Dividends from foreign companies - How are they taxed?Dividends from foreign companies
Dividends from foreign companies - How are they taxed?
A resident individual taxpayer receiving dividends from foreign companies should return them along with other foreign income, and a credit should be claimed for tax paid to foreign countries UNLESS ...
the income of a controlled foreign company has already been attributed to him under the accruals tax measures.
Dividend paid to a resident from the income of a controlled foreign company that has been attributed to that resident under the accruals tax system is exempt from tax....
If you think about it, it makes sense.
To include the dividend income would amount to double taxation
What about dividends received by companies resident in Australia?
Are they exempt too?
It all depends!
If the resident company receives
non portfolio dividends from a company resident in a listed country then the dividends are exempt.
So what are non portfolio dividends?
A dividend is a non portfoloio dividend if ...
Remember there are core conditions that must be fulfilled to gain exemption.
The dividends received by the resident company must be ...
1. non portfolio dividends ...
2. from a company resident in a listed country.
The requirement that the company be a LISTED COUNTRY COMPANY makes sense when you think about it, because the profits from which the dividends are paid must either be ...
Answer this question….
A resident company receives a dividend from a United Kingdom company in which it holds 10% of the voting power.
Is the amount included in its assessable income?
Yes No
Non portfolio dividend from resident of a listed country.
Answer this question….
A resident company receives a dividend from a United States of America company in which it holds 1% of the voting power.
Is the amount included in its assessable income?
Yes No
NOT a non portfolio dividend - less than 10% of voting power held
What about non portfolio dividends received by resident companies?
It all depends on the type of distributable profits out of which the dividend is paid. If the dividends are paid from ...
they are EXEMPT
.
HOWEVER, dividends from an unlisted country company from all other profits are included in assessable income of the recipient.
So why not 'dress up' the non listed country dividends as listed country dividends?
If non portfolio dividends paid by a listed country company are exempt, and non portfolio dividends paid by an unlisted country are taxable, why not get the unlisted country company to distribute the dividend to a listed country company, then get that listed country to pay a dividend out of the profits represented by that non listed country company dividend?
Because section 458 will include such dividends in the assessable income of the resident recipient, UNLESS they have been taxed in a listed country.
What about benefits other than dividends
Why not get the unlisted country company to distribute benefits, in a form other than dividend to its shareholders or their associates?
Because sec 47A will
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