# Tax on Dividends from a foreign company



## NINA88 (11 Sep 2021)

When you receive dividends from a foreign company and you include the dividends in your tax returns can you offset the corporation tax already paid by the company and if so how is it done?


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## Brendan Burgess (11 Sep 2021)

No, you can't offset the Corporation Tax paid.

But if the company has deducted tax on the payment of the dividend, then you may be able to claim it.

It differs from country to country.

So which country is the company in which paid the dividend? 
Does the dividend certificate show tax withheld? 
What company is it? 

Brendan


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## Bronco Lane (12 Sep 2021)

Brendan Burgess said:


> Does the dividend certificate show tax withheld?


Whenever I get a dividend credited to my Davy Stockbroker account....I just get a net amount...No breakdown of tax taken.

Considering the fees I pay these people I feel that I should get a certificate within a few days telling me that I have a gross dividend of €x, a tax deduction of €x and a net credit of €x.


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## Brendan Burgess (12 Sep 2021)

Hi  Bronco 

After the end of the tax-year you should get a tax pack with all the information in it.

But I agree with you. I made a claim a couple of months ago for a refund of German Withholding Tax and could not claim for a dividend I received this year, as I had not cert from Davys and they could not give one to me. They told me to wait until next year.

Brendan


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## rob oyle (12 Sep 2021)

Brendan Burgess said:


> After the end of the tax-year you should get a tax pack with all the information in it.


Is this something you have to request Brendan? I get an annual statement but don't remember dividend breakdown details included in the report.


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## Brendan Burgess (12 Sep 2021)

I got in May this year for last year. This is what it looks like.  I didn't request it, I was told I would get it automatically.

Brendan


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## SlurrySlump (13 Sep 2021)

Brendan Burgess said:


> But if the company has deducted tax on the payment of the dividend, then you may be able to claim it.


I recently opened an account with Davy Stockbrokers and like the above posters I have received some dividends credited to my account.

I notice that I am getting a net dividend and that 25% tax has been deducted.

The company that I have invested in is a UK pharma company that pays a dividend 4 times a year.

Who is deducting the tax from the dividend before I get it?  Is it the UK company or is it Davy Stockbrokers or is it someone in between?



Brendan Burgess said:


> I made a claim a couple of months ago for a refund of German Withholding Tax and could not claim for a dividend I received this year, as I had not cert from Davys and they could not give one to me. They told me to wait until next year.



So who has the benefit/use of this cash before you can make a claim for it to be refunded?


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## Brendan Burgess (13 Sep 2021)

SlurrySlump said:


> Who is deducting the tax from the dividend before I get it? Is it the UK company or is it Davy Stockbrokers or is it someone in between?



It's definitely not the UK company.

It's Davy's Irish Encashment Tax for which you get a full credit in your tax returns.

Are you sure it's not 20%?

Brendan


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## Brendan Burgess (13 Sep 2021)

Here is my dividend from Siemens, a German company

Gross dividend: €100
Overseas tax: €26.40   (26.4%)
Received in Ireland: €73.6
Irish Encashment Tax:€14.72 (20% of €73.60)
Dividend received: €58.88

On my Irish tax return, I claim  a credit of €15 of the Overseas Tax and the €14.72 Irish Encashment Tax. 

The Germans still owe me €11.40 which I have to reclaim.  I get most, but not all of it and don't really understand why.

Brendan


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## jpd (13 Sep 2021)

Irish Encashment tax was 20% prior to 1st Jan 2021 and is now 25%

This is a different tax to Dividend Withholding Tax which only applies to Irish companies

Part of the German Tax is a an Income tax (25%) and part is a surcharge of 5.5% on the income tax 
So the German tax withheld should be € 25.00 (Income tax) and € 1.38 Surcharge - maybe that was rounded up to € 26.40 :-(

They seem to be abolishing the 5.5% surcharge (which was brought in to pay for the costs of re-unification) but not for all - and presumably non-residents will still be charged


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## Brendan Burgess (13 Sep 2021)

So I am paying for German re-unification? 

Brendan


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## jpd (13 Sep 2021)

maybe they will pay for ours?


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## kinnjohn (13 Sep 2021)

Brendan Burgess said:


> So I am paying for German re-unification?
> 
> Brendan


It was done away for around 90% of taxpayers as of 2121  But kept in place for the Wealthier taxpayers,


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## Brendan Burgess (13 Sep 2021)

kinnjohn said:


> It was done away for around 90% of taxpayers as of 2121  But kept in place for the Wealthier taxpayers,



Ah well, I will just have to put up with it. 

Brendan


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## NINA88 (13 Sep 2021)

Brendan Burgess said:


> No, you can't offset the Corporation Tax paid.
> 
> But if the company has deducted tax on the payment of the dividend, then you may be able to claim it.
> 
> ...


Brendan, 
Thank you. The company is US and they deduct 15% withholding. I am not an accountant or have much knowledge of tax . However , I think I can remember when corporation tax in Ireland was 50% and if you received a dividend you could offset the corporation tax against your personal tax on the dividend?.    Then, I think, when they reduced corporation tax down to 12.5% they removed that faciality for Irish tax residents.

Is this correct?

.


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## NINA88 (13 Sep 2021)

NINA88 said:


> Brendan,
> Thank you. The company is US and they deduct 15% withholding. I am not an accountant or have much knowledge of tax . However , I think I can remember when corporation tax in Ireland was 50% and if you received a dividend you could offset the corporation tax against your personal tax on the dividend?.    Then, I think, when they reduced corporation tax down to 12.5% they removed that faciality for Irish tax residents.
> 
> Is this correct?
> ...


Dividends  is just paid into the account and 15% taken off and paid to the I assume IRS.


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## Brendan Burgess (14 Sep 2021)

Tax Issues For Irish Residents - GillenMarkets
					

This...




					www.gillenmarkets.com
				




_Dividends on US Shares_
There is a 30% with-holding tax on US shares for non-US residents, but if you complete a W8-Ben form for your stockbroker, a lower 15% with-holding tax will apply. Your therefore receive 85% of the dividend. You are assessed on the full 100% and the 15% withheld by the US Revenue is deemed as tax already paid by you in accounting for tax due to the Irish Revenue, and for anyone on a marginal tax rate above 15%, then the balance is due to the Irish Revenue. The 15% US With-holding tax is non-refundable so pension accounts cannot reclaim it.


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## Paul O Mahoney (12 Oct 2021)

This encashment tax has me confused,  reading the above its not Dividend withholding tax.
I record the income as foreign dividends, the foreign tax withheld 15% in most situations the encashment tax is Irish tax do I lump that in with the foreign tax?

This has got me a little worried now, most of dividend income is paid into a US brokerage account and its left there , it actually pays for college fees, but I pay the additional tax to Revenue when doing the Form 11, I don't deduct or pay encashment tax when we transfer the money.

Have I been doing this wrong?

The other dividend income comes from US shares that are in a  Revenue approved scheme where the shares are locked in for 3 years and paid in Euro and encashment tax is deducted.


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## Paul O Mahoney (12 Oct 2021)

Found the encashment bit , ie where to put the amount,  and I think my other question is moot as I think what I'm doing is ok.

Mods delete post if ye wish.


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## nest egg (7 Nov 2021)

Brendan Burgess said:


> ....
> On my Irish tax return, I claim  a credit of €15 of the Overseas Tax and the €14.72 Irish Encashment Tax.


Does anyone know where to declare the DWT if filling a simple return (i.e. form 12, not sure if it's still called that when filing online these days).

A credit for  "_Irish Tax deducted on the encashment of foreign dividends_" is there, but there's no obvious choice for entering the 15% of DWT paid. The only "_Other Credits_" are 1) _Tax Relief Incentive Schemes (EII / SURE)_, 2) _Professional Services Withholding Tax_, 3) _Other Lump Sum Payments_.

None of the above look appropriate, any ideas?

EDIT/UPDATE: I think the answer is, you enter it when entering the gross amount on Foreign Dividends, there's a box for "_Non refundable foreign tax deducted_" which I believe is where the 15% would apply.


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## nest egg (8 Nov 2021)

Regarding the 11.4% of the DWT which can't be offset against Irish taxes in Brendan's example above, a little more googling on the topic revealed this service from taxback.com.

Has anyone any experience with it?


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## jpd (8 Nov 2021)

There is absolutely nothing to stop you claiming back any dividend Withholding tax (DWT) from countries that have withheld over and above the limit allowed. All it takes is your time and perseverance.

But if you want to pay some, or all or even more, of the overheld tax to Taxback and avoid the effort, by all means use Taxback.com


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## PensionPlans (10 Mar 2022)

Can anyone share their experiences seeking a DWT refund or exemption for dividends from shares in EU countries such as Germany, France, Spain, Portugal held in an Irish pension?

There is no pension specific term in the Irish tax treaties with those countries.

Article 22 of the French tax treaty suggests I should be no worse off than a French citizen in the same circumstances:

_1. The nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected. 
2. In particular, the nationals of a Contracting State shall enjoy in the other Contracting State, and under the same conditions as the nationals of the latter State, all exemptions, basic abatements, deductions and reductions of tax whatsoever granted on account of family responsibilities._

Using a local fiscal representative in each country would be more costly than the refund itself each year.


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## NINA88 (11 Oct 2022)

Brendan Burgess said:


> Tax Issues For Irish Residents - GillenMarkets
> 
> 
> This...
> ...


Brendan,
Thank you. So you do your taxes ignoring any deductions and at the end, if any tax is due you deduct us tax already paid. If the tax deducted is greater than the tax due you don't get it back.  But can you get it back from US.  Brendan thank you again.  Do you have to state it is US deductions in order to get the credit?


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## jpd (11 Oct 2022)

No, you declare the gross amount of US dividends - the Revenue then automatically give you a tax credit of 15% for US tax deducted.


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## NINA88 (13 Oct 2022)

jpd said:


> No, you declare the gross amount of US dividends - the Revenue then automatically give you a tax credit of 15% for US tax deducted.


Brendan thank you.


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## NINA88 (13 Oct 2022)

jpd said:


> There is absolutely nothing to stop you claiming back any dividend Withholding tax (DWT) from countries that have withheld over and above the limit allowed. All it takes is your time and perseverance.
> 
> But if you want to pay some, or all or even more, of the overheld tax to Taxback and avoid the effort, by all means use Taxback.com


Thank you.


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## NINA88 (1 Nov 2022)

jpd said:


> No, you declare the gross amount of US dividends - the Revenue then automatically give you a tax credit of 15% for US tax deducted.


On my tax returns I included the dividend paid into our us account less charges made to the account as investment income. 
I also included the withholding tax deducted from the account as tax paid. But instead of revenue giving a credit for the total tax paid they only allowed 20% on the investment income as a tax even though the actual ax was greater..   

The investment costs are charged to the account and I personally have no involvement in it.


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## jpd (1 Nov 2022)

It is not clear - where is the brokerage account held - US, Ireland, elsewhere?

Did you report the gross dividend - ie the dividend per share x the number of shares, ignoring any tax deducted by anyone? did the US deduct tax?

You are supposed to report the gross amount of tax - the Revenue will give you a credit of 15% for the tax deductible by the US

The tax deducted by the Irish broker, if any, will be a tax credit


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## relax carry on (1 Nov 2022)

jpd said:


> It is not clear - where is the brokerage account held - US, Ireland, elsewhere?
> 
> Did you report the gross dividend - ie the dividend per share x the number of shares, ignoring any tax deducted by anyone? did the US deduct tax?
> 
> ...


Just to be clear with the withholding tax deducted by an Irish broker (if one is in involved); it is called Irish tax deducted on foreign dividends. You must input that amount shown on your annual dividend statement in order to benefit from a credit for that amount.


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## AAAContributor (2 Nov 2022)

NINA88 said:


> On my tax returns I included the dividend paid into our us account less *charges* made to the account



Can you be more explicit as to what you mean by charges?

If your broker has charged you a corporate action processing fee or other such fees (ticket fee, back office fee etc) to process dividends, you cannot net these charges off the gross dividend in your tax return. 

If you are buying shares on margin and are paying interest to your broker (or are paying interest to cover a settlement fail as you did not have enough funds in your account to settle a purchase), you cannot net the interest charged against any dividend income received on your long position(s) for tax purposes.

Has your account got an up to date W-8BEN on file?



NINA88 said:


> instead of revenue giving a credit for the total tax paid they only allowed 20% on the investment income as a tax even though the actual ax was greater..



The only thing I can think of here is that you have declared the dividend income as interest income. Interest payments (from a non-bank, such as a broker) to Irish residents have to be paid net of 20% withholding tax and if income is inserted in this section in the tax return, it will only generate a credit for 20%.

If you could provide more explicit detail as regards amounts, numbered section of the tax return and answers to some of the questions posted above by other posters you may be able to get more assistance.


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## NINA88 (29 Nov 2022)

AAAContributor said:


> Can you be more explicit as to what you mean by charges?
> 
> If your broker has charged you a corporate action processing fee or other such fees (ticket fee, back office fee etc) to process dividends, you cannot net these charges off the gross dividend in your tax return.
> 
> ...


Thank you,
Nothing is paid directly to me personally. It is all within a trading account Dividends are paid into the account and charges are taken out . The rules of the account is that if the cost of purchases is greater than the funds provided the difference is charged at about 7% per year for the relevant period. I have no involvement in borrowing myself that it is just a charge on the account. Sometimes it is referred to as interest and sometimes as an investment charge.  It might be an insurance policy, I don't know.   The broker is in New York and, as far as I know, he provides a list of the charges to his other Irish Clients to set off against their dividends paid into their account.

I have no accountancy training or knowledge but my belief was that you are  accessed for tax on all your income as if it was income in Ireland 
and any tax paid abroad is  deducted from the accessed tax and if you owe more tax than already paid abroad you pay the difference in Ireland but if you paid more abroad you don't get a refund.  \i have completer the w-8Ben form.

In my tax returns,


NINA88 said:


> Brendan thank you.



I included the dividends paid into the account less the charges taken out of the account and I showed the Tax paid on the 

Your foreign investment income , stated as income from securities on the notice of assessment , was input as €25,310 as per your returns. As you  are entitled to double taxation relief on this income, relief  is given by regrossing the foreign income ( net of foreign tax ) at the lower of the Irish effect rate and the effect rate of the relevant foreign country and bringing that regressed income into the final computation of liability to Irish tax. Credit is then given in respect of the regrossed  foreign income at the lower effective rate . The expression effective rate means the rate at which have born or are liable to bear) tax on total income . Therefore , the amount stated on the assessment will differ from that declared on the return. 





jpd said:


> It is not clear - where is the brokerage account held - US, Ireland, elsewhere?
> 
> Did you report the gross dividend - ie the dividend per share x the number of shares, ignoring any tax deducted by anyone? did the US deduct tax?
> 
> ...


I reported  as income, ( gross dividends paid into the account less the charges paid out of the account),  I then reported the withholding tax as reported on a form 1042-S  .  The account is in the U. S.A.


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## NINA88 (29 Nov 2022)

NINA88 said:


> Thank you,
> Nothing is paid directly to me personally. It is all within a trading account Dividends are paid into the account and charges are taken out . The rules of the account is that if the cost of purchases is greater than the funds provided the difference is charged at about 7% per year for the relevant period. I have no involvement in borrowing myself that it is just a charge on the account. Sometimes it is referred to as interest and sometimes as an investment charge.  It might be an insurance policy, I don't know.   The broker is in New York and, as far as I know, he provides a list of the charges to his other Irish Clients to set off against their dividends paid into their account.
> 
> I have no accountancy training or knowledge but my belief was that you are  accessed for tax on all your income as if it was income in Ireland
> ...



This is a paragraph I received from revenue. I cannot understand it. I would appreciate it if would you be able to explain what they mean. 

Your foreign investment income stated as income from securities on the notice of assessment was input as €25,310 as per your returns. As you are entitled to double taxation relief on this income, relief is given by regrossing the foreign income ( net of foreign tax ) at the lower of the Irish effect rate and the effective rate of the relevant foreign country and bringing that regrossed income into the final computation of liability to Irish tax. Credit is then given in respect of the regrossed foreign income at the lower effective rate. The expression effective rate means the rate at which have born (or are liable to bear) tax on total income. Therefore, the amount stated on the assessment will differ from that declared on the return.


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## AAAContributor (29 Nov 2022)

NINA88 said:


> I reported as income, ( gross dividends paid into the account less the charges paid out of the account)



Why are you deducting the charges from your dividend income? What basis have you for doing so if Revenue queried it?

Weren't you previously told that you could not do this (post #31 in the following thread):






						Tax on Dividends
					

Before corporation tax was reduced down to 12.5% taxing the profits of companies and again taxing the same money as dividends was regarded as double taxation. It appears therefore Irish companies paid less tax but Irish shareholders paid more in that they suffered double taxation which they...



					www.askaboutmoney.com
				




It looks like income is being under-declared from what you have outlined. 

A call to a tax adviser to get it all regularised would be worthwhile.


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## relax carry on (29 Nov 2022)

Just on this bit of the reply from NINA88 
"I then reported the withholding tax as reported on a form 1042-S". 
If the dividends are paid to you directly and not through an Irish broker who deducts Irish tax on foreign dividends; you don't report the tax withheld in the US. You declare the Gross dividends in the US dividends field and the return includes a credit in the calculations for the 15% US taxes withheld. If you have included the taxes withheld somewhere on the return then you have filed an incorrect return and benefited on the double for the US tax deducted.


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## NINA88 (31 Dec 2022)

AAAContributor said:


> Why are you deducting the charges from your dividend income? What basis have you for doing so if Revenue queried it?
> 
> Weren't you previously told that you could not do this (post #31 in the following thread):
> 
> ...


Yes, revenue did query it and the person I was dealing with initially said I could charge the costs against the asset when the assets are sold. I explained that the assets might never be sold and surely it is only correct and proper to charge current costs against current income. I sent revenue copies of all the details. I explained that I personally am not directly involved.  The conditions of the accounts are if the funds provided are less than the funds used there is a charge for the facility of about 7% to 8% per year on the difference.  That is basically all I know. I don't borrow money and I don't even know if any money is borrowed, there might be some kind of facility or the charge might be the cost of an insurance policy to cover the risk. 

They asked me if I could send a copy of the conditions of the account and I didn't because I didn't have one.   I have over 100 pages on options but I never got involved or even read the book which I did not send.  They seemed to accept it as I heard nothing afterward.

It is all done within the accounts. I don't get a cheque for dividends or are dividends paid to me.  Dividends are paid into the account and the costs of the facilities provided are charged to the account.  In some cases the dividends only arise because of the facility which has a cost. The dividends paid into the account and the costs charged to the account are intrinsically linked.


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## NINA88 (3 Jan 2023)

Brendan Burgess said:


> No, you can't offset the Corporation Tax paid.
> 
> But if the company has deducted tax on the payment of the dividend, then you may be able to claim it.
> 
> ...


Brendan,

My understanding is if you have income in the U.S. and withholding tax is deducted at 15%  in the U.S. that this is regarded by the Irish revenue as tax already paid. Apparently, this is not necessarily true.  Below is a paragraph I received from revenue recently that I can not understand. Can you please explain what they mean. ?   

_“Although the amount of €9,115 of foreign tax was claimed, the credit for foreign tax deducted is not automatically the actual amount of foreign tax incurred. It is arrived at by multiplying to the amount of foreign income finally incurred in the computation of the liability by the lower effective rate. “_


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## Brendan Burgess (3 Jan 2023)

Hi Nina

Sorry, that is beyond by paygrade.  I just knew that you couldn't deduce the Corporation Tax paid by the company.

I don't know the mechanics of the Irish-US tax treaty.

Brendan


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## RedOnion (3 Jan 2023)

NINA88 said:


> Brendan,
> 
> My understanding is if you have income in the U.S. and withholding tax is deducted at 15%  in the U.S. that this is regarded by the Irish revenue as tax already paid. Apparently, this is not necessarily true.  Below is a paragraph I received from revenue recently that I can not understand. Can you please explain what they mean. ?
> 
> _“Although the amount of €9,115 of foreign tax was claimed, the credit for foreign tax deducted is not automatically the actual amount of foreign tax incurred. It is arrived at by multiplying to the amount of foreign income finally incurred in the computation of the liability by the lower effective rate. “_


This is most probably because you've incorrectly treated the expenses on your account as an offset against dividends.

If there's 9k withholding tax, it would be worth paying an accountant to look at this for you rather than guessing the correct tax treatment.


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## jpd (3 Jan 2023)

The amount of credit you get for foreign tax paid depends on the what the Revenue call your Effective Irish Tax Rate

If the percentage tax deducted by the foreign authority is higher than your Effective Irish Tax Rate, then the amount allowed as a Tax credit is limited to the Effective Irish Tax Rate

For example, suppose your Effective Irish Tax Rate is 10% and the US deducted 15%
Gross income 100
US tax 15
Net Income 85

The Revenue will re-calculate the gross income using the formula 85 / (100% - 10%) to get 94.44 rather than the 100
The tax credit is now 94.44 x 10% = 9.44 and not 15

Your Effective Irish Tax Rate is calculated based on the tax due on your total income, Irish and Foreign, using your normal tax credits and ignoring any foreign tax paid


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## ClubMan (3 Jan 2023)

NINA88 said:


> Brendan,
> 
> My understanding is if you have income in the U.S. and withholding tax is deducted at 15%  in the U.S. that this is regarded by the Irish revenue as tax already paid.


I thought that if you filed a W-8BEN then withholding taxes were reduced to 0% and you dealt with the tax issues arising with Revenue?


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## jpd (3 Jan 2023)

No, filing a W-8BEN allows the broker to only deduct 15% and not the usual 30%. It avoids having to reclaim the overpaid tax from the US Revenue

You declare the gross dividend and the Revenue here automatically credit you the 15%, or possible a lower amount if your Effective Irish Tax Rate is lower than 15%, allowed by the double taxation treaty between US and Ireland


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## NINA88 (5 Jan 2023)

jpd said:


> No, filing a W-8BEN allows the broker to only deduct 15% and not the usual 30%. It avoids having to reclaim the overpaid tax from the US Revenue
> 
> You declare the gross dividend and the Revenue here automatically credit you the 15%, or possible a lower amount if your Effective Irish Tax Rate is lower than 15%, allowed by the double taxation treaty between US and Ireland


Thank you.


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## NINA88 (5 Jan 2023)

jpd said:


> The amount of credit you get for foreign tax paid depends on the what the Revenue call your Effective Irish Tax Rate
> 
> If the percentage tax deducted by the foreign authority is higher than your Effective Irish Tax Rate, then the amount allowed as a Tax credit is limited to the Effective Irish Tax Rate
> 
> ...


Thank you very much. That explains it even though I found it confusing. Thank you again.


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