Taxation of foreign profits: Treasury update requires additional feedback

The much awaited announcement regarding the status of the taxation of foreign profits proposals was published on 21 July 2008 in ministerial letters from Rt Hon Jane Kennedy MP to the CBI and the Hundred Group, together with a technical note by HM Treasury. The announcement was generally in line with the expectations that have been emerging over the past few months, with the material effectively deferring the proposals relating to the taxation of foreign profits for further discussion, although some of the proposals may be unbundled from the package and put on a faster track.

What happens if this issue remains unaddressed?

The Government remains attracted to the idea of introducing a wide dividend exemption but considers the fiscal risk too high to enact in FA 2009.  Other major aspects of the proposals relating to the taxation of foreign profits are being reconsidered.

How can we help to solve this issue?

This provides an opportunity for companies to contribute further to the discussion process and for individual groups to consider the type of system that they would like. In relation to the dividend exemption, companies could consider lobbying and help with determining the fiscal risks if they want a dividend exemption introduced in the life of this Parliament.

A webcast discussing the implications of this announcement with partners Peter Maybrey and Peter Cussons can be viewed on PwCPlus, our free award-winning site which brings together the latest news, information, research and insight in the areas of Tax, Finance and Human Resource Services .

How to download the webcast

• Register for PwCPlus
• Once registered (or if already registered) click here to view the webcast

The HM Treasury letters and Technical Note can be accessed here .

PricewaterhouseCoopers international structuring tax specialists can help with any queries relating to how your business might be affected by changes to the rules for the taxation of foreign profits.