans

Three mistakes account for almost every unpleasant surprise, and none is easy to fix afterwards.

1. Distributing without checking net equity or without funding the legal reserve. The distribution is irregular and the shareholders have to repay it with statutory interest if the company proves they knew of the irregularity or could not have been unaware of it (article 278 of the Capital Companies Act). When the shareholder is the same person who draws up and approves the accounts, that proof costs nothing.
2. Paying the withholding over in the quarter of payment rather than the quarter in which the dividend fell due. This is the mistake of someone who resolves in June, pays in December and believes the tax agency has been postponed too: the 123 belonged to the second quarter (articles 94.1 and 108.1 of the personal income tax regulations), so filing it in January is out of time, with surcharge and interest. What to do once it has happened is in the guide to a missed deadline.
3. Taking the money out as a shareholder loan and letting it sleep. A company and its shareholders are related parties, and in that relationship the link requires a holding of 25% or more (article 18.2 of the corporate tax act). Those transactions are valued at market value, the value independent parties would have agreed (article 18.1). A loan with no contract, no interest and no repayment is a reclassification waiting for an inspection.

That third point drags a form of its own behind it. Under Orden HFP/816/2017, modelo 232 reports transactions with the same related party when the set of them exceeds 250,000 euros, specific transactions above 100,000 euros by type and, whatever the amount, transactions of the same type and valuation method whose total exceeds 50% of turnover. It is filed in the month following the ten months after the end of the tax period: November with a calendar year end.

And the other way round, where it is the shareholder who lends money to the company, there is a trap: interest above three times equity, in the part matching their holding, does not go into savings income but into general income, taxed on a considerably higher scale (article 46.a of the personal income tax act). A badly sized loan turns savings income into general income.

kontora records the distribution resolution and its withholding in your SL's books, carries that withholding into the box by box draft of modelo 123, warns you of each quarterly deadline and of the January summary, and reflects the application of the result in the accounts. Whether to distribute remains your decision, and so does filing through the electronic office of the AEAT, Spain's tax agency.

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