Edited version of private advice

Authorisation Number: 1051806240950

Date of advice: 16 February 2021

Ruling

Subject: Foreign income tax offset

Question

Are you entitled to a Foreign Income Tax Offset (FITO) of Withholding Tax imposed on dividends sourced from Country Z?

Answer

Yes.

Subsection 770-10(1) of the ITAA 1997 provides that a person is entitled to a FITO for foreign tax paid in respect of an amount that is included in the person's assessable income in a year of income. It is not necessary that the payment of foreign income tax actually occurs in the claim year.

To qualify for a foreign income tax offset (FITO) you must meet all of the following criteria:

•         You must have paid the foreign tax on the foreign income,

•         The foreign tax must be a tax which you were personally liable for, and

•         The income or gain that the foreign tax was paid must be included in your assessable income for Australian income tax purposes.

The foreign income tax offset is a non-refundable tax offset. The foreign income tax offset is applied to your income tax liability including the Medicare levy and the Medicare levy surcharge where applicable. Any excess is not refunded to you.

Based on the information provided to us you are entitled to a FITO on the tax you will pay on dividend income in Country Z.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a resident of Australia for taxation purposes.

You intend on investing in a company in Country Z.

You expect to receive dividend income from the company in Country Z.

You will pay tax on the dividend income in Country Z.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 770-10(1)