U.S. taxation of U.K. dividends.In addition to the normal sources of U.S. tax law dealing with the U.S. foreign tax credit (FTC FTC See Federal Trade Commission (FTC). ) rules, certain other matters need to be considered when determining the U.S. tax effect of dividends received from the United Kingdom. For example, Articles 10(2)(a)(iii) and 23(1) of the U.K.-U.S. Tax Treaty provide that for U.S. income tax/FTC purposes: * Any advance corporation tax (ACT) refund paid to a U.S. investor is to be treated as an additional dividend. * The 5% or 15% withholding tax The amount legally deducted from an employee's wages or salary by the employer, who uses it to prepay the charges imposed by the government on the employee's yearly earnings. deducted from an ACT refund will be treated as an income tax imposed on the dividend's recipient. * For a direct corporate investor Noun 1. corporate investor - a company that invests in (acquires control of) other companies company - an institution created to conduct business; "he only invests in large well-established companies"; "he started the company in his garage" receiving only a one-half ACT refund, the unrefunded half of the ACT will be treated as an income tax imposed on the recipient. See the example above. The views of the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. and the U.S. courts on the taxation of U.S. dividends are also set out, inter alia [Latin, Among other things.] A phrase used in Pleading to designate that a particular statute set out therein is only a part of the statute that is relevant to the facts of the lawsuit and not the entire statute. , in The U.S. Treasury U.S. Treasury Created in 1798, the United States Department of the Treasury is the government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills. Some of the government branches operating under the U.S. Treasury umbrella include the IRS, U.S. Explanation of the U.K./ U.S. Tax Treaty, originally issued in March 1977; Rev. Proc. 80-18, as clarified and amplified by Rev. Proc. 90-61; and in Xerox Corp., Cl. Ct., 1988. Certain key points should be noted. * For a direct corporate investor, the unrefunded portion of the ACT on dividends will ultimately be regarded as an income tax paid in the year for which the U.K. company paying the dividend obtains a set-off of the relevant ACT. * If an immediate set-off is not obtained for all ACT paid (i.e., if there is surplus ACT), the unrefunded element will be regarded for U.S. FTC purposes as paid in the period in which the related dividend is paid. However, if a setoff setoff (offset) n. a claim by a defendant in a lawsuit that the plaintiff (party filing the original suit) owes the defendant money which should be subtracted from the amount of damages claimed by plaintiff. subsequently becomes available, the unrefunded tax credit is "transferred" to the year of set-off, potentially resulting in a recomputation of prior years' FTC calculations. * ACT "surrendered" by one U.K. company to another generally is regarded as an income tax paid by the company accepting the surrender rather than the one that originally paid the ACT. There are also complex guidelines to determine when a subsidiary accepting a surrender is deemed to have paid a dividend to its parent. |
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