Dividend distribution tax imposes liability on domestic companies for declared dividends, with reductions for taxed subsidiary dividends and pass thru payments.

Every domestic company is subject to a dividend distribution tax on declared dividends at the rate and in the manner specified in the Second Schedule, with liability discharged by self-assessment or other prescribed modes and collection after credit for pre-paid taxes. The taxable amount is reduced by dividends received from a subsidiary that has paid the tax, provided the recipient is not itself a subsidiary of another company, and by dividends paid to pass-thru entities or their agents. A subsidiary is defined by majority nominal equity holding.

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