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HMRC internal manual

International Manual

DT Agreements: Canada - Income from a UK source paid to a resident of Canada

UK dividends paid to a resident of Canada - direct investor

See INTM343540 for an explanation of ‘directinvestor’.

The convention (see Article 10) provides that a direct investor company is entitled to atax credit equal to half the tax credit to which a UK individual would be entitled. And topayment of the excess of that tax credit after retention of 10% of the aggregate of thenet UK dividend plus the half tax credit. This means that there is no amount available topay where the dividend was paid after 6 April 1999. Examples of the way in which relief iscalculated can be found at INTM343540.

Dividend Stripping

The anti-dividend stripping provisions of Article 10(7) apply where a resident ofCanada:

  • does not bear Canadian tax on the dividends derived from a company which is a resident of the UK, and
  • owns more than 10% of the class of shares in respect of which the dividend is paid

The answer to the relevant question on the dividend claim form should tell you when youneed to consider these provisions of the convention.

INTM343550 tells you more about dividend stripping.