Standard rate

The standard rate of corporation tax (s 21) is 12.5%.

Foreign dividends paid from trading profits are taxed at 12.5%(s 21b). If the dividend is not paid from trading profits, it is taxed at 12.5% provided:

(a) 75% or more of the paying company’s profits are trading profits, or derived from trading profits arising in EU States or treaty countries.

(b) 75% or more of the recipient’s assets, on a consolidated basis, must consist of trading assets.

Where the recipient company owns not more than 5% of a paying company based in an EU State or treaty country, the dividend is also taxed at 12.5%.

Excess foreign tax credits in respect of dividends taxed at 12.5% are not available for set-off against dividends taxed at 25% (but not vice versa).