Budget 2009 – Foreign Dividends
Taxpayers who receive dividends from non-UK resident companies will benefit from new rules that were announced in the Budget. With effect from Budget day (22 April 2009), many taxpayers who own 10% or more of the shares in a UK non-resident company will be eligible for dividend tax credits.
This will put these taxpayers in the same position as shareholders in UK resident companies and those that held less than 10% of the shares in non-resident companies. All taxpayers will be entitled to a non-repayable tax credit which can reduce the effective tax rate on dividends to 0% for those on the basic-tax rate and to 25% for higher-rate taxpayers.
In order to qualify the overseas company must be resident in a ‘qualifying territory’. This means that there must be a double taxation agreement in place with the UK and it must contain a non-discrimination article.
There are also some anti-avoidance provisions to ensure that the new rules are not subject to abuse.