What Is Franked Investment Income?
Franked investment income (FII) is income that is received as a tax-free distribution by one company from another. This income is typically tax-free to the receiving firm and is usually distributed in the form of a dividend. Franked investment income was introduced in the interest of avoiding double taxation of corporate income.
From the perspective of the company that makes the distribution, the FII is referred to as franked payment, and the term is most commonly used in Australia and New Zealand.
- Franked investment income (FII) allows companies to receive tax-free distributions on certain income to avoid double taxation.
- A franked dividend is paid with a tax credit attached that reduces a dividend-receiving investor’s tax burden.
- Double taxation is a principle that avoids income taxes paid twice on the same source of income.
Understanding Franked Investment Income
Double taxation of dividends occurs when