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HMRC internal manual

International Manual

UK residents with foreign income or gains: corporation tax: Dividends: extension of relief

TIOPA10/S63 extends tax credit relief for underlying tax to include:

  • any UK Income Tax or Corporation Tax;


  • tax in any third country paid on the profits of the foreign company in question.

Both of these are treated as if they were tax paid in the country in which the foreign company is resident on the profits out of which the dividend is paid.

For example, UK company A controls 10 per cent of the voting power of foreign company B which is resident in country X. B trades in the UK through a permanent establishment and is liable to Corporation Tax on the profits of that permanent establishment. It also trades in country Y through a branch the profits of which are taxed by country Y.

Use this link to view example diagram

The underlying tax attributable to a dividend paid by B to A will take into account

  1. country X’s tax on B’s profits, and
  2. UK Corporation Tax on B’s UK branch profits, and
  3. country Y’s tax on B’s country Y branch profits.