CGT loss claim on panic share sale

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ksmith169

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Hello All,

I had a bunch of US shares like X = US Steal, SPY = Standard and Poor 500 ETF, BRK-B = Berkshire Hathaway. Unfortunately I sold them all during the covid stock market crash. This is off course something I regret now considering how well all markets have recovered. Any ways no going back in time now.

I have done some rough calculations and I estimate I lost about 100,000 Euros when I sold the shares.

I know I can claim this as a CGT loss for any potential future CGT payments I need to make. I can see you don't have to necessarily declare a loss when it occured although revenue did say they advise making the claim right away. To be frank I got into such a state about the losses I did not want to face them BUT now I need to do something even if just registering the losses with Revenue for future CGT should I make them.

I made the trades on Interactive Brokers. The initial purchase and the sale. Obviously with an online broker you don't get physical share certificates in the post etc.

So are PDFs of the share purchases and sales from Interactive Brokers good enough receipts for Revenue? I presume they will want some proof of the loss.

Another complication is because they are US stock purchased using a US Broker 15% has already paid on the dividends to tax authorities in the USA. I did more research on this and I found the tax on dividends in Ireland is 25%. I also found I need to pay income tax on the dividend income (less the 25%) already paid.

Unfortunately I did not realise this. I assumed the 15% paid to US tax authorities and the double taxation agreement between USA and Ireland meant I was covered for dividend tax.

I have to look through the records in my broker account but I estimate I received about Euro 30,000 in dividends from the companies I made the losses in whilst I held them. So will revenue punish me if I come along and try to pay the dividend tax about 3 years later on?

A quick calculation on 30,000 dividend income reveals this tax liability.

30,000 X 15% = 4,500 Paid to US authorities already with Double Taxation Agreement
30,000 X 10% = 3,000 owed to Revenue

I am in 52% tax bracket

so 30,000 x 52% = 15,600
15,600 + 3000 = 18,600 less 4,500 already paid = 14,400 due to Revenue.

I know Revenue may charge interest on the 14,400 but how likely is this?

Any help much appreciated.
 
ksmith169 said:
I presume they will want some proof of the loss.
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Not at the time of filing.
They may ask for it later but I doubt it
CGT is a self assessed tax and they don't check every detail of every filing.
But keep the broker transaction logs/statements in case they're ever needed.
ksmith169 said:
I know Revenue may charge interest on the 14,400 but how likely is this?
Click to expand...
Not sure but you should still just go ahead and file the dividend income for the relevant years and see what happens.
 
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Dividend tax is not 25% in Ireland

Dividend income is included in your taxable income, so in your case it will be taxed at your marginal rate

You should submit corrective tax returns for the years in question and, yes, I imagine you will be charged interest

You should not have invested large amounts if you do not understand what you are doing - this was a disaster waiting to happen

Hopefully, the capital losses will be useful to you in the future
 
It seems like ksmith169 was able to purchase US Etf some years ago - perhaps before their sale was banned

It isn't clear whether SPX falls under exit tax or CGT
 
Their sale wasn't banned as such, but when the US product owners refused to supply the PRIPS documentation mandated in the EU, this effectively banned the sale of such products to retail customers in the EU
 
It would be worth your while to find a tax adviser to review /resubmit your tax returns for the impacted years - its just not worth the hassle to complete yourself and potential make errors. Sometimes you do need to leave it to the experts who are doing this day in day out
 
I would suggest that the calculation is

€30,000 by 0.52 = €15,600 less €4,500 paid in US = €11,100.

However you definitely need proper advice. Take action now to get it in hand and you may not be penalised and may even escape interest.
 
Regarding the capital loss incurred, Dominic Coyle, in this (most likely paywalled) article:
www.irishtimes.com

Must I let Revenue know of a loss before I can use it to cut tax bill?

Q&A: Make sure you keep a record of any losses and how they arose
www.irishtimes.com www.irishtimes.com
says:
... page 3 of the Tax and Duty Manual covering allowable losses under capital gains tax. It states: “Where an allowable loss arises in a chargeable period and there is no chargeable gain against which it may be offset in that chargeable period, there is no requirement for a person to include the loss in a tax return for the chargeable period in which the loss arises.”
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So you should probably focus on regularising the situation with regard any underpayment of income tax on the dividends first.
 
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jpd said:
Dividend tax is not 25% in Ireland

Dividend income is included in your taxable income, so in your case it will be taxed at your marginal rate

You should submit corrective tax returns for the years in question and, yes, I imagine you will be charged interest

You should not have invested large amounts if you do not understand what you are doing - this was a disaster waiting to happen

Hopefully, the capital losses will be useful to you in the future
Click to expand...
ClubMan said:
Not at the time of filing.
They may ask for it later but I doubt it
CGT is a self assessed tax and they don't check every detail of every filing.
But keep the broker transaction logs/statements in case they're ever needed.

Not sure but you should still just go ahead and file the dividend income for the relevant years and see what happens.
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Thanks for the information ClubMan. So I am guessing if Revenue ask for the proof later on PDFs from the US Broker showing loss the at exit would be good enough proof? I cannot thing of any other proof as I say no one gets physical share certificates these days.
 
ksmith169 said:
Thanks for the information ClubMan. So I am guessing if Revenue ask for the proof later on PDFs from the US Broker showing loss the at exit would be good enough proof? I cannot thing of any other proof as I say no one gets physical share certificates these days.
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Yes, broker transaction statements should suffice.
 
jpd said:
Dividend tax is not 25% in Ireland

Dividend income is included in your taxable income, so in your case it will be taxed at your marginal rate

You should submit corrective tax returns for the years in question and, yes, I imagine you will be charged interest

You should not have invested large amounts if you do not understand what you are doing - this was a disaster waiting to happen

Hopefully, the capital losses will be useful to you in the future
Click to expand...

jpd said:
Dividend tax is not 25% in Ireland

Dividend income is included in your taxable income, so in your case it will be taxed at your marginal rate

You should submit corrective tax returns for the years in question and, yes, I imagine you will be charged interest

You should not have invested large amounts if you do not understand what you are doing - this was a disaster waiting to happen

Hopefully, the capital losses will be useful to you in the future
Click to expand...
Thanks for reply and information JPD.

I am still researching this but from this example -> https://www.revenue.ie/en/additional-incomes/dividend-income/index.aspx Dividends get taxed twice. First Dividend With Holding Tax. Second as income. Unless I am missing something? The example is for Irish company dividends not US.

I will do more research on US company dividends and the double taxation agreement. I am fairly sure the 15% collected by US Tax authorities goes towards the Irish 25% DWT.
 
cremeegg said:
I would suggest that the calculation is

€30,000 by 0.52 = €15,600 less €4,500 paid in US = €11,100.

However you definitely need proper advice. Take action now to get it in hand and you may not be penalised and may even escape interest.
Click to expand...
I am still researching this but from this example -> https://www.revenue.ie/en/additional-incomes/dividend-income/index.aspx Dividends get taxed twice. First Dividend With Holding Tax. Second as income. Unless I am missing something? The example is for Irish company dividends not US.

I will do more research on US company dividends and the double taxation agreement. I am fairly sure the 15% collected by US Tax authorities goes towards the Irish 25% DWT. I will post results of research here.
 
I think you are misreading the Irish example. Withholding tax can usually be reclaimed. It not 25% plus 52%. Its a liability of 52% on the gross and the DWT tax paid is credited towards that. Foreign DWT can generally be reclaimed.

The relevant section is

Other foreign dividends​

You are liable to tax on the gross dividend at your marginal rate of tax.

The foreign jurisdiction paying the dividend may withhold tax on payment of the dividend. There might be a Double Taxation Agreement (DTA) in place between Ireland and the foreign jurisdiction. When there is, the DTA may provide that the rate of withholding is reduced in certain circumstances. The DTA may also provide relief in respect of foreign withholding tax on the dividend received.

Foreign dividends received by an Irish tax resident individual may suffer Irish Encashment Tax. You are entitled to a credit against your Income Tax liability for the Encashment Tax.

The gross dividend may not be the €30k you received.
 
cremeegg said:
I think you are misreading the Irish example. Withholding tax can usually be reclaimed. It not 25% plus 52%. Its a liability of 52% on the gross and the DWT tax paid is credited towards that. Foreign DWT can generally be reclaimed.

The relevant section is

Other foreign dividends​

You are liable to tax on the gross dividend at your marginal rate of tax.

The foreign jurisdiction paying the dividend may withhold tax on payment of the dividend. There might be a Double Taxation Agreement (DTA) in place between Ireland and the foreign jurisdiction. When there is, the DTA may provide that the rate of withholding is reduced in certain circumstances. The DTA may also provide relief in respect of foreign withholding tax on the dividend received.

Foreign dividends received by an Irish tax resident individual may suffer Irish Encashment Tax. You are entitled to a credit against your Income Tax liability for the Encashment Tax.

The gross dividend may not be the €30k you received.
Click to expand...
You are correct I am misreading it. The DWT in Irish example is credited back (taken off) the 52% income tax part of the dividend tax. That makes more sense. If I was correct then 75% of dividends would be eaten up in taxes.

Just to say thanks to everyone for their help/input on this thread. Really appreciate it.
 
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