You will see in the article that there is sort two ways to go about it from a tax administration perspective to deal with double taxation.
No dividend tax. ( tax paid in hands of company )
Here the company in that tax system would pay tax and distribute the rest tax free to shareholders.
This used to be the case in South Africa for a long time. Now it's 20%. Doesn't matter what your personal tax rate is.
No dividend tax is an advantage to to shareholders where the corporate tax rate is LOWER than your personal tax rate.
Imputation system ( tax paid in hand of individual )
Tax is withheld at certain rate, in this case 30%....like your salary and PAYG.... the company is paying tax at whatever rate, just like the company employing you pays it's own tax rate..
This is just a tax withheld rate... makes no diff... at the end of the day you are paying tax at your personal tax rate. No benefit to shareholder.
It just make dividends more equal to other forms of income and you are taxed at your individual tax rate.
The company tax rate has no influence.
But we are at risk of digressing.... these things have a history. And it's a way to try and deal with double taxation and probably trying rich and poor to pay a fair amount of tax.
What I do want to stress is that when we talk about yields of one company vs the next.
We really should be talking GROSS yield.
From a shareholder and individual taxpayer perspective, that is all that matters.
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