Dividends in Philippine Corporations

Dividends are declared by the board out of unrestricted retained earnings, subject to the Revised Corporation Code, share rights and restrictions protecting capital and creditors. A shareholder cannot demand a dividend merely because the corporation earned revenue.

Decision checklist

• Are unrestricted retained earnings legally available?
• What share classes and preferences apply?
• Will the dividend be cash, property or stock?
• Does a stock dividend require shareholder approval?
• Would payment impair capital, solvency or obligations?
• Are there loan covenants or regulatory restrictions?
• What withholding and tax reporting applies?

Approval and records

1. Prepare current financial information.
2. Confirm available unrestricted retained earnings.
3. Review share preferences and contractual restrictions.
4. Approve the declaration at a valid board meeting.
5. Obtain any additional approval required for stock dividends.
6. Set record and payment terms.
7. Record payment and complete tax reporting.

Improper distributions

Directors and recipients may face consequences when distributions violate capital-maintenance rules, involve bad faith or prejudice creditors. Document the financial basis for the decision.

Sources and review

• Republic Act No. 11232, dividends and retained earnings
• SEC official website
• BIR official website

Verified 22 September 2026. Tax treatment requires current verification.