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income", which is a distribution on which ACT has already been
paid. Id. secs. 238(1), 241(1). Additionally, if a controlled
subsidiary makes a distribution to a parent, the parties can
elect whether the subsidiary will pay ACT on the distribution or
the parent will pay ACT on subsequent distributions of such
funds. See id. sec. 247(4)
Additionally, a U.K. shareholder, upon receipt of the
dividend, becomes entitled to a credit (shareholder credit)
against its individual taxes. The shareholder credit is a
portion of the ACT paid by the corporation. See id. sec. 231(1)
Absent a treaty provision to the contrary, the shareholder credit
is not available to nonresidents of the United Kingdom. See id.
The United States and the United Kingdom entered into the
Convention for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with Respect to Taxes on Income and
Capital Gains and Three Protocols, Dec. 31, 1975-Mar. 15, 1979,
U.S.-U.K., 31 U.S.T. (Part 6) 5668, T.I.A.S. 9682 (U.S.-U.K.
Convention). Article 10 of the U.S.-U.K. Convention, 31 U.S.T.
at 5677, provides that shareholders owning more than 10 percent
of the outstanding stock of a U.K. corporation are entitled to a
payment of one-half of the shareholder credit to which an
individual U.K. resident shareholder would have been entitled.
Shareholders owning less than 10 percent of the outstanding stock
of a U.K. corporation are entitled to a payment of the full
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Last modified: May 25, 2011