008 Treatment of foreign withholding income tax imposed on dividends received from foreign subsidiaries under the law of Corporation Enterprise Tax
We reported in our homepage on March 30 about the system of dividends received from foreign subsidiaries which could not be included in taxable income. This new system has made an impact on whether or not foreign income withholding tax should be deductible in the calculation of the corporation enterprise tax. This system allowed that 5% of dividends received from foreign subsidiaries are included to taxable income. According to the theory, it is not unusual to think that the withholding tax imposed on dividends received from foreign subsidiaries should be deductible from taxable income. However, this foreign withholding tax should not be deductible from taxable income, complying with the Corporation Tax Law. It is concluded that this foreign withholding tax is not deductible even though the 5% of the dividends received from foreign subsidiaries can be included to taxable income. So, we need to be more careful of this matter.
