Q: My company has substantial accumulated retained profit but with no Section 108 credit. Thus my company could not declare dividends to me unless it pays income tax. With the proposed Budget 2008 announcement on the single-tier tax system for dividends, how will the change affect my company’s position?
A: Budget 2008 proposed a single-tier company income tax system whereby tax on the company’s profits is a final tax and dividends distributed to shareholders will be exempted from tax. Under this single-tier income tax system, companies having no Section 108 credit on Jan 1, 2008, will automatically be allowed to move to this system. However, companies with credit balance in the Section 108 credit will be given an option to elect for this system or continue with the full imputation system until Dec 31, 2013.
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