Tax & Superannuation: International - Guides
International
3. Foreign Dividends
Last updated: 31 Jul 2015
- Traditionally dividends from foreign companies were assessable in the hands of a resident company but there was an exception to this rule if:
- the Australian company held at least 10% of the voting power in the foreign company; and
- did not receive the dividend in its capacity as a trustee.
- The income that is not taxed in Australia is referred as non-assessable non-exempt income. This means that the company could deduct any interest it incurred because it borrowed that money to invest in the foreign company shares and to derive dividend income.
- From 17 October 2014 the law has changed. The exemption will be available provided the resident company holds at least a participation interest of 10% in the foreign company paying the dividend.
- The exemption will not only be available to companies but also to corporate limited partnerships, corporate unit trusts and public trading trusts.
- Unlike under the earlier law the distributions can be received through interposed entities and still be exempted from tax in Australia.
- Similar to the earlier law the distributions to be exempt must not be received by the company in its capacity as trustee unless in the capacity of trustee of a corporate unit trust or public trading trade.
- Participation interest is determined on holding of issued capital, voting rights and rights to capital in the foreign company.
- Indirect participation interest is interest held through intermediate entities.
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