Tax credit on dividends paid by a petroleum business

(13/2008)

The Board of Taxation ruled that:

1. Individuals who obtain dividends from a company subject to petroleum income tax which are paid out of the net profits of the petroleum business are not entitled to the benefit of the dividend tax credit under Section 47 bis of the Revenue Code because the dividend tax credit is granted only if the dividends are paid out of net profits which have been subject to income tax under the Revenue Code.

2. In the case of a company which has received dividends paid out of the net profits of a petroleum business subject to petroleum income tax and then distributes such dividends to its individual shareholders, these individuals are also not entitled to the tax credit for the dividends under Section 47 bis of the Revenue Code. Since the dividends obtained by the company are exempt from tax under the Revenue Code by virtue of the law governing petroleum income tax, they are not regarded as dividends paid out of net profits which have been subject to income tax under the Revenue Code.

This Board of Taxation’s ruling became effective on 9 April 2008.