Relief From Double Taxation
There is a risk of double taxation whenever a company receives income that has already been taxed. This could be dividend income, which will have been paid out of the post-tax profits of another company and which may have suffered withholding tax. Or it could be because the company itself has suffered foreign tax, perhaps because it conducts part of its trade through an overseas permanent establishment, or because it receives other types of foreign income.
Double taxation is avoided for UK dividends by exempting them from tax for most companies: only dealers in shares suffer tax on them. Where double taxation arises because of overseas tax suffered, relief is available either in the form of expense or credit relief. Expense relief allows the overseas tax to be treated as a deductible expense in the tax computation. Credit relief is given as a deduction from the UK tax liability, but is restricted to the amount of UK tax suffered on the foreign income. There is a system of onshore pooling, so that overseas tax suffered in high tax territories may be set off against taxable income arising from low tax territories. From 1 July 2009, new rules were introduced to exempt most non-UK dividends from corporation tax so these double taxation rules in respect of non-UK dividends will be of less common application in practice after that date.
Read more about this topic: United Kingdom Corporation Tax
Famous quotes containing the words relief, double and/or taxation:
“Across Parker Avenue from the fort is the Site of the Old Gallows, where 83 men “stood on nothin’, a-lookin’ up a rope.” The platform had a trap wide enought to “accommodate” 12 men, but half that number was the highest ever reached. On two occasions six miscreants were executed. There were several groups of five, some quartets and trios.”
—Administration in the State of Arka, U.S. public relief program. Arkansas: A Guide to the State (The WPA Guide to Arkansas)
“O, my offense is rank, it smells to heaven;
It hath the primal eldest curse upon ‘t,
A brother’s murder. Pray can I not,
Though inclination be as sharp as will;
My stronger guilt defeats my strong intent,
And like a man to double business bound
I stand in pause where I shall first begin,
And both neglect. What if this cursed hand
Were thicker than itself with brother’s blood,
Is there not rain enough in the sweet heavens
To wash it white as snow?”
—William Shakespeare (1564–1616)
“The Government is able to afford a suitable army and a suitable navy. It may maintain them without the slightest danger to the Republic or the cause of free institutions, and fear of additional taxation ought not to change a proper policy in this regard.”
—William Howard Taft (1857–1930)