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PBR: Govt introduces foreign dividend exemption for large and medium-sized companies

The Government has introduced a package of reforms to the taxation of foreign profits, including the introduction of a foreign dividend exemption for large and medium-sized businesses, supported by a worldwide debt cap on interest.

The new measures announced in today’s pre-Budget report will attempt to halt the exodus of companies shifting overseas and are intended to “enhance the competitiveness of the corporate tax system to make the UK a more attractive location for multinational business.”

The Government will also continue to examine options for reform of the Controlled Foreign Companies rules to improve the way they tax profits diverted from the UK.

PricewaterhouseCoopers LLP UK head of tax Barry Marshall says: “Large business will in principle welcome the long awaited participation exemption for foreign dividends to be brought in from April 2009. However, we must await the detail of this, the introduction of a worldwide cap on interest deductions and changes to the controlled foreign company rules – draft legislation for all which will be introduced in December – before we can determine if the overall package will make the UK more competitive for multinational companies.”


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