Foreign Dividends in ISA

[bruncher]

I've had a 27% tax applied to a dividend from a Danish Company. There's a treaty between Denmark and UK, but does this mean I could claim the tax back as a non-resident. I have avoided double taxation only because the UK waives tax on dividends within ISA's.

I will see if I can ask the Danish Tax Office tomorrow, but if anyone has already trodden this path, I would be grateful to hear about it.

[XFool]

...Sorry, I don't know the answer to your question. Hopefully someone else may.

Just two things: This is fine for US dividends, at least their witholding tax is reduced from 30% to 15% if you can sign a US, IRS W8-BEN form. In or out of an ISA is of no relevance to the IRS.

This matter came up a long time ago in respect of Spanish dividend witholding tax, on Santander shares. The answer was, yes, you should be able to get them to reduce it but, good luck with that! i.e. It was more trouble than it was worth - unless, I believe, your Santander shares were held in Santander's own nominee account.

It is supposed to be different in pension accounts, like a SIPP, with no witholding taxes charged. But again, that's the theory...

[BullDog]

Ask the platform provider? As far as I am aware, no foreign tax authority recognises UK ISAs as a tax shelter.

[bruncher]

It would be the same regardless of whether the shares are in an ISA or other trading account.

For anyone interested, the Danish Tax authorities provides a form which needs to be completed by the person claiming refund of withholding tax, and there's a portion of the form which HMRC has to complete - confirming that the claimant is a UK tax payer.

HMRC took nine months to do their bit (and they missed out a portion). I have submitted this, however, with other documentary evidence - i.e. that I was a shareholder and that I received the dividend.

We'll see whether the Danes accept a partially-completed form from HMRC, or whether they send it back, and whether they need nine months to complete a transaction.

[bruncher]

...Sorry, I don't know the answer to your question. Hopefully someone else may.

Just two things: This is fine for US dividends, at least their witholding tax is reduced from 30% to 15% if you can sign a US, IRS W8-BEN form. In or out of an ISA is of no relevance to the IRS.

This matter came up a long time ago in respect of Spanish dividend witholding tax, on Santander shares. The answer was, yes, you should be able to get them to reduce it but, good luck with that! i.e. It was more trouble than it was worth - unless, I believe, your Santander shares were held in Santander's own nominee account.

It is supposed to be different in pension accounts, like a SIPP, with no witholding taxes charged. But again, that's the theory...

More trouble than it's worth is probably right. I received a letter from the Danish Tax Authority this week telling me that it will probably take another 18 months for them to deal with this! There are new 'processing procedures' in place to combat fraud, and these have slowed things down - so they say. But interest will be paid on any refund owed.

[scrumpyjack]

I don't know why we don't have a withholding tax on dividends. Almost every other country has it, and it might help fill RR's black hole a little!

[Alaric]

I don't know why we don't have a withholding tax on dividends.

We do here and there, the tax on REITs for example.

The technical reason is that dividends are paid out of profits that have already been subject to Corporation Tax.
The other complication is that investors not subject to tax would have to reclaim it. That was in effect what Gordon Brown abolished as in the "tax raid on pension funds"

[Lootman]

I don't know why we don't have a withholding tax on dividends. Almost every other country has it, and it might help fill RR's black hole a little!

Also foreign investors do not have to pay any UK CGT on gains on UK securities. So other than stamp duty, investing in the UK is free of UK tax for foreigners.

Given the relatively dismal performance of UK securities, perhaps we have to do this to get anyone to invest here?

[stevensfo]

I don't know why we don't have a withholding tax on dividends. Almost every other country has it, and it might help fill RR's black hole a little!

Also foreign investors do not have to pay any UK CGT on gains on UK securities. So other than stamp duty, investing in the UK is free of UK tax for foreigners.

Given the relatively dismal performance of UK securities, perhaps we have to do this to get anyone to invest here?

But they still have to pay CGT in their own country.

Which is usually more than UK tax.

Steve

[DelianLeague]

I've had a 27% tax applied to a dividend from a Danish Company. There's a treaty between Denmark and UK, but does this mean I could claim the tax back as a non-resident. I have avoided double taxation only because the UK waives tax on dividends within ISA's.

I will see if I can ask the Danish Tax Office tomorrow, but if anyone has already trodden this path, I would be grateful to hear about it.

I had the same problem with dividend payments from a Spanish company. I pay 19% Spanish tax on the dividend and I am entitled to recover 9% of the tax back from the Spanish authorities. (I can almost hear everyone saying "Good luck with that")

I would have to Fill in the relevant Spanish tax form.
Get the necessary paperwork and UK residence certificate from HMRC.
Evidence that the tax was withheld. (Not a problem).
Submit all necessary documents along with my bank details in person at the office in Madrid - Or pay someone to do it for me.

I came to the conclusion that (in Europe) they purposely make it difficult because the majority of people don't bother claiming the refund, so the authorities get a bigger chunk of tax. Cynical of me, I know. They could reduce the rate automatically for non residents by having a system like the USA but for some reason they don't.

Regards, D.L

[modellingman]

I've had a 27% tax applied to a dividend from a Danish Company. There's a treaty between Denmark and UK, but does this mean I could claim the tax back as a non-resident. I have avoided double taxation only because the UK waives tax on dividends within ISA's.

I will see if I can ask the Danish Tax Office tomorrow, but if anyone has already trodden this path, I would be grateful to hear about it.

I had the same problem with dividend payments from a Spanish company. I pay 19% Spanish tax on the dividend and I am entitled to recover 9% of the tax back from the Spanish authorities. (I can almost hear everyone saying "Good luck with that")

I would have to Fill in the relevant Spanish tax form.
Get the necessary paperwork and UK residence certificate from HMRC.
Evidence that the tax was withheld. (Not a problem).
Submit all necessary documents along with my bank details in person at the office in Madrid - Or pay someone to do it for me.

I came to the conclusion that (in Europe) they purposely make it difficult because the majority of people don't bother claiming the refund, so the authorities get a bigger chunk of tax. Cynical of me, I know. They could reduce the rate automatically for non residents by having a system like the USA but for some reason they don't.

Regards, D.L

The UK-Spain tax treaty (which I'm familar with) allows both the UK and Spain to tax dividends if the taxpayer and company are resident in different countries. However, the rate is limited to 10% in the country in which the company is resident. This explains DelianLeague's 9% refund entitlement since Spanish tax is levied at 19% on unearned income.

Its not quite clear (to me) where bruncher is resident/non-resident. If he/she is UK resident and the UK-Denmark treaty is the same as that for UK-Spain (I haven't checked) then the Danish tax would be limited to 10%. If he/she is Danish resident then Danish rules would apply.

modellingman