Recovering dividend tax
In many cases, too much dividend tax is withheld from your dividend payment in other countries. You can often reclaim this excess tax on the basis of tax treaties between your country of residence and the country where the tax was levied on the dividend at source. This can be as much as 20% of excess dividend tax in some cases.
If you receive dividend on foreign shares, in many cases the country in question is permitted to withhold dividend tax. However, tax treaties often set a limit on the amount of tax that may be levied. The maximum levy is frequently 15%. Many countries apply a system of levying tax on dividends at source, also called ‘dividend withholding tax’. This means that the financial institution which holds the shares for you automatically withholds a certain percentage of the dividend distribution for the tax authorities. Often the percentage of the tax levied at source is higher than the rate set in the treaty. That means that you are paying too much tax. You can reclaim the excess tax paid.
Setting off against income tax
In addition to reclaiming an overpayment of foreign income tax, you can often set off the dividend tax you do need to pay against income tax in the country in which you are resident. As well as submitting a ‘tax reclaim’ to recover the dividend tax you have paid abroad, we will be happy to help you check whether you have entered the dividend tax correctly on your income tax return. This will prevent you from paying a double tax levy on your income. We can provide this check for a small fee when we carry out the procedure to reclaim excess tax withheld at source.
Recovering foreign dividend tax
You can reclaim the amount withheld from the dividend that is in excess of the rate in the treaty. The procedures for reclaiming excess foreign tax paid at source are often complicated. That leads to many investors missing the opportunity to reclaim their money – apart from the fact that not everyone is even aware that it can be reclaimed. To make your life easier, we offer a service for reclaiming foreign dividend tax. We have drawn up a step-by-step plan in which we explain exactly how foreign dividend tax can be recovered. This will enable you to maximise your returns from your investments.
The procedure for recovering dividend tax and the amount of dividend tax that can be reclaimed differs from country to country. Some issues that are relevant here are: ‘What is the tax regime in the country where you have investments?’ and ‘What are the requirements for recovering excess tax paid at source?’ Whether an application to reclaim excess tax paid is worthwhile and likely to be successful mainly depends on the percentage withheld by a particular country. Switzerland is a case in point, since a rate of 35% dividend tax is generally withheld there. Apart from reclaiming dividend tax in Switzerland, we regularly deal with other countries such as Belgium, France, Germany and the United States too. There are also many other countries which levy tax on dividends at source. A case by case assessment will have to be made to see whether reclaiming dividend tax is worthwhile. This is highly likely to be the case in substantial portfolios.