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.
In nearly all jurisdictions, dividends paid by a company represent the distribution of its post-tax profits. Where the company paying the dividend is resident outside the UK and has paid foreign tax on its profits, any taxation of the dividend in the hands of the UK shareholder results in double taxation of those profits.
Accordingly, credit is allowed against UK tax not only for withholding tax, but also, in certain situations, for foreign taxes borne on the relevant profits (see under 'Relevant profits' below) out of which the dividend is paid (underlying tax)1.
Rate of underlying tax
The basic calculation of the underlying tax rate where it is available is as follows:
where:
- Ìý
–ÌýÌýÌýÌý Actual tax paid is the tax paid by the overseas company in the accounting period to
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Web page updated on 17 Mar 2025 17:38