What are qualified foreign corporation dividends?
Dividends from a qualified foreign corporation qualify for the reduced rate.
Qualified foreign corporation dividends are a specific type of dividend income that is earned by an individual or a corporation from a foreign corporation that meets certain qualifications as defined by the U.S. Internal Revenue Service (IRS).
To be considered a qualified foreign corporation dividend, the following criteria must be met:
1. The dividend must be paid by a foreign corporation that is not a passive foreign investment company (PFIC) or a company that is ineligible for the preferential tax treatment under the IRS rules.
2. The recipient of the dividend must hold the stock of the foreign corporation for at least 60 days during the 121-day period that begins 60 days before the ex-dividend date.
3. The dividend must not be listed as an excluded dividend or an interest-related dividend under the IRS rules.
If the dividend meets all these requirements, it will be eligible for preferential tax treatment as a qualified foreign corporation dividend. The tax rates for qualified foreign corporation dividends can be lower than ordinary income tax rates, depending on the individual or corporate taxpayer’s tax bracket. It is important to note that non-qualified foreign dividends and income earned from PFICs are taxed at different rates and do not qualify for this preferential tax treatment.
More Answers:
Understanding Property Dividends: Tax Implications and Considerations for Shareholders.How Foreign Stock Dividends are Taxed in the US: Understanding Tax Treaty Benefits and ADR Implications
Understanding the Criteria for a Qualified Foreign Corporation (QFC) in the United States – A Guide for Foreign Businesses and Tax Professionals.