Most Tax Efficient Way To Allocate Share Investments Across Spouses In Different Tax Brackets

Derek Maloney

Registered User
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Hi all,

I am interested in planning how to allocate a portfolio of shares across two spouses. One of them is in the maximum tax bracket whereas the other has no taxable income (eg. homemaker).

Does it make sense to set up the no-income spouse on a platform like Degiro and have them purchase dividend-yielding shares in their own name? The aim would be to earn around €1k annually on an investment of around €20k. That way the dividend income will be used against their income tax (from this link, as they would 'earn €16,500 or less they would not pay any income tax').

I am confused by the concept of dividend withholding tax of 20% - I presume that the no-income spouse would not need to pay it? Though, probably they need to pay it and reclaim it? I'm not sure if they can be exempted from paying it at source (to avoid the need to reclaim)? In fact, I'm not even sure if no-income individuals would be exempt from dividend tax - given that they are not listed on the "Exemptions for residents" in this revenue article.

UCITS ETFs are taxed at 41% so they would be a bad investment for the no-income spouse. And I presume it would be impossible for them to reclaim US-based withholding tax on non-UCITS US-based ETFs? So that makes non-UCITS US-based ETFs a bad investment idea too. That seems to leave individual shares as the best option. Would it then make sense to pursue a strategy of purchasing Irish and European dividend-yielding shares? And biotech stocks like AbbVie? Note: I have not done much dividend stock research so far; as I wanted to stress test the tax efficiency of the above idea before researching.

Any advice greatly appreciated,
Derek.
 
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