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HMRC internal manual

International Manual

UK residents with foreign income or gains: corporation tax: Dividends: underlying tax

Besides direct tax charged on a dividend, where the company is a direct investor give tax credit relief for the underlying tax attributable to the dividend. A direct investor is a company which controls directly or indirectly not less than 10% of the voting power of the company paying the dividend.

Underlying tax is the foreign tax which is borne by the foreign company on the profits out of which a dividend is deemed to have been paid. The amount of underlying tax for which credit relief may be given is calculated by CTIAA Underlying Tax Group, Yorke House, Nottingham (see INTM164060, INTM164360 and INTM164440). Relief is given either under the credit Article in a double taxation agreement or unilaterally under TIOPA10/S12.