Who will be entitled to zero US withholding tax (“zero”) on dividends?
It should be noted that the provisions of Article 23 (Limitation on benefits) in relation to zero on dividends are more stringent than for other benefits. The following therefore describes the rules in relation to zero on dividends only. UK resident companies that beneficially own the dividend and that have owned shares representing 80% or more of the voting power of the US company paying the dividend for a 12 month period ending on the date the dividend is declared will be entitled to zero (Article 10(3)(a)), provided that the UK company either: owned those shares, directly or indirectly, before 1 October 1998 (Article 10(3)(a)(i)) and it passes either an “ownership and base erosion” test (Article 23(2)(f)) or an “active conduct of a trade or business” test (Article 23(4)); is a company whose principal class of shares is listed or admitted to dealings on a recognised UK or US stock exchange and whose shares are regularly traded on a recognised stock exchange (Article 23(2)(c)(i)); is
