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Legal database

Draft Taxation Determination

TD 93/D1

Income tax: to what extent are dividends paid by a resident company to a non-resident individual subject to withholding tax ?

  • Please note that the PDF version is the authorised version of this draft ruling.
    This document has been finalised by TD 93/116.

FOI status:

draft only - for comment

Preamble

Draft Taxation Determinations (TDs) present the preliminary, though considered, views of the ATO. Draft TDs may not be relied on; only final TDs are authoritative statements of the ATO.

1. The payment of a fully franked dividend is not subject to withholding tax under paragraph 128B (3)(ga) of the Income Tax Assessment Act 1936.

2. If a partially franked dividend is paid, the unfranked portion will be subject to tax at the dividend withholding tax rate of 30%. However, this rate is generally reduced to 15% in the case of countries which have a double tax agreement with Australia.

3. If an unfranked dividend is paid, the whole dividend is subject to withholding tax.

Note: In the case of the Philippines and Thailand, the withholding tax rate varies and is dependant on the type of dividend received.

Example:

John, is a resident of a country in which Australia has a double tax agreement. He received a fully franked dividend of $200 from Aust. Co. This dividend is not subject to withholding tax.
He also received a dividend of $100 which was 75% franked, 25% unfranked. The unfranked portion of $25 is subject to withholding tax of $3.75 ($25 x 15%).

Commissioner of Taxation
21 January 1993

References


BO BAN TD 25

ISSN 1038 - 8982

Subject References:
franked dividends
withholding tax

Legislative References:
ITAA 128B(1)
ITAA 128B(3)(ga)
ITAA 128B(4)


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