Dividend tax from foreign shares

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lyonsa3

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I've read many posts on this topic but I'm still not 100% sure.
I will be investing about 100K in stocks in the near future. I'll be investing mainly in US, UK, Germany and Irish shares. If equal dividends are paid out by all the shares, will my net dividend be equal (after all taxes are paid) from the different countries.

My understanding is that I'll be paying more overall tax from the foreign shares compared to the Irish shares. Is this correct?
 
No answers out there!

So i'll ask another question.

If I'm investing for long term 8 years should I be looking at growth shares or income shares. I'll like to know the difference in tax over this term.
Am I correct to say the only tax I will pay on growth shares will be CGT (if they don't pay a dividend).
As for income shares i'll also pay CGT and marginal rate of tax on any dividends.
Is this correct?

Finally, if US shares pay dividend will i be taxed at marginal rate on gross dividends or marginal rate on dividend received less 15% with-holding tax?

Does this also apply for UK shares?
 
Not an expert but my understanding is that you will pay tax on dividends at your higher rate of tax.

For the US, assuming you complete your W8-ben form, the US guys will deduct 15%, then you should declare the amount to revenue. I forget whether you declare gross or net, but the end result is that you will pay tax at your normal rate on the gross, not necessarily the marginal rate. The amount deducted in the US is used as a sort of tax credit. I believe the same holds true for the UK and possibly for Europe.

So I believe your net dividend after tax, will be the same from all sources.

As for growth versus income what you said is correct. There is a certain logic to choosing non-dividend shares in order to avoid the higher tax rate. Of course this depends on what tax rate you pay at. If you are not working then you might pay minimal tax on the dividends.

One thing I'm not clear on is... aprt of the regular tax, and I assume the income levy, are there other applicable taxes to dividends? PRSI? Health levy?

Ix
 
As I understand it, if you receive dividend income, you are further liable for:

1. the excess of your marginal PAYE rate over the Dividend Withholding Tax already paid (20%)
2. PRSI, and
3. the Income Levy

If you receive dividend income from a UK resident company, a withholding tax is levied at source, but you cannot use this to offset your PAYE liability here. That is, if you are a higher rate tax-payer you must pay 41% of the income. In effect you are taxed twice, once in the UK and once here. I am unsure if a similar situation exists for income earned in the US or elsewhere.

From a personal perspective, I just completed my first declaration of income (Form 12) and was amazed at the taxation burden on dividend income. By my calculations, if you factor taxation (at the higher rate) into the dividend yields of most ISEQ and FTSE companies at the moment, then they do not compare at all favorably with cash on deposit.

In future I would be more inclined to invest in stocks that are not "high yielders" - it seems to me more efficient to seek long term gains via capital gains - ie growth stocks. Of course, there are a million other variables when investing, so this opinion is very much an "all things being equal statement".
 
Flann O'B said:
If you receive dividend income from a UK resident company, a withholding tax is levied at source, but you cannot use this to offset your PAYE liability here. That is, if you are a higher rate tax-payer you must pay 41% of the income. In effect you are taxed twice, once in the UK and once here. I am unsure if a similar situation exists for income earned in the US or elsewhere.
Click to expand...

Hmmm.. Can anyone clarify this? I declare some small US dividends each year and from the liability the Revenue inform me about it seems that the 15% the US withholds is taken into account (and it seems I pay only an amount to bring the total liability to 41% + levies). I assumed this is the purpose of having a "double-taxation" agreement.

For the UK I declare about €10 of Vodafone dividends! So it's hard to tell how it's treated. However I believe the same is true. Wow, I stand corrected...http://www.askaboutmoney.com/showthread.php?t=8981 UK dividends are punitive...

Looks like the US is done as expected. http://www.askaboutmoney.com/showpost.php?p=763082&postcount=7

Why is the UK different I wonder?


Ix
 
So, it looks like i'll be knocking the UK shares on the head.
This seems amazing to me, being taxed twice on UK shares and only once on US shares.
I'll now look at US income shares (blue chip with dividend) along with a few UK growth shares to avoid the high tax burden.
Thank God I asked before I decided to buy.

So, for people out there, does this idea seem sound or is there anything else I need to consider?

Thanks for replies
 
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