Irish Encashment Tax / Double Taxation query...

[rob oyle]

Well, they say you learn something new every day...

KBC paid a dividend of E1.00 per share this year and I hold 125 shares. Nice simple round numbers for calculations!

However, my net receipt was only E0.60 per share, so I thought Belgian dividend withholding tax looked a bit high! I queried this with Davy Select, who(m) hold my shares - turns out my dividend is subject to 'Irish Encashment Tax' which is something I'd never heard before.

The description I have of this encashment tax is: 'The system requires that bankers and paying agents in the State who collect foreign dividends belonging to others are obliged to deduct and account for income tax at the standard rate when they cash the foreign dividend for their client.’

My first thought on this was that this is a form of double taxation and if dividend withholding tax has already been deducted in Belgium at a higher rate than the standard income tax rate here, there shouldn’t be a second tax applied to the dividends. Can anyone advise on this point?

The complete calculation I received is:
Holding: 125
Dividend per share: E1.00
Gross Dividend: E125


Less Belgian DWT @ 25%: E31.25
Less Irish Encashment Tax @ 20%: E18.75


Net Dividend: E75.00

Effective taxation: 40%

 

[jpd]

UNder the double taxation treaty with Belgium (see here [broken link removed] ) the belgian DWT is limited to 15% - so you can contact the belgian Tax authorities and reclaim the 10% over-deducted ie € 12.50

Part of the non-deductible Belgian DWT (tax € 18.75) is deductible from your Irish tax liability - you have to fill in a form 11 or 12 to get this.

KBC should be able to help you with the forms to reclaim the 12.50 from Belgium

 

[dublin66]

Irish encashment tax (Schedule C) is a bizarre tax and more times than not, is not deducted. You will get a credit on your tax return when you file. Consider it a payment on account and you should get a full credit. It is different from any Belgian withholding tax