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What is the difference between corporate dividend tax and dividend distribution tax?

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What is the difference between corporate dividend tax and dividend distribution tax?
posted Jun 13, 2017 by Vijay

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1 Answer

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When a corporation pays a dividend to an individual, the individual is taxed, generally at 15% of the amount of the dividend. If the recipient of the dividend is another corporation, there is usually a 80% or 100% "dividends received deduction" on the amount of the payment, meaning that corporate shareholders don't pay much dividend taxes.
In either case, the corporation paying the dividend is not taxed and recognizes no gain or loss on the distribution, but must reduce its earnings and profits.

A "dividend distribution tax" COULD refer to a separate tax imposed on the corporation if it distributes not cash, but appreciated property, as a dividend. If a corporation distributes an asset as a dividend, and the asset has a built-in gain, then the corporation may recognize a gain. That might be what "dividend distribution tax" means, but I've never heard that expression before. It's a tax imposed under section 311(b) of the Internal Revenue Code. The tax is imposed on the corporate distributer, not the shareholder distributee..

answer Jun 13, 2017 by Abu Anam
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