Summary

Under the recently adopted amendments to the Income Tax Act, income tax is levied on dividends payable to non-residents who hold less than 25 per cent of the share or stock capital of a resident enterprise, and such income tax is automatically deducted from the dividends. Other non-residents must declare dividends and pay the corresponding tax themselves. In comparison, a resident taxpayer is not required to add dividends to his or her taxable income. The amendments put non-residents who have made direct investments in a more difficult situation than non-residents who have made portfolio investments.
Further, the author of this article addresses problems concerning imposition of taxes on dividends received by non-residents, e.g. danger of double taxation, indirect favouring of under-capitalisation, etc.