Interim dividend represents the distribution of a portion of profit to members of a limited liability company (LLC) during the financial year, prior to the adoption of the annual financial statements, in accordance with the Law on Companies of the Republic of Serbia.

An interim dividend may be distributed only if it is permitted by the company’s Articles of Association or not prohibited therein, and provided that all statutory conditions are cumulatively met. The company must prepare interim financial statements for the current financial year, based on which it is determined whether profit has been generated and whether sufficient distributable funds are available.

The amount of the interim dividend may not exceed the profit shown in the interim financial statements, reduced by accumulated losses from previous years and by amounts that must be allocated to statutory or contractual reserves in accordance with the law or the Articles of Association. This ensures compliance with capital maintenance rules.

Additionally, the distribution must not result in the company’s net assets falling below the amount of the registered share capital increased by mandatory reserves, nor may it jeopardize the company’s ability to meet its due obligations (solvency and liquidity test). Members of the governing body that adopted the decision bear responsibility for the legality of the distribution and fulfillment of statutory conditions.

The decision on the distribution of an interim dividend is adopted by the competent corporate body (most commonly the shareholders’ meeting), in the form prescribed by law and the Articles of Association. The decision must be based on reliable financial data and properly documented.

From a tax perspective, where an interim dividend is paid to an individual resident of the Republic of Serbia, it is treated as income from capital. The company is required to calculate and withhold tax at source at the rate of 15%. The tax liability arises at the moment of payment, and the company is responsible for accurate calculation, withholding and remittance of the tax.

A distribution made contrary to the above rules constitutes unlawful profit distribution and may result in an obligation to return the distributed amount, as well as liability of the responsible corporate officers.