Double taxation relief: banks using manufactured overseas dividends
The measure
This measure acts to deny a deduction for foreign withholding tax where a bank has entered into a specific structured transaction involving manufactured overseas dividends ('MODs'). The targeted transaction is one whereby the bank has not borne the economic cost of foreign withholding tax on a MOD but would otherwise be entitled to such a deduction based on the current MOD rules.
Who will be affected?
Banks that enter into structured financial transactions involving MODs.
When?
The measure takes effect from 22 April 2009.
Our view
We welcome the clarity that this targeted anti-avoidance measure provides.
