DEFINITION
Imputation System

"Imputation system": Tax. A system adopted in the UK and most other EC countries, which wholly or partially imputes to the shareholders some of the corporation tax paid by companies on the income out of which dividends are paid. The mechanism for imputation is a tax credit given to the shareholders at the time of a dividend, which can be used in full or partial payment of the individual's income tax liability. (By contrast, 'classical system' tax rules - for example in the US - do not normally give any credit to individual investors for the corporate tax already paid by the corporations in which they have invested. This results in the effective double taxation of the related business profits.)
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