If a corporation pays income tax on its profit, then shareholders will not have to pay income tax on any dividends received.

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While corporations do pay income tax on their profits, shareholders may still have to pay income tax on any dividends they receive from the corporation. This is known as double taxation, where the same income is taxed twice, once at the corporate level and again at the individual level. Some types of corporations, such as S corporations, may be able to avoid this double taxation.

If a Corporation Pays Income Tax on Its Profit, Then