Foreign dividends

By Tolley
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The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Foreign dividends
  • When is the dividend taxable?
  • Can the taxpayer obtain UK tax relief for the foreign tax paid on the foreign dividend?
  • Can the taxpayer also claim a 10% dividend tax credit in the UK (for dividends received before 6 April 2016)?
  • Reporting overseas dividends on the Tax Return ― arising basis
  • Remittance basis and dividends
  • Interaction with the temporary non-residence rules

Overseas dividends are those received from companies not resident in the UK. ‘Dividends’ includes certain other distributions, see the Cash dividends and Non-cash dividends guidance notes. For the rate of UK tax on taxable dividends, see the Taxation of dividend income guidance note.

For tax purposes, the UK territories of the Isle of Man, Jersey and Guernsey are classed as overseas.

When is the dividend taxable?

The answer to this question depends on the individual.

Those who are resident and domiciled or deemed domiciled in the UK are taxable on their worldwide income (and gains) in the tax year in which these are received and should declare these on their Tax Returns. This means they are taxed when the foreign dividends are paid to them, for instance, by being credited to a bank account. For more on these terms, see the Residence ― overview and Domicile guidance notes. The taxation of income and gains in the year of receipt is commonly known as the arising basis of assessment.

ITTOIA 2005, s 368

Individuals who are not domiciled or deemed domiciled in the UK are eligible to access the remittance basis of assessment. Someone who is using the remittance basis is thus not taxed until the foreign income is remitted (brought) to the UK, under the income tax rates that apply in the year of remittance. See the Remittance basis ― overview guidance note. Care is needed, as remittances can happen by accident. See the When are income and gains remitted? guidance note.

ITTOIA 2005, s 832

If an individual who is eligible to access the remittance basis chooses not to do so, he is taxable on his worldwide income in the year it is received (the arising basis of assessment). This means he must declare all his foreign income and gains in the year in which it

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