Dividend Imputation

Dividend imputation is a corporate tax system designed to get rid of double taxation on dividends, i.e. cash payouts from companies to shareholders (investors).

Why would dividends get double taxed? Well, when the company makes the money that will get paid to investors—part of their income—that gets taxed. Then, when that income gets paid out to the shareholders, it becomes shareholder income, and that same money gets taxed again. That poor money goes through the tax-ringer twice. Tough life.

Unless you’re a dividend in Australia, New Zealand, or a few other countries...then you only get taxed once, thanks to dividend imputation. The government doing the taxing will be notified something like “hey guys, the company already paid the tax on these; don’t make the shareholders pay taxes on this too, plz, thx, k byeeee.”

Other countries, like Canada, the UK, Korea, and Chile have partial imputation systems—a kind of halfway version. Germany and France used to have dividend imputation, until the early 2000s, when they were like “ehhhhh...nah, we’re gonna tax dividends twice, ya rich geezers.”