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Hi,
Over here, they multiplied the remittances required by 100/95 as 5% is the witholding tax, however arthuro’s tax rate is 10% more than bowerscots so why arent we multiplying by 100/85. In question Limni Co (6/13) they multiplied it by 100/94, 6% being the additional tax the company has to pay in the country, so why are we not doing it here?
They are two separate taxes.
One is the withholding tax on remittances. Most countries require tax to be paid out of any dividends paid outside of the country,
The other is the tax on the profits. Provided that there is a double tax agreement between the countries (as their usually is) then the tax payable on the profit in the home country is reduced by the amount of tax paid on the profits in the foreign country), so there is only extra tax payable in the home country if their tax rate is higher than that in the foreign country.
so if they say how much the dividend capacity needs to increase by we gross up the amount using the tax on profits but if they ask how much of dividends need to be remitted we gross up the witholding tax?
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