A voucher for a dividend paid by a Malaysian company shows a gross amount, Malaysian tax deducted (currently at a rate of 34 per cent) and a net amount, which is what the shareholder actually receives. This Malaysian tax is company tax deducted (see INTM164010(c)). A portfolio shareholder (see INTM164010(f)) is not entitled to credit for this tax (Article 24(1)(b)). However, the correct measure of the dividend for United Kingdom tax purposes is the net dividend received.
The Malaysian company does not normally have to pay over to the Malaysian Revenue the tax it has deducted from the dividends it pays, but, where the total tax deducted from dividends paid exceeds the tax paid by the company on its profits, Section 108(5) of the Malaysian Income Tax Act 1967 may require the company to pay over such excess. Exceptionally, therefore, where a claim to tax credit relief is made and it is alleged that the company paying the dividend has been required to make a payment under Section 108(5), the recipient should be asked to provide a statement from the company showing
- the total dividends paid by the company for each dividend period,
- the total Malaysian tax paid on the profits out of which the dividend was paid, and
- the amount of any additional payment made under Section 108(5).
On receipt of the statement, refer the claim to HMRC, Customs & International, Tax Treaty Team.
Where the recipient of a dividend is a United Kingdom company controlling, directly or indirectly, at least 10 per cent of the voting power in the Malaysian company paying the dividend (Article 24(1)(b)), credit is due for the underlying tax, but only in respect of the amount of tax actually paid by the Malaysian company on the particular profits out of which the dividend is paid (see Statement of Practice SP12/93 and INTM164070).