SIE: Taxes (Dividends)


According to the textbook, a qualified foreign corp must be listed on an established stock exchange. Can it be an established on a foreign stock exchange? For example, does a dividend coming from a Japanese company listed on the Tokyo Stock Exchange count as a qualified foreign corp?

Thank you in advance!

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Great question! It must be a US exchange - I’ve clarified our materials on this point.

Here’s the regulatory language if you’re curious:

Under section 1(h)(11), dividends paid to an individual shareholder from either a domestic corporation or a “qualified foreign corporation” are generally subject to tax at reduced rates applicable to certain capital gains. Subject to certain exceptions, a “qualified foreign corporation” is any foreign corporation:

  • That is incorporated in a possession of the United States;
  • That is eligible for benefits of a comprehensive income tax treaty with the United States that the Secretary determines is satisfactory for purposes of this provision and that includes an exchange of information program (the treaty test); or
  • Whose stock with respect to which such dividend is paid is readily tradable on an established securities market in the United States.
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