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9.1.2. Dividends

The UK generally provides a credit for direct tax paid on dividends in the foreign country incurred by residents of the UK, and additionally, relief to the underlying tax paid where the company owns more than 10% of the voting power of the payee company.  However, DTAs usually contain provisions restricting or denying a credit where a dividend is paid out of pre-acquisition profits in order to prevent excessive tax credits being obtained through dividend stripping. The circumstances of the restrictions will depend on the individual DTA negotiated.