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Some deemed dividends paid by a CFC directly or through other entities to another CFC are portfolio dividends. These dividends may be included in the attributable income of a CFC and be attributed to a resident taxpayer under section 456. An example of how a portfolio dividend can arise under section 47A is where a dividend is deemed to have been paid from one sister subsidiary to another. The following diagram illustrates such dividends.
Amount included in assessable income
Where a portfolio dividend is deemed to have been paid to a CFC, and it is included in the CFC's attributable income, the amount to be included in the assessable income of the attributable taxpayer depends on the taxpayer's attribution percentage in the CFC.
You do not adjust the dividend for any part paid from previously attributed income and no foreign tax credit is allowed.
Example 8 - Dividends included in assessable income
AustCo has an attribution percentage of 80% in Unlisted Country CFC1 and 80% in Listed Country CFC2. CFC1 is deemed, under section 47A, to have paid a portfolio dividend of $1,000 to CFC2 on 1 August 2004. Under section 456, AustCo includes 80% of the dividend, $800, in its assessable income.
Last modified: 05 Dec 2006QC 18000