The exempt distribution regime broadly provides that most dividends received by a UK company (from the UK or overseas) will be exempt from corporation tax (see Division D5.1). The provisions discussed in this article apply to overseas dividends that are not exempt.
Dividends deductible for foreign tax purposes
No underlying tax is to be taken into account in the case of a dividend if, under the law of any territory outside the UK, a deduction is allowed to a resident of that territory in respect of an amount determined by reference to the dividend1. In practice, this means dividends which are tax-deductible in certain territories such as Australia and Brazil no longer carry the underlying tax on the relevant profits out of which they are paid (previously, HMRC accepted that underlying tax was available if such payments represented dividends under local company law following the principles established by Rae v Lazard Investment Co Ltd2).
Bought in foreign tax credits
There is a largely redundant (following the introduction of the mixer
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