Goodbodys dividend tax on Spanish Shares

[I'm Nobody]

Goodbodys are taking 40% dividend tax on one of my Spanish shares.
While Degiro are taking 19%, which I think is the correct amount,
does anyone know why this discrepancy is happening?
I have asked Goodbodys the last time this happen.
This was their reply.
The Spanish tax is deducted from the gross dividend and then the Irish Encashment tax is taken from the net amount after that which results in the final figure you see in your account. We take both of these from the gross dividend, but you can use the CTV to do your tax returns if there is any to be reclaimed from revenue.
They don't do this with Irish shares.

 

[AAAContributor]

does anyone know why this discrepancy is happening?

It's happening because Goodbody Stockbrokers is an Irish-based financial firm and Degiro is not.

As such, Goodbody Stockbrokers (as a 'chargeable person') has to adhere to Irish tax legislation in relation to the application of 'Encashment Tax'.
Encashment Tax is a withholding tax deducted from dividends of a non-resident body (the Spanish company in this instance). The chargeable person responsible for the payment of income (Goodbody in this instance), must deduct the tax.

Encashment Tax is applied to the receipt of foreign dividends by Irish resident investors. Non-resident clients of Goodbody Stockbrokers would not be subject to Encashment Tax (once the proper documentation is in place).

Think of Encashment Tax as a pre-payment of the income tax that would (most likely) have to be paid. If too much tax has been withheld, a tax reclaim can be applied for.

If you are a higher-rate taxpayer you have covered off most of your income tax liability on the shares held at Goodbody, through a credit of 15% you will get in your Irish Tax Return for Spanish withholding tax (15%, not the 19% deducted - the 4% difference can be reclaimed from the Spanish tax authorities) and the 20.25% Encashment Tax [ ((1-0.19) x 25%), i.e. 25% Encashment Tax applied to the net dividend]. PRSI (if not in receipt of the COAP) and USC is also due in addition to the income tax.

With the Spanish shares you hold at Degiro, you will be declaring the gross dividend in your tax return, receiving a tax credit of 15% for Spanish withholding tax, with a much larger balance to pay to discharge the income tax liability (as no Encashment Tax was required to be paid).

They don't do this with Irish shares.

Right. The only withholding tax applied to an Irish-resident individual receiving dividends on Irish shares should be just (Irish) Dividend Withholding Tax of 25%.

 

[I'm Nobody]

Thanks AAA for the information.
I think from now on I'll only buy Irish shares with Goodbodys and foreign shares with Degiro.