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HMRC internal manual

Double Taxation Relief Manual

DT: Saudi Arabia: Underlying Tax

Documents needed to support the underlying tax claim

Accounts and notice of assessment.

Calculation of the rate

Saudi Arabian shareholders in joint venture companies there pay little or no tax on the Saudi Arabian share of the profits. The Saudi Arabian tax on the UK company’s share of the profits is the liability of the UK shareholder.

Before the changes to the double taxation rules brought in by FA2000, we accepted that the ability to specify profits contained in Section 799(3)(b) ICTA 1988 meant that all of the UK company’s tax payment could be attributed to its share of the Saudi Arabian company’s profits.

For dividends paid into the United Kingdom on or after 31st March 2001 Section 799(3)(b) has been abolished. It is no longer possible therefore for a UK shareholder to specify that a dividend has been paid out of only a portion of the company’s profits.

However in accordance with past practice we are happy to continue regarding the tax paid by the shareholder as qualifying for underlying tax relief. But for dividends paid into the UK on or after 31st March 2001 the tax paid by the shareholder must be attributed to the whole of the company’s profits for the year.