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HMRC internal manual

International Manual

From
HM Revenue & Customs
Updated
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UK residents with foreign income or gains: dividends: Portfolio shareholders

The elimination of double taxation Articles (credit Articles) in a double taxation agreement generally provide that the UK resident portfolio shareholder is entitled to tax credit relief for foreign direct tax on a dividend received from a foreign company. There is no entitlement to relief for underlying tax or company tax deducted.

This is because the Article expressly prohibits the allowance of credit. For example, where the dividend Article is the type referred to in INTM164020 sub-head (a), the credit Articles are worded in terms of `…. the credit shall only take into account such tax in respect thereof as is additional to any tax payable by the company on the profits out of which the dividend is paid and is ultimately borne by the recipient without reference to any tax so payable’.

Where the dividend Article is the type referred to in INTM164020 sub-head (b) the credit Articles are worded as in Article 21(5)(a) of the UK/Netherlands agreement , `(excluding in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid)’. If using the HMRC Intranet, the agreement can be viewed through the “New treaties/protocols in force” link on the sidebar. On the HMRC web-site, searching for “Treaties in force Netherlands” will provide a link to the treaty.