Consolidation of dividend entitlements on a current-period basis: Administrative Court upholds restrictive approach

In a ruling dated 11 November 2025, the Administrative Court (VwGH) confirmed that the simultaneous capitalisation of dividend entitlements between parent and subsidiary companies with the same balance sheet date is not permitted in the absence of an entitlement that has already arisen and is sufficiently secured prior to the resolution to distribute dividends.

In this specific case, a parent company had already capitalised distributions from its subsidiaries as at the balance sheet date, even though the relevant distribution resolutions were not passed until the following year. This early recognition increased the parent company’s retained earnings, thereby enabling a subsequent special dividend to be paid to its shareholders.

Decision of the Administrative Court

In its decision of 11 November 2025, Ro 2022/15/0014, the Administrative Court ruled that there was no sufficiently secured entitlement to a dividend for tax purposes as at the balance sheet date. In the court’s view, where balance sheet dates coincide, no entitlement to the dividend can yet arise for tax purposes, as the necessary distribution resolution has not yet been passed at that point in time. Thus, the principle of taxation in the period in which the income arises overrides the phase-congruent recognition permitted under company law.

The decision thus confirms the now established case law of the Administrative Court: for tax purposes, dividend entitlements may, in principle, only be capitalised once the distribution resolution has been passed. An exception may only be considered in very limited exceptional cases – but not where the balance sheet dates of the parent company and subsidiary are identical.