Key Post The taxation of dividends from German companies

Discussion in 'Investments' started by Brendan Burgess, 13 Jan 2017.

  1. Brendan Burgess

    Brendan Burgess Founder

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    36,813
    Last edited: 5 Nov 2018
    (Thanks to Gordon Gekko for correcting an earlier version of this.)

    When you get a dividend from a German company through your Irish stockbroker, you should get a dividend certificate as follows:

    Gross dividend: €100
    German tax deducted: €26.375
    Net German dividend: €73.625
    Encashment tax :€14.725 [ 20% of net German Dividend] (On some occasions, the broker did not deduct this tax.)
    Net dividend: €58.90



    You paid €26.375 in German withholding tax.
    You are entitled to claim a credit for €15 in your Irish tax return.(15% of the dividend.)
    You must claim the balance of €11.375 from the German tax authorities

    upload_2017-1-13_10-30-21.png

    On your Irish tax return
    There is a box which is very misleading which says "amount of foreign tax deducted". You don't actually put in €26.29 . You put in only €15.

    In a separate box, you put in the encashment tax of €14.74

    To claim the German tax

    Download the first form in this list from the German Revenue's website. It looks daunting, but it's not really.

    There are three copies of the form within the PDF - for the German Revenue, for you, for the Irish Revenue. But once you fill in one, the others are filled in automatically.

    I put in two dividends on one form, and it did not seem to total them properly. It just took the second dividend as the sub-total. So I stuck in a third figure equal to the sub-total and so the form is correct. (If you have more than 5 dividends, you also use the second form Attachment E-01)

    Sign the form in the appropriate places.

    Send it to the Income Tax section of your own local Revenue District. ( There is no special office.)
    They will certify it and send it back to you.
    Send it to the German address on the form.

    Notes

    The copy certified correct by the authority should be forwarded by the claimant to the Bundesamt für Finanzen by the end of the fourth calendar year following that in which the dividends and/or interest have been received.

    So for Dividends received in 2013, the claim must be submitted by the end of 2017.

    Fill in your bank details as the money is transferred.
    Make sure to sign it.
    Keep copies of all the documentation - the dividend certs and the Revenue's certification of the claim in case the whole lot goes missing in the Irish Revenue or the German Revenue. Of cou

     

    Attached Files:

    Last edited: 5 Nov 2018
  2. Brendan Burgess

    Brendan Burgess Founder

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    I submitted a claim a few weeks after the 4 year deadline and they refused me a refund.

    I submitted a claim over a year ago well within the time limit and they are still processing it.

    Brendan
     
  3. Bluebeard

    Bluebeard Registered User

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    5
    Since I do not hold German shares in certificated form, and I do not see how I can produce the documents they specify for custodial accounts, this route does not seem promising. Exchanges with Taxback.ie about this topic reached the same conclusion. I do not have proof in the form they require that I am the beneficial owner of the dividends in question. In effect, Germany (and other countries) make me pay extra tax as if Ireland did not have a tax treaty, and in effect this extra tax is paid out of my after-tax income.

    This a discriminatory obstacle to capital movement in the EU.

    The ROS income tax software does not appear to deal properly with foreign tax on dividends either.
     
  4. jpd

    jpd Frequent Poster

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    I have filed returns with foreign dividends with foreign tax paid for many years now and I find that ROS works perfectly. The calculations involved in working out the amounts chargeable to tax and the credit for the foreign tax paid is incredibly complex and not for the faint-hearted. But I am able to duplicate the ROS calculations for the income tax on a spreadsheet and it is correct. This year I have a USC charge and that seems even more complicated - I haven't sat down to check their calculation, but I'm sure it is correct
     
  5. Brendan Burgess

    Brendan Burgess Founder

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    I am not sure that ROS is the problem, it's the Form 11 wording which caused me a problem until Gordon pointed it out.

    Income from all other foreign non-deposit interest,royalties, annuities, dividends etc. on which foreign tax deducted :

    Amount of foreign tax deducted
    :

    I put in the amount of foreign tax deducted, as asked, and then later contacted Revenue to correct it.

    Brendan
     
  6. joe sod

    joe sod Frequent Poster

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    601
    Thats very true, Id say a handful of accountants in ireland would be able to do the calculations manually themselves.
     
    RETIRED2017 likes this.
  7. Bluebeard

    Bluebeard Registered User

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    5
    Slight thread drift:

    I have too have been reproducing the ROS figure for my foreign tax credit on a spreadsheet. This is an iterative calculation, regrossing the net foreign taxed dividends at the lower of the Irish "effective rate" and the aggregate foreign tax rate. It is iterative because the "effective rate" depends inter alia on the regrossed foreign income, hence the circularity. The effect is to give a deduction for the non-credited part of the aggregate foreign tax.

    The credit for foreign tax allowed in one's USC calculation I can also reproduce. This gives a credit for the proportion that gross foreign taxed dividends represent of total income liable to USC (including - different from income tax - the gross amount of those dividends), multiplied by one's USC liability on that total income. The effect is to give a USC credit at the taxpayer's average USC rate across all income liable to USC. One can only speculate as to the logic.

    The foreign taxed dividends that I'm referring to here do not include jurisdictions such as USA etc that are reported separately on Form 11.

    I said that the ROS calculations do not seem to deal "properly" with the foreign tax credit - I meant that the complexity of treaty-by-treaty credits described in Schedule 24 TCA seems to be simplified by ROS, by aggregating all foreign-taxed dividends (other than USA etc) into one calculation. Whether that is to the advantage or disadvantage of a particular taxpayer will depend on the numbers.
     
  8. mattmacg

    mattmacg Frequent Poster

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    27
    I have some shares in Siemens. I have applied for a tax refund for dividend income in 2017. The German tax authorities have confirmed receipt of my application but I have not received any refund yet.

    The link that I used here has changed
    Before it gave a 3 page form as per Brendan post (the German shares you have, the amount of dividends received, and a page for the Irish revenue to stamp).
    Now the page that the link brings up is for refunds for residents of Bolivia, Mongolia, China etc.

    I have contacted the German tax authorities to ask how a resident in a European country claims back withholding tax from the German tax revenue under the double tax EU agreement and they have sent me to this page - http://www.bzst.de/EN/Home/home_node.html

    I can’t find the form anywhere. Does anyone know where I might get the original form?
     
  9. Brendan Burgess

    Brendan Burgess Founder

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    36,813
    Hi Matt

    I am waiting over 18 months for a refund. They have acknowledged receipt of the claim and have told me that there is a backlog.

    Brendan