Dividend distributions by companies are taxable for shareholders. Subject to integrity measures, Australian resident shareholders may be entitled to a tax credit for corporate tax paid by the company. Dividends to foreign residents are prima facie subject to withholding tax at 30 percent, which may be reduced under a DTA, subject to satisfying the integrity measures under the MLI (eg, the Principal Purpose Test) where applicable. In addition, certain exemptions are available in domestic tax law (eg, for dividends paid out of taxed profits).
Capital distributions are taxable for shareholders to the extent they exceed the cost base of the shareholder's shares in the company.
Dividends paid to a domestic or non-domestic individual are subject to a 27.5 percent income withholding tax rate (Kapitalertragsteuer). Austria's double tax treaties may provide for a reduced withholding tax rate, which could apply at source or by way of a refund procedure. Claiming the reduced rate may require certain documentation, including a residency certificate. Austrian dividends paid to resident individuals are not subject to further income tax if the 27.5 percent income tax has already been withheld at source.
Dividends distributed to domestic or foreign corporations are, in general, subject to a 25 percent withholding tax. An exemption from withholding taxation of dividends distributed to an Austrian or EU parent company is applicable, provided that the following conditions are met:
- The shareholder is a corporation resident in Austria or
- in another EU member state and the shareholder has held at least a 10 percent interest for 1 year.
Additionally, withholding tax relief may be provided for recipients resident in countries with a double tax treaty with Austria. Dividends paid to foreign corporations are only exempt from Austrian withholding tax if the activities of the foreign company go beyond those of a mere holding company, that staff is being employed and business premises are used.
If dividends are paid to domestic or non-domestic individual or corporate shareholders optionally by dissolution of the share premium of a company, there is no income withholding tax due. Such dividends are paid without source taxation and are treated as capital repayment (Einlagenrückzahlung).
Distributions paid by a corporation to its shareholders are treated as dividends. Distributions that stem from paid-in capital, as defined under Belgian tax law, are, subject to certain conditions, not subject to income tax.
Distributions paid by a Brazilian legal entity to shareholders are treated as tax-free dividends, regardless of where the shareholder is domiciled. As mentioned above, the Brazilian Government is studying possible changes to the rules regarding the payment exemption.
Distributions paid by a corporation are generally treated as dividends. Certain distributions on shares of a corporation, such as returns of capital (to the extent of the paid-up capital in respect of the relevant shares), may generally be returned to shareholders on a tax-free basis.
Profits distributed by corporate entities are treated as dividends for the shareholders and are subject to final taxes. Corporate Income Tax paid by the corporation is creditable against final taxes.
The part of the distribution equivalent to retained earnings is treated as a dividend; the remaining part is treated as return of capital, with any exceeding amount being treated as capital gain.
Dividends taxation in Colombia depends on whether the dividends are paid from profits obtained before 2017.
Profits obtained before 2017
Dividends distributed out of profits taxed at the level of the distributing company do not trigger additional income taxes for the shareholder. Conversely, dividends paid out of profits untaxed at the company's level are taxed at the corporate income tax rates (35 percent).
Profits obtained as of 2017
- Individuals tax residents, non-residents (individuals and entities), and permanent establishments of foreign entities
If the beneficiary of the dividend is an individual tax resident, a non-resident, or a permanent establishment of a foreign entity, the dividends tax rate is 10 percent. If the profits were not taxed at a corporate level, the profits will be taxed at the ordinary Corporate Income Tax (35 percent) plus the 10 percent dividends tax (the 10 percent applies on the distributed amount after subtracting the 35 percent).
These tax rates can be reduced under Tax Treaties.
For individual tax residents, the dividends tax does not apply if the amount of the dividends is less than 300 UVT (in 2022, COP11,401,200).
- Colombian companies
If the beneficiary of the dividends is a Colombian Company, the dividends are subject to a withholding dividends tax of 7.5 percent. If the profits were not taxed at a corporate level, the profits will be taxed at the ordinary Corporate Income Tax (35 percent) plus the 7.5 percent withholding dividends tax rate. The withheld amount (7.5 percent) is creditable towards the dividends tax of the ultimate beneficial owner (individual tax resident or foreign investor).
The withholding dividends tax does not apply in the following cases:
(i) Colombian companies that have registered a control situation or a corporate group with respect to the distributing Colombian company before the Chamber of Commerce; or
(ii) Companies registered in the CHC regime (described in the Participation Exemption section of this Guide).
Distributions paid by a company to a shareholder are primarily regarded as dividends for tax purposes, but treatment under capital gain rules is possible under specified criteria. A transfer of funds from a shareholder to a company is generally tax exempt.
A participation exemption regime is available for eligible dividends. Non-eligible distributions are subject to corporate income tax at ordinary rates.
Qualifying dividends may be eligible for preferential treatment for the recipient.
Hong Kong, SAR
Dividends distributed by a Hong Kong company to its shareholders are tax exempt. No withholding tax is levied on the distributing Hong Kong company.
There are no withholding taxes on patent royalties, dividends and interest paid to resident or nonresident companies.
Distributions of dividends, on or after April 01, 2020, by a corporation are subject to income tax in the hands of the shareholders and corporations are required to withhold taxes thereon from resident recipients at 10 percent and for non-resident recipients at 20 percent (subject to applicability of Tax Treaty).
Dividends received by an Irish resident company from another Irish resident company are usually exempt from Irish tax, including dividend withholding tax. The 12.5-percent corporation tax rate applies (on election) in respect of foreign dividends paid out of EU/treaty country trading profits where either the dividend paying company:
- Is resident in the EU/treaty country/signatory country of the OECD Convention on Mutual Administrative Assistance in Tax Matters or
- Is a publicly quoted company or a 75-percent subsidiary of a publicly quoted company.
Corporation tax at the rate of 25 percent applies to foreign dividends sourced from other companies or from non-trading profits.
Ireland provides for unilateral credit relief for foreign withholding tax and underlying taxes on dividends paid to an Irish resident company. A minimum shareholding of 5 percent applies. The foreign tax is available as a credit against Irish tax and, where the foreign tax exceeds the Irish tax on the dividend, the excess can be pooled and offset against Irish tax on other foreign dividends received in the same accounting period. Any balance unused can be carried forward and used in subsequent accounting periods. This credit system often operates to eliminate any additional Irish taxes on the receipt of foreign dividends.
Dividends paid by an Israeli corporation to another Israeli corporation are not subject to tax if paid out of income that was subject to corporate tax at the regular rate.
Dividends paid by an Israeli corporation to an individual or to a foreign corporation are subject to tax at the rate of 25 percent, or 30 percent if the shareholder is (or was during the 12 months prior to the distribution) a "significant shareholder." A shareholder is generally considered a significant shareholder if they hold 10 percent or more of the economic or voting rights in the company. These rates may be reduced under an applicable treaty.
As noted above, dividends from qualifying domestic and foreign shareholdings may be eligible for an exclusion from taxable income.
Distributions paid by a corporation are treated as dividends to shareholders, which are not deductible, unless a corporation fulfills requirements set forth under the Asset Liquidation Law or similar special laws.
Dividends that come from the CUFIN account should not be subject to additional tax at the level of the Mexican entity distributing the dividend. Otherwise, they should be subject to a grossed up tax rate of 42.8 percent.
The Mexican Income Tax Law (MITL) does not provide ordering rules with respect to how CUFIN balances are considered with respect to dividend distributions. However, it is assumed that older balances should be distributed first.
Under the MITL in force until 2013, dividends received by an individual or a foreign shareholder from a Mexican entity were not subject to withholding tax. The 2014 tax reform introduced a new withholding tax of 10 percent on dividends when distributed to a foreign shareholder or an individual. The new rules also broaden the definition of what should be considered a dividend, covering other transactions between the distributing company and its shareholders and/or related parties.
As part of the 2014 tax reform, CUFIN balances must be segregated between pre-2014 and post-2014 Mexican balances in order to determine the potential impact from the 10-percent withholding tax introduced that year.
With respect to post-2014 CUFIN which could be distributed in the future, the domestic 10-percent dividend withholding tax may be reduced to under available income tax treaties entered into by Mexico to the extent that the requirements provided in the treaty and the MITL are met.
For Mexican tax purposes, capital reductions are generally treated as a distribution in exchange for shares. The general purpose of these rules is to treat distributions made in a capital redemption as either a tax-free return of capital or a deemed dividend or distribution of earnings.
Distributions paid by a corporation to its shareholders are treated as dividends. The legal entity paying such dividends shall withhold tax (IRPC) at a rate of 20 percent on the dividends distributed (unless the beneficiary of such dividends is domiciled in a country with which Mozambique has a tax treaty which provides for a more attractive tax treatment). The obligation to pay tax is of the shareholders (as the beneficiaries of the income), but the entity paying such dividends is obliged act as a tax substitute and withhold tax owed and then pay it over to the Mozambican tax authorities on behalf of the beneficiary. More attractive rates can be applied, provided that the application of an available Double Taxation Treaty is requested.
Dividend distributions paid by a Dutch company or holding cooperative to its shareholders or members are, in principle, subject to Dutch dividend withholding tax. Dividend withholding tax may be reduced under the domestic dividend withholding exemption or under the application of a tax treaty. A return of paid-up capital is, in principle, not subject to Dutch dividend withholding tax.
Please see Participation exemption. If the participation exemption regime does not apply, the dividends will be taxed at the ordinary corporate tax rate of 22 percent.
Dividends distributed to non-domiciled persons, whether they are individuals or legal entities, as well as domiciled individuals are subject to a withholding tax rate of 5 percent on the amount distributed. Dividends distributed between domiciled entities are not subject to withholding taxes.
A participation exemption applies to qualifying dividends.
Distributions paid by a corporation to its shareholders are treated as dividends.
Distributions of current profits and retained earnings paid by a corporation to its shareholders represent dividends. A distribution in excess of current profits and retained earnings may qualify as a return of capital (if carried out as a share capital reduction), non-taxable up to the contributions of each shareholder to the share capital of the distributing company. A distribution of new participation titles or an increase of their nominal value, as a result of an incorporation of reserves, benefits or share premiums, are non-taxable for corporate income tax purposes.
Dividends received by a Russian organization are taxed at a 13-percent corporate profits tax rate. If dividends are paid to a foreign organization, they are subject to a corporate profits tax withholding at a rate of 15 percent, unless the relevant treaty relief is applied.
Under recent Tax Code clarification, a distribution received by a shareholder from exiting a subsidiary or as a result of the subsidiary’s liquidation is classified as a dividend for tax purposes. If the withdrawal or liquidation results in a loss on an investment in subsidiary, this loss shall be treated as a tax-deductible non-sales expense for corporate profits tax purposes.
These rules have also established that, if a distribution is the result of voluntary reduction of the subsidiary’s charter capital, the shareholder shall not recognize taxable income on the return of capital.
Dividends paid by a Singapore resident company will be exempt from tax. Furthermore, Singapore does not levy any withholding tax on dividend payments.
Distributions paid by a corporate are generally treated as a dividend to shareholders unless the board of a corporate entity determines that the distribution results in a reduction of contributed tax capital. A return in capital in excess of a shareholder's tax base is normally treated as a capital gain.
Distributions paid by a corporation are treated as dividends to shareholders within the limit of the amount obtained by subtracting the amount of capital from the amount of net asset value on the balance sheet.
As a general rule, distributions paid by a corporation are treated as dividends to shareholders to the extent of the current and accumulated earnings and profits. A distribution in excess is treated as a return on capital up to the limit of the shareholder's tax basis and thereafter is treated as taxable income.
Distributions paid by a corporation to a shareholder are normally treated as dividends for tax purposes. A transfer of funds from a shareholder to a company is normally treated as a conditional or unconditional shareholder’s contribution.
A federal 35-percent dividend withholding tax is levied at the source on the gross amount of dividend distributions made by Swiss companies. These withholding taxes can be reclaimed or be exempted at source depending on the applicable treaty.
For resident individuals, the gross dividend received may at the election of such individual either:
- be included in such individual's taxable income, whereby 8.5 percent of such dividend income will be treated as deductible amount (the maximum deductible amount is NT80,000 for each household); or
- be taxed separately on a flat rate of 28 percent, and excluded from such individual's other taxable income
For non-resident shareholders, dividends received are subject to 21 percent withholding tax, absent an available tax treaty for a reduced rate.
The dividends received by a domestic company from its investment in another domestic company are not included in the first-mentioned domestic company's taxable income.
If a Taiwan company invests in foreign companies, dividends declared by such foreign companies must be included in the domestic company’s taxable income, but any foreign tax credits may be used.
The rate of the withholding tax applicable for international holding companies' dividend distributions (based on the profits derived from their foreign participations) to non-resident companies are subject to a withholding tax rate of 10 percent. This rate may be subject to reduction under an applicable double taxation treaty.
The capital will be deemed to have been reduced from (i) first, from the capital elements whose transfer or withdrawal are subject to corporate tax and withholding tax due to dividend distribution, (ii) second, from accounts subject to withholding tax due to profit distribution, and (iii) third, from non-taxable cash and in-kind capital. This applies to businesses that have realized a capital reduction within 5 years of the date of transfer of various sources to capital.
Upon distribution of a dividend, a company may be required to pay advance corporate income tax on the dividend (ACIT) at a 18-percent tax rate. ACIT is paid only if certain conditions are met and may further be credited against corporate income tax due for future periods.
United Arab Emirates
No specific tax rules apply in relation to distributions by UAE companies.
Distributions paid by a UK company are generally treated as dividends to shareholders. UK company law forbids distributions which exceed accumulated realized profits and restricts a company's ability to repay capital, which (in relation to public companies) requires a court order.
Distributions paid by a corporation are treated as dividends to shareholders to the extent of the current and accumulated earnings and profits (E&P) of the payer corporation. A distribution in excess of current and accumulated E&P is treated as a return of capital to the extent of a shareholder’s tax basis and thereafter is treated as capital gain.
Interest paid on loans in excess of the stipulated debt to equity (gearing) ratio of 3-to-1 is regarded as a dividend distribution and the portion of the interest relating to such excess shall be subject to nonresident and resident shareholders’ tax, as the case may be.