Simultaneous dividend booking in group relationships
Silvia Hunziker
The Swiss Accounting and Reporting Manual allows a domestic parent company to recognize the investment income of its subsidiary (i.e. its dividend declared in financial year n+1) as income on a deferred basis in the financial year in which the subsidiary earned it. If the parent company makes the final booking of this income to the income statement at the time of distribution of the dividend, this constitutes proper booking for the purposes of the refund of the withholding tax and for the implementation of the reporting procedure.
In a group relationship, the parent company can, under certain conditions, show in its accounting records the income from investments in its subsidiary to which it is entitled in the financial year in which the subsidiary earns it and not only at the time of distribution of the dividend. In other words, the parent company can thus already book in its financial year n the investment income attributable to it from the financial year n of its subsidiary. In this context, this is referred to as simultaneous or congruent dividend accounting.
Correctly, the parent company posts the investment income to the income statement in its accounting in fiscal year n (posting: Prepaid expenses to investment income) and reverses it by means of a reverse posting (posting: Investment income to prepaid expenses) when opening the accounting for fiscal year n+1. In order to maintain the right to a refund of the withholding tax or to carry out the reporting procedure, the definitive booking of this investment income to the income statement must be made at the time when the taxable benefit becomes due (i.e. the dividend is distributed in year n+1) (asset account [bank] to investment income).
With this procedure, the parent company fulfils the requirements for proper accounting of this income in accordance with Article 25 paragraph 1 of the Federal Law of 13 October 1965 on Withholding Tax (withholding tax law, VStG; SR 642.21). The same applies to the right to carry out the notification procedure in accordance with Article 26a of the Ordinance of 19 December 1966 on Withholding Tax (Withholding Tax Ordinance, VStV; SR 642.211).
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