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 from, relief, double and/or taxation:
“Look at your lake, Christine. You’ll love it here, when you get used to the dark. And you’ll love the dark, too. It’s friendly. And peaceful. It brings rest and relief from pain. It’s right under the Opera. The music comes down and the darkness distills it, cleanses it of the suffering that made it, then it’s all beauty and life here is like a resurrection.”
—Eric Taylor, and Leroux. Arthur Lubin. Erique Claudin (Claude Rains)
“[I]t forged ahead to become a full-fledged metropolis, with 143 faro games, 30 saloons, 4 banks, 27 produce stores, 3 express offices—and an arena for bull-and-bear fights, which, described by Horace Greeley in the New York Tribune, is said to have given Wall Street its best-known phrases.”
—For the State of California, U.S. public relief program (1935-1943)
“... the next war will be a war in which people not armies will suffer, and our boasted, hard-earned civilization will do us no good. Cannot the women rise to this great opportunity and work now, and not have the double horror, if another war comes, of losing their loved ones, and knowing that they lifted no finger when they might have worked hard?”
—Eleanor Roosevelt (1884–1962)
“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)