(4) Such portion of any dividend received at any time in a taxation year by a corporation resident in Canada on a share owned by it of the capital stock of a foreign affiliate of the corporation, that was received after the 1971 taxation year of the affiliate and before the affiliate’s 1976 taxation year, as exceeds the amount deductible in respect of the dividend under paragraph 113(1)(d) in computing the corporation’s taxable income for the year shall, for the purposes of paragraph 113(1)(a), be deemed to be the portion of the dividend prescribed to have been paid out of the exempt surplus of the affiliate.

(b) a dividend received by a particular foreign affiliate of a corporation resident in Canada from another foreign affiliate of the corporation is an exempt dividend to the extent of the amount, if any, by which the portion of the dividend that was not prescribed to have been paid out of the pre-acquisition surplus of the other affiliate exceeds the total of such portion of the income or profits tax that can reasonably be considered to have been paid in respect of that portion of the dividend by the particular affiliate or by a partnership in which the particular affiliate had, at the time of the payment of the income or profits tax, a partnership interest, ...[+++]either directly or indirectly; and

By contrast, application of the imputation method to foreign-sourced dividends leads to an additional tax liability so far as concerns the resident company receiving them if the effective level of taxation to which the profits of the company paying the dividends were subject falls short of the nominal rate of tax to which the profits of the resident company receiving the dividends are subject.

Some companies established in the UK which received dividends from subsidiaries resident in another State are disputing the compatibility of the UK’s tax treatment of foreign-sourced dividends with EU law before the UK courts.

I saw that back in the days of Carter, when we wanted to tax all dividends from foreign affiliates.

Governments will be required to accept the loss of some domestic capabilities, to procure directly from foreign or trans-national companies, and to allow changes to the ownership of defence companies.