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Dividend paid to an attributable taxpayer
If the dividend is paid to you, the amount of the reduction in attributable income is worked out as follows:
amount of the dividend assessed
your attribution percentage in the CFC
Dividend paid wholly out of attributed income
A taxpayer has a 50% attribution percentage in a CFC resident of an unlisted country. The CFC has no profits from previous years and $1 million current year profits are distributed as a dividend. The dividend was paid wholly from profits referable to the attributable income of the CFC. The $500,000 received by the taxpayer is included in the taxpayer's assessable income.
The amount by which the attributable income would be reduced is worked out as follows:
$500,000 / 50% = $1 million
Dividend paid partly out of attributed income
A taxpayer has a 50% attribution percentage in a CFC resident of an unlisted country. The CFC has an accumulated profit of $2 million. The CFC pays a dividend of $2.2 million. The dividend would be taken to have been paid out of the accumulated profits first. The whole of the $200,000 component of the dividend paid from current year profits is referable to the attributable income of the CFC.
The reduction would be: $100,000 / 50% = $200,000
Dividend is exempt
A resident company has a 50% interest in a CFC resident of a listed country. The CFC has no profits from previous years and distributes all of the current year profits as an exempt dividend.
There is no reduction of attributable income in this case because the dividend was not assessable.
Last modified: 05 Dec 2006QC 18000