Corporation Tax Act 2010 section 794

Company receiving manufactured overseas dividend from foreign payer

Section 794 deals with how a company is taxed on a manufactured overseas dividend it receives, where the payer is outside the UK and has accounted for and paid the required tax.

• When a UK company receives a manufactured overseas dividend (MOD) from a foreign payer, it is treated for corporation tax purposes as if it were a real overseas dividend from the actual overseas shares involved.
• The company receiving the MOD (or the underlying share owner, if different) is treated as having received an annual payment from which income tax has already been deducted, provided the payer has accounted for and paid the tax due under the relevant provisions.
• The recipient company can claim credit for the tax already accounted for by the foreign payer, so that it is not taxed twice on the same income.
• This treatment ensures that manufactured overseas dividends flowing through foreign intermediaries are brought into the UK corporation tax net on a basis consistent with genuine overseas dividends, while recognising tax already suffered.