Credit on additional Income tax on dividend distribution during the period

Lesson Summary-Credit Occurred from withholding tax on dividend distribution during the period under Cambodia Tax

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Credit on additional Income tax on dividend distribution during the period can be offset against profit (income) tax liability. Tax Credit on Dividend distribution applied to investment at tax on income (profit) 0% or 9%.

Profit (income) tax liability = tax on profit(income) – Credit on additional Income tax on dividend distribution during the period

Example 1

ABC Company is subject to tax on income (profit) 20%. ABC Company invested two companies as follows.

1.ABC Company invested BBB Company granted as Qualified Investment Project (QIP) by the Council for the Development of Cambodia (CDC), and BBB is under tax holiday ( 0% tax on income). But this year 2018, BBB will pay dividends $10,000 earned from 0% tax on income to ABC Company.

2.ABC Company invested CCC Company granted as Qualified Investment Project (QIP) by the Council for the Development of Cambodia (CDC), and CCC is under 9% tax on income.  Also this year 2018, CCC will pay dividends $9,100 earned from 9% tax on income to ABC Company.

Assume tax on income for ABC Company is $20,000 during year 2018.

Required 

1. Calculate withholding tax credit on dividend distribution for ABC Company that BBB Company withheld tax on dividend and paid to tax authority.

2. Calculate withholding tax credit on dividend distribution for ABC Company that CCC Company withheld tax on dividend and paid to tax authority.

3.Calculate profit (income) tax liability for ABC Company in 2018.

Answer 

Note: to understand this question well, please read this article: Dividend Distribution Tax

1.Calculate withholding tax credit on dividend distribution from BBB Company

Withholding Tax (WHT) base = dividend payment=$10,000
Withholding tax credit= dividend payment x 20%=$10,000 x 20%=$2,000

So Withholding tax credit=$2,000

2.Calculate withholding tax credit on dividend distribution from CCC Company

Withholding Tax (WHT) base = dividend payment=$9,100
Withholding tax credit= dividend payment x 11/91=$9,100 x 11/91=$1,100

So Withholding tax credit=$1,100

3.Calculate profit (income) tax liability for ABC Company in 2018

Profit (income) tax liability = tax on profit(income) – Credit on additional Income tax on dividend distribution during the period=$20,000-($2,000+$1,100)=$16,900

So Profit (income) tax liability = $16,900