20 September 2007
Ours is a indian company registered under companies act, has a joint venture with Saudi Arabian Company with a 20% Share capital of Saudi Arabian company. The indian company receives net dividend regularly from the saudi arabian company for the share of 20%. The net dividend crediting to our bank account after deduction of TDS and tax on total profits of saudi.arabian company. Example
Saudi Arabian Company earned a profit before taxes 1000000
Tax at saudi arabia 300000
Profit after Tax 700000
Saudi Arabian Company declared dividend 500000
Dividend of Indian Company @ 20% 100000
Less Tax or TDS @ 20% paid by saudi arabian co. 60000
Net dividend distributed to indian company by saudi co. 40000
Now how to account the entries in indian company and what is the tax treatment for indian company. The indian compay incurring operational losses, but after considering the dividend received from the saudi arabian company, the indian company gaining some net profits. Suppose in a financial year after receiving the dividend of Rs 100000/- the indian company gained taxable income of Rs 20000/-.
Kindly advise how to account the entries in books and what is the tax treatment and how do claim the deduction of tax Rs 60000/- by the saudi arabian company ?
CAclubindia
