Discussion:"Franked" and "unfranked" dividends (Australia)
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Discussion Forum Index --> Tax Questions --> "Franked" and "unfranked" dividends (Australia)
| 18 May 2007 | |
| Somebody please tell me if I can take a foreign tax credit.
My client received "franked" dividends, and some "unfranked" dividends, from Australian companies. I think that "franked" means that the COMPANY already paid income taxes on their earnings before paying the dividend. This means that no income taxes were withheld from my client's dividends, so she is not due a credit for taxes paid. But I am not 100%. I wonder if anyone can give me a reference with a clear yes/no answer. Thank you. | |
| 18 May 2007 | |
| Your description is in line with my understanding of the Australian franking of dividends. Note that if your client is a C corporation that owns 10% or more of the voting stock of the Australian corporation, then your client can claim deemed paid foreign tax credits under Sec. 902. | |
| 18 May 2007 | |
| Adonini, my understanding of the franking process is that the shareholder takes the franking amount into income, thereby transferring the tax withholding to the shareholder. If the shareholder's actual Australian tax liability is less than the franked amount, then he is entitled to a refund from the Australian government. This would also tend to suggest that the franked amount is eligible for the foreign tax credit. | |
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