Tax treatment of UK dividends

I recently opened an online share trading account. I have never purchased share directly previously.

I fully understand the tax treatment of dividends from Irish companies.

For UK companies, it would appear from reading online you don't get any tax credit for tax paid in the UK. I was quite surprised by this. It would seem that it doesn't make any sense for irish investor to buy UK dividend paying shares.

What is the treatment for other European countries. Do you get a tax deduction for tax paid in other countries? Does it vary for each country? Can anyone point me to good link which explains how it works.

I see USA and Canada have specific treatment on Form 11.

Hello,

While I am not the right person to try and answer your questions, I do agree that not being given any credit for tax withheld in the UK against dividend payments (which you subsequently incorporate into your Irish tax returns) is wrong. Should this not be dealt with under the Double Tax Agreement between Ireland and the UK and if not, why not ?

Because the UK credit is not really a credit at all. It's a notional thing. If the dividend is £100, you get £100. You're not actually losing out.

Gordon Gekko said:

Because the UK credit is not really a credit at all. It's a notional thing. If the dividend is £100, you get £100. You're not actually losing out.

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Hello,

Are you sure about that ? I seem to recall seeing a dividend notice a while back for a UK company I have shares in and was pretty sure there was an amount withheld (tempted to say it was 10%, but really working from memory here). I must dig it out and have another look.

I have never owned UK share (yet) but i have seen reference to 20% withheld and 10% withheld.

Gordon - would mind explaining further how you don't lose out?

Also, anyone know the treatment of say a german dividend?

As far as I know there are no UK withholding taxes so you should be getting the full dividend. I think it stems from the importance of financial services and city of london. Germany has 26% withholding taxes, France has 30% if i remember. If you want to get some of these back you have to go through a tedious process of filling out paperwork detailing the dividends withheld and then getting revenue to stamp it and forwarding onto french revenue. However even though taxes are high you get a credit from revenue for the taxes withheld. Maybe someone has better information than me .

Here's a brief explanation:

- The notional tax credit in the UK is just that...notional. It's UK Revenue (HMRC) giving credit for the tax that was paid by the actual underlying company. But no actual money or tax is withheld. If the dividend is £100, you as an Irish taxpayer get £100, so it is logical to disregard it. As an aside, the UK are reforming this system and changes were announced in a recent Budget / Finance Bill.

- For a UK REIT (property company), it's different. 20% withholding tax arises. You can't get round this, but an individual can get a refund of 5% from HMRC because the tax treaty caps the tax at 15%.

- For other jurisdictions, different withholding tax rates apply. But our tax treaties typically limit this to 15%. Take Switzerland as an example: If you get a dividend of CHF100 from Nestle, CHF35 will be withheld in Switzerland. You are supposed to claim a credit for CHF15 in your Irish tax return and go to the Swiss authorities to get your CHF20 back. Of course many people are confused by this or don't know how it works and erroneously claim credit for the full CHF35.

Thank you Gordon.

Can I check is my understanding below correct if I were to invest in UK REIT.

UK Reit announces dividend of £100. They pay me £80. I complete my Irish tax return and pay irish taxes (income tax, PRSI and USC) on £100 of income. I get tax credit of £15 for UK tax. I have to apply to UK HMRC to get the £5 back.

Spot on

Gordon Gekko said:

- For a UK REIT (property company), it's different. 20% withholding tax arises. You can't get round this, but an individual can get a refund of 5% from HMRC because the tax treaty caps the tax at 15%.

Click to expand...

Just wondering how do you treat UK reits on the irish form 11 tax return. There is a place for UK dividends which assumes that there was no tax deducted at source . However there is no place for UK reits and the tax deducted by UK revenue. I was thinking of just lumping this in the "other foreign income" section as you can then enter the tax deducted in "foreign tax deducted" section. At least that way you get a credit for the tax deducted.