Dividend Tax Credits from overseas companies
HMRC have published draft legislation to extend the dividend tax credit to shareholders who have holdings of 10% or more in overseas companies. Comments are invited on the draft legislation before 20 February 2009.
These changes follow an initial announcement in the 2008 Budget. The legislation is due to be introduced in The Finance Bill 2009. In future, tax credits will usually be available if the distributing company is in a ‘qualifying’ territory i.e. in a territory with whom the UK has a double taxation agreement. The tax credit will not be available to holdings in countries where the relevant tax authority does not levy a tax on profits (similar to corporation tax).
The legislation will be drafted to seek to ensure that the new rules are not subject to abuse.