DIVIDEND IMPUTATION

Arrangement removing the double taxation of cash payouts from a company to its shareholders. Australia has permitted dividend imputation since 1987. Tax authorities are notified a firm has already paid the imposed income tax on the distributed income as dividends through tax credits known as franking credits or imputed tax credits. The shareholder needs not to pay tax on the dividend. Other countries that impose dividend imputation include Finland, Italy, Mexico, and New Zealand.