engleski

Dividend tax implementation effects in Croatia

On average, dividends have historically been treated less favorably than capital gains by the tax authorities in the world. The double taxation of dividends at the level of individual investors should have created a strong lack of encouragement to pay or to increase dividends by the companies. Taxes may affect the dividend payment decisions by companies which want to maximize market value. It is known that market value of company is determined by expected after cash flows and any differential tax treatment of capital gains relative to dividends might influence investors demand for dividend. As a result taxes might have important effects on personal investment decisions and corporate dividend policy. Recreantly in Croatia income from dividends was not taxable as of 1st January 2005. But from 1st of March 2012 tax on dividend has been implemented by changes in Income Tax Act. Accordingly to changes in Income Tax Act all dividend earned from 1st of January 2001 is taxed with a rate of 12%. While dividends are taxed, capital gains are not taxed at all. This kind of tax disadvantages can influence on preferences for individual investors to buy stocks of dividend paying companies listed on Zagreb stock exchange influencing on decrease of stock prices for dividend paying companies. The aim of this paper is to investigate what influence implementation of dividend taxation had on companies listed on Zagreb stock exchange. Did the number of dividend paying companies or dividend amount decline accordingly to changes in Income tax Act or there were no changes at all. Did the dividend paying companies adjust their dividend supply accordingly to demand of individual investors?

dividends, dividend policy, stock market, taxes

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