Tax on Dividends from a foreign company

[nest egg]

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?

 

[jpd]

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

 

[PensionPlans]

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.

 

[NINA88]

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.

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?

 

[jpd]

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

 

[NINA88]

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.

 

[NINA88]

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.

 

[NINA88]

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.

 

[jpd]

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

 

[relax carry on]

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

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.

 

[AAAContributor]

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?

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.

 

[NINA88]

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?



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.

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,

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.

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

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.

 

[NINA88]

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,


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.




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.

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.

 

[AAAContributor]

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.

 

[relax carry on]

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.

 

[NINA88]

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.

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.

 

[NINA88]

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

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. “

 

[Brendan Burgess]

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

 

[RedOnion]

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.

 

[jpd]

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