DIVIDEND

Dividend includes:

Any distribution by a company of accumulated profits to its shareholders, whether capitalized or not;

DEFINITIONS

1. any distribution by a company, to its shareholders of debentures, debenture stock or deposit certificate in any form whether with or without profit, to the extent to which the company possesses accumulated profits whether capitalized or not,
2. any distribution made to the shareholders of a company on its
3. liquidation out of accumulated profits of the company immediately before its liquidation, whether capitalized or not,
4. any distribution by a company to its shareholders on the reduction of its capital to the extent to which the company possesses accumulated profit whether capitalized or not,
5. any payment by a private company or trust of any sum by way of advance or loan to a shareholder or any payment by any such remittance of after tax profit of a branch of foreign company operating in Pakistan, but does not include
6. a distribution made in respect of any share for full cash consideration or redemption of debentures or debenture stock,
7. where the holder of the share or debenture is not entitled in the extent of liquidation to participate in the surplus assets, (if) any advance or loan made to a shareholder by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company.
8. remittance of after tax profit by a branch of petroleum exploration and production foreign company operating in Pakistan.

Explanation

Dividends are distribution to the shareholders of a company in proportion to the number of shares held by them. During a tax year a company earns profits from its business. This profit may be retained by a company in its business or may be distributed to the shareholders. The INCOME TAX

profit which is distributed to the shareholders is called dividend, and the profit which is retained by a company in its business is known as accumulated profit or retained earnings. Dividend may be distributed out of current year’s profit or out of accumulated profits. It must also be noted that dividend may be distributed by way of cash or in any other form, such as property dividend, stock dividend, script dividend, etc

By virtue of an amendment made through Dfa Ho Finance Act, 2008, clause ( above was inserted. It is a legitimate attempt to curb remittance of after tax profits by a branch of foreign company as a measure of foreign exchange conservation