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1) Why does the dividend require only gross up for withholding tax at 95% ? What about tax at 10% (30% – 20%) ?
2) Why in Arthuro we take “total dividend remittance to gross up by 95%” but in Limni Co (June 2013), we only take the remaining dividend to gross up ?
1. Corporation tax is payable on the profits, regardless of how much is paid out as dividend. As far as withholding tax is concerned the total paid out by the company is gross of withholding tax (part paid to the state and parts paid to the shareholder). These are the normal tax rules from Paper TX.
2. Because Limni part (c) specifically asks for how much the dividend needs to increase by.
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