What is Dividend Distributions?
Dividend distributions are payments made by a company to its shareholders from after-tax profits, declared by the board and ratified by the shareholders’ general assembly, paid in cash (most common), additional shares, or in-kind assets.
How It Works
- Cash dividend: cash paid per share held.
- Stock dividend: additional shares issued pro rata.
- Property dividend: distribution of non-cash assets.
- Special dividend: one-time payment from surplus.
Saudi Context
Saudi joint-stock companies declaring dividends require CMA notification for listed entities, board approval, and shareholder general assembly ratification. ZATCA withholds 5% on dividends paid to non-resident shareholders, while dividends to resident Saudi individuals are tax-free. Companies must first fully fund the legal reserve before paying any dividend.
Example
A Saudi joint-stock company declares a SAR 0.50 per share dividend on 50,000,000 issued shares (total SAR 25,000,000). Of this, SAR 5,000,000 goes to non-resident holders (5% ZATCA withholding = SAR 250,000) and SAR 20,000,000 to residents with no withholding.