003 Notes on application of new exemption system of dividend received from foreign subsidiaries
Due to the newly amended taxation system in the fiscal year ended 31 March, 2009, dividends received from foreign subsidiaries are excluded from taxable income. The followings are the notes to be primarily considered on whether this system should be applied to your case.
(1) Fiscal year of a parent company receiving dividend from its foreign subsidiaries should begin on or after 1 April, 2009.
(2) The resolution date on distribution of dividend should begin or after 1 April, 2009.
According to Corporation Tax Law Basic Interpretive Regulation (CTLBIR) 2-1-27, a parent company should record dividend income on the date when foreign subsidiaries make a resolution to distribute dividend. Therefore, in the case the resolution is made on or before 31 April, 2009, you have to be careful because this taxation system can not be applied, even though the parent company receives dividend from its foreign subsidiaries on 1 April, 2009.
As CTLBIR 2-1-28 permits you to record dividend income on its payment date, you have to examine carefully whether or not this taxation system is applicable as well as how to record dividend received.
