Dividend

Question 1

What sections are related to Dividend Taxation

Answer 1

S-94 Main - Dividend paid by (Every means including Foreign Co.) Company - chargeability as per S5

S5 - Chargeability Gross amt x 7.5%;15%;25% where income exmpt due to law tax credits or losses

S8 - FTR

S150 - Withholding 7.5% & 15%

S236S - Dividend in specie (assets instead of cash), WH rates same as S150 rates

Section 39 - IFOS, although includes but no dividend u/39 even foreign covered u/s5, 8 so FTR

S55 - Exempt income of Co. does not mean dividend exempt

Question 2

What is nature of Foreign Dividend

IFOS?

Answer 2

Foreign Dividend taxation same as as per Sec 5 & 8; FTR

There is no dividend in IFOS category

Recepient will have to pay himslef by applying rate to Gross amount

Question 3

What is taxation of Dividend in Specie (assets & not in cash)

Any withholding

Answer 3

S236A

Same rates as

Question 4

What about taxation of dividend paid by Companies with exempt/no income due to credits/losses

Answer 4

Taxed at higher rate 25%

Question 5

What is included in Dividend

Answer 5

(a) distribution by company of accumulated profits to its shareholders
(b) any distribution of debentures, debenture-stock or deposit certificate to the extent to which the company possesses accumulated profits

(c) any distribution on liquidation, to the extent of accumulated profits immediately before liquidation
(d) any distribution on the reduction of its capital, to the extent of accumulated profits

(e) any payment by a private company (Companies Ordinance, 1984 ) or trust
of any sum ( by way of advance
or loan to a shareholder or any payment on behalf, or for the individual benefit, to the extent of accumulated profits;

(f) remittance of after tax profit of a branch of a foreign company operating in Pakistan;]

but does not
include -
(i) a distribution made in accordance with 45[sub-clause] (c) or (d) in respect of any share for full cash
consideration, or redemption of debentures or debenture stock, where the holder of the share or debenture is not
entitled in the event of liquidation to participate in the surplus assets;
(ii) any advance or loan made to a shareholder by a company in the ordinary course of its business, where the
lending of money is a substantial part of the business of the company; 46[]
(iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum
previously paid by it and treated as a dividend within the meaning of 47[sub-clause] (e) to the extent to which it
is so set off; 48[and]
49[(iv) remittance of after tax profit by a branch of Petroleum Exploration and Production (E&P) foreign
company, operating in Pakistan.]