Dividends paid by overseas subsidary | AccountingWEB

Dividends paid by overseas subsidary

I'm the accountant of a UK coy that provides technical training services. The coy also owns 40% of a coy registered in Dubai which provides training in the middle east. The other 60% is owned by a major training coy based in Jordan.The subsidiary recently won a contract which includes sending students to the UK for training. The subsidiary wanted to set up a coy in the UK to facilitate this. It is going to take up premises in the uk and will be more substantial than the existing UK coy itself. All working cap are to be provided by the 60% shareholder.

Say if newco in UK makes profits, it pays UK corp tax as normal and out of its retained profit pays dividends back to its parent in Dubai who in turn pays dividends to the existing UK coy (probably without withholding tax I think). Am I right in thinking there maybe a double tax here. Newco UK pays CT in UK. Newco pays div to Dubai who in turn pays div to the existing UK coy which will then have to pay tax on the dividend from Dubai?

If I'm correct in my thinking, does anyone has an idea on the best way to structure this inorder to avoid double taxation. The best way I thought was to set up newco with the same shareholding structure as the Dubai coy therefore divs from one UK coy to another is not taxed. Unfortunately this is not acceptable to the 60% shareholders as they wanted to build the Dubai coy into a substantial training coy.

Any help would be much appreciated..

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Is it a small company?

afairpo |
afairpo's picture

Not big