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HMRC internal manual

Double Taxation Relief Manual

From
HM Revenue & Customs
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DT: Zambia: double taxation agreement, Article 11: Dividends

 

Article 11 was substituted by SI81/1816

(1) Dividends paid by a company which is a resident of Zambia to a resident of the United Kingdom may be taxed in the United Kingdom. Such dividends may also be taxed in Zambia according to the law of Zambia but, provided the recipient is subject to lax in respect thereof in the United Kingdom, the tax so charged, being tax which is charged in addition to the tax chargeable in respect of the profits of the company, shall not exceed:

(a) 5 per cent of the gross amount of the dividends if the recipient is a company which controls directly or indirectly at least 25 per cent of the voting power in the company paying the dividends;

(b) in all other cases 15 per cent of the gross amount of the dividends.

(2) Dividends paid by a company which is a resident of the United Kingdom to a resident of Zambia may be taxed in Zambia. Such dividends may also be taxed in the United Kingdom and according to the laws of the United Kingdom but, provided the recipient is subject to tax in respect thereof in Zambia, the tax so charged, being tax which is charged in addition to the tax chargeable in respect of the profits of the company, shall not exceed:

(a) 5 per cent of the gross amount of the dividends if the recipient is a company which controls directly or indirectly at least 25 per cent of the voting power in the company paying the dividends;

(b) in all other cases 15 per cent of the gross amount of the dividends.

(3) However, as long as an individual resident in the United Kingdom is entitled to a tax credit in respect of dividends paid by a company resident in the United Kingdom, the following provisions of this paragraph shall apply instead of the provisions of paragraph(2) of this Article:

(a)

(i) Dividends paid by a company which is a resident of the United Kingdom to a resident ofZambia may be taxed in Zambia on the aggregate of the amount or value of the dividends and the amount of the tax credit (if any) to which he is entitled under sub-paragraph (b) of this paragraph.

(ii) Where a resident of Zambia is entitled to a tax credit in respect of such a dividend under sub-paragraph (b) of this paragraph tax may also be charged in the United Kingdom and according to the laws of the United Kingdom, on the aggregate of the amount or value of that dividend and the amount of that tax credit at a rate not exceeding 15 per cent.

(iii) Except as aforesaid, dividends paid by a company which is a resident of the United Kingdom to a resident of Zambia who is subject to tax in Zambia on them shall be exempt from any tax in the United Kingdom which is chargeable on dividends.

(b) A resident of Zambia who receives dividends from a company which is a resident of the United Kingdom shall, subject to the provisions of sub-paragraph (c) of this paragraph and provided he is subject to tax in Zambia on the dividends, be entitled to the tax credit in respect thereof to which an individual resident in the United Kingdom would have been entitled had he received those dividends, and to the payment of any excess of that tax credit over his liability to United Kingdom tax.

(c) The provisions of sub-paragraph (b) of this paragraph shall not apply where the recipient of the dividend is a company which either alone or together with one or more associated companies controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividend. For the purposes of this sub-paragraph two companies shall be deemed to be associated if one is controlled directly or indirectly by the other, or both are controlled directly or indirectly by a third company.

(4) The term `dividends` as used in this Article means income from shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights assimilated to income from shares by the taxation law of the State of which the company making the distribution is a resident and also includes any other item of income (other than interest or royalties relieved from tax under the provisions of Article 12 or the provisions of Article 13 of this Convention) which under the law of the Contracting State of which the company paying the dividends is a resident, is treated as a dividend or distribution of a company.

(5) The provisions of paragraphs (1), (2) and (3) of this Article shall not apply if the recipient of the dividends, being a resident of a Contracting State, has in the other Contracting State, of which the company paying the dividends is a resident, a permanent establishment and the holding by virtue of which the dividends are paid is effectively connected with a business carried on through that permanent establishment. In such a case,the provisions of Article 8 shall apply.

(6) If the recipient of a dividend owns 10 per cent or more of the class of shares in respect of which the dividend is paid then the relief from tax provided for in paragraphs(1), (2) and (3) of this Article shall not apply to the dividend to the extent that it can have been paid only out of profits which the company paying the dividend earned or other income which it received in a period ending twelve months or more before the relevant date. For the purposes of this paragraph the term `relevant date` means the date on which the recipient of the dividend became the owner of 10 per cent or more of the class of shares in question.

Provided that this paragraph shall not apply if the shares were acquired for bona fide commercial reasons and not primarily for the purpose of securing the benefit of this Article.

(7) Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company to persons who are not residents of that other State, or subject the company’s undistributed profits to a tax on undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in that other State.