Dividend tax on foreign companies

Riviera

I'm curious to know how dividends are taxed. Specifically, foreign-based company shares.
e.g. a 21 yr old irish student has 20k worth of annual dividends coming to him. What rate of tax can he expect to pay?

Blackjack

Riviera wrote:

I'm curious to know how dividends are taxed. Specifically, foreign-based company shares.
e.g. a 21 yr old irish student has 20k worth of annual dividends coming to him. What rate of tax can he expect to pay?

I think you're taxed as if it was regular wages or salary.

PDelux

Dividends are taxed as income, so income tax. You would likely pay non-resident withholding tax over there and then pay the balance here. Search the revenue.ie website for dividends.

Reyman

PDelux wrote:

Dividends are taxed as income, so income tax. You would likely pay non-resident withholding tax over there and then pay the balance here. Search the revenue.ie website for dividends.

I'm not sure it's that simple. I suspect that you very often pay tax on your overseas dividends here as well as in the country you're earning the dividends.
This is just information I've picked up by chatting to accountants so I'm not definite on this.

PDelux

Yea, could depend on the country. I receive dividends from companies in the US so I pay 15% tax over there and the balance here.

Reyman

What I meant is that if you earn €100 dividends in France and you pay €20 tax there. You can then end up paying another €20 tax here.
i.e. they don't allow you credit for the 'hit' you're taking overseas.

I'd like to be proven wrong on this, so if someone has solid information I'd like to hear it !

dermot_sheehan

Reyman wrote:

What I meant is that if you earn €100 dividends in France and you pay €20 tax there. You can then end up paying another €20 tax here.
i.e. they don't allow you credit for the 'hit' you're taking overseas.

I'd like to be proven wrong on this, so if someone has solid information I'd like to hear it !

If Ireland has a tax treaty with the country in question then you can take a tax credit for the tax paid overseas.

section 826 of the Taxes Consolidation Act http://www.irishstatutebook.ie/ZZA39Y1997S826.html

Where the Government by order declare that arrangements specified in the order have been made with the government of any territory outside the State in relation to affording relief from double taxation in respect of—

( a ) income tax;

( b ) corporation tax in respect of income and chargeable gains;

( c ) any taxes of a similar character imposed by the laws of the State or by the laws of that territory;

and that it is expedient that those arrangements should have the force of law, then, subject to this section and sections 168 and 833 to 835, the arrangements shall, notwithstanding any enactment other than section 168, have the force of law.

Article 21(B) Tax Treaty with France http://www.irishstatutebook.ie/ZZSI162Y1970.html

Subject to the provisions of the law of Ireland regarding the allowance as a credit against Irish tax of tax payable in a territory outside Ireland, French tax payable directly on or by deduction in respect of income from sources within France shall be allowed as a credit against any Irish tax payable in respect of that income. Where such income is a dividend paid by a company which is a resident of France the credit shall take into account (independently of the withholding tax) the French tax payable by the company in respect of its profits

.

dermot_sheehan

Riviera wrote:

I'm curious to know how dividends are taxed. Specifically, foreign-based company shares.
e.g. a 21 yr old irish student has 20k worth of annual dividends coming to him. What rate of tax can he expect to pay?

If the student is irish resident, then irish tax will be paid (specifically it's caught by schedule D case III of the tax code).

section 71 Taxes Consolidation Act 1997 http://www.irishstatutebook.ie/ZZA39Y1997S71.html

A credit can be taken for the overseas withoulding tax paid provided there is a tax treaty. If the irish student is irish resident but domiciled overseas (i.e. permanent home is overseas) the student can be taxed on the remittance basis of taxation (i.e. only pay tax on funds brought into the state). The student is also liable for capital gains if the student is resident or ordinarily resident (which lasts for a couple of years after giving up residence) if any capital gain is realised when the shares are sold. This can be overriden by the provisions of any tax treaty.

section 826 Taxes Consolidation Act
http://www.irishstatutebook.ie/ZZA39Y1997S826.html