Corporation Tax on foreign dividends

Corporation Tax on foreign dividends

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I act for UK company.  It is in receipt this year dividends from foreign subsidiaries in Vietnam and France.  Are these liable to corporation tax?  I know the rules changed in 2009 and it seems dividends from most countries are now exempt as is the case for UK dividends.  How do I find out whether the same applies here?

Thank you 

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By AlexLondon
14th Aug 2015 16:22

France and Vietnam are on HMRC's list of qualifying countries for the exemption to potentially apply.   Assume your client is "small" and this is a "straightforward" dividend so it should apply but you need to read the legislation to confirm the detail.

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Replying to Paul Crowley:
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By taylorstaxservices
17th Aug 2015 10:10

Foreign dividend

Thank you.

The only thing I am still unsure of 931B part c) - how do you know whether France or Vietnam law will dictate that a deduction will apply before receipt?

  

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By User deleted
15th Aug 2015 09:19

The dividend will be exempt from tax if the receiving company is small (OECD definition) and the payer is resident in a country with which UK has a tax treaty with a non-discrimination clause (s.931B CTA/09). Vietnam and France appear on this list, so the dividend should be exempt from UK tax.

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Replying to Duggimon:
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By taylorstaxservices
17th Aug 2015 10:13

Foreign dividend

Thank you that's great.

One final issue on reviewing the legislation is S931B part (c) - how do I know whether France or Vietnam law will dictate that a deduction is taken from the dividend before receipt?

 

 

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By AlexLondon
24th Aug 2015 13:48

"how do I know whether France

"how do I know whether France or Vietnam law will dictate that a deduction is taken from the dividend before receipt?"

Look at an online summary to see whether these countries have dividend WHT on dividends paid overseas:  France does, Vietnam only does when dividend is paid to an individual.  The look at the treaty to see if it potentially reduces the rate - France does.  The confirm with the payer what they need from you, eg a letter from HMRC confirming that the company is Uk resident, for them to withhold in accordance with the treaty.

 

 

 

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By Steve Kesby
24th Aug 2015 14:01

That isn't the requirement of s. 931B(c)

What s. 931B(c) actually says is that "no deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of the distribution".

What that means is that no non-UK resident should get a tax deduction for the distribution. The most obvious situation in which that would occur would be if the paying company (or another group member) could get a deduction from their taxable profits for the dividend paid in any country. See INTM65230.

It would be unusual, and I'd be inclined to assume that the condition was satisfied, and leave it to HMRC to argue otherwise.

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By AlexLondon
24th Aug 2015 14:27

I don't think that France or Vietnam will look at s931B(c) in determining whether or not they will collect withholding tax, which is what I assume is meant by applying a deduction from the dividend (as opposed to the dividend being a tax-allowable expense) ?  If the companies are subsidiaries the EU  parent subsidiary directive is also in point.

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By Steve Kesby
24th Aug 2015 14:35

S 931B(c)

Has got absolutely nothing to do with whether France or Vietnam will deduct a withholding tax.

It is about whether anybody that is not a UK resident will obtain a tax reduction anywhere in respect of the dividend, as is clearly explained in INTM652030.

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