When a domestic corporation or a qualified foreign corporation pays a dividend to an individual shareholder, the dividend is taxed at the reduced rates applicable to long term capital gains if the shareholder meets certain holding period requirements. Subject to certain exceptions, a qualified foreign corporation includes certain foreign corporations that are eligible for benefits of a comprehensive income tax treaty with the U.S. that the Secretary determines is satisfactory for purposes of this rule and that includes an exchange of information program. I.R.C. §1(h)(11)(C).
On August 18, 2011, the IRS released Notice 2011-64. The Notice updates the list of U.S. tax treaties that the Secretary deems satisfactory for purposes of the qualified dividend rule.
Even if a foreign corporation is not eligible for the benefits of a listed treaty, the corporation is treated as a qualified foreign corporation with respect to any dividend it pays if the stock with respect to which the dividend is paid is readily tradable on an established securities market in the U.S.