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What is dividend imputation?

Dividend imputation

It’s a tax arrangement indicating that a company issuing a dividend has already paid tax on its profits. The investor who receives the dividend gets a tax credit for the corporate taxes that the company has paid, reducing their annual tax bill.

Where have you heard about dividend imputation?

Dividend imputation isn’t a common tax system worldwide, but it is used in Australia, New Zealand and Finland. The UK has operated under a partial imputation system since 1973, in which some tax relief is given to shareholders.

What you need to know about dividend imputation.

Dividend imputation was introduced to avoid dividends being taxed twice, which occurs when a company pays corporate tax on its profits and then a shareholder pays tax on the dividend they receive from the after-tax profits.

The amount of the dividend imputation, along with the value of the tax credit, is outlined in an investor’s dividend statement. When they submit their annual tax form to the government, the amount that has already been paid by the company on dividends is used to offset their total annual income..

Find out more about dividend imputation.

Read our definition of dividend tax for more insight into how dividend payments are taxed.

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