Itās unknown who is the legal owner of our shares , T212 or IB (or maybe some other ltd as a separate entity in case T212 or IB go bankrupt our shares are not part of their assets).
Usually companies donāt have to pay tax on dividends because if t212 is the legal owner of shares, received dividends are their income (earning/profit) and tax on dividend is paid when t212 distribute these earnings to shareholders. We should see what the law says in case of brokers and financial institutions.
@Richard.W if I understood correctly, you donāt pay withholding tax in the USA, you get a gross dividend?
@Vedran Yes, withholding, same as in Croatia, tax is deducted from divided before payout to shareholders. But this part below confused me, in the UK up to approx. Ā£ 60,000 you pay very little dividend tax.
But France and Germany have similar forms to the W-8BEN form right? So wouldnāt it be possible for Trading 212 to also allow us to automatically fill those in?
You are the owner, but you hold them through a nominee, in this case IB. This is a completely standard and typical arrangement for retail stocks and shares platforms. Nothing to worry about. The tax is being correctly taken.
Iām not worried about that, itās a common arrangement, as you wrote.
Could you tell me more about dividend tax, for example, unemployed uk citizen receive Ā£20,000 in dividends from UK company? Ā£20,000 - Ā£12500 Personal allowance = Ā£7500. So he will have to pay 7.5% tax (from Ā£2000 to Ā£37500) on Ā£5500 or Ā£412,50. How much dividend tax he will have to pay in case he receives Ā£20,000 in dividends to his t212 account from USA companies?
That is correct. And if you receive Ā£20,000 in US company dividends, 15% (Ā£3000) will be deducted as US withholding tax and then you will receive to your account the net amount of Ā£17,000. No further UK tax is due because the Ā£3000 already paid exceeds the UK of Ā£412,50 that would have been due if the payers had been UK companies. The person you describe is better off earning interest from UK companies than from US ones, other things being equal.
Thnx. I assume that he is not entitled to tax refund (Ā£2587,50), just in case he also receive dividends from uk companies, for example he receive another Ā£20000 from uk companies, he can use Ā£2587,50 that he already paid un the usa.
Thatās right. Basically you figure your tax with and without the US income, say X and Y, respectively, and then use the US withholding tax you have paid as a credit against Y-X. Remember that X>0 only if dividends exceed the dividend allowance of Ā£2000.
In fact because your shares are being held in a nominee account you list of countries that Slovenia have made agreement with about avoiding double taxation and the agreements too I can send you with a pleasure. are being charged less than it might be if you held them in your own name.
āGermany charges investors who hold stocks directly in their own names 30 per cent withholding tax and nominee accounts 26.375 per cent withholding tax.ā
That is not correct. I as Slovenian citisen am owner of stocks form some company and I am getting dividend from that company not from T212 or IB. (By the way what is IB?) Slovenia has the mutual agreement with France or Germany in the same way as with USA about avoiding double taxation and that si a law. So in the same way as T212 or some other broker can arrange 15% tax witholding on dividends from USA companies or Canadian and not 30% they can do it also with companies from France or Germany. You can not expect from shareholders that even do not know German or France language to study their taxatoin system and to reclaim refunding taxes on dividends.
If you need a list of countries that Slovenia have made agreement with about avoiding double taxation and the agreements too I can send you with a pleasure.
I think Richard pretty much explained why there is difference in making witholding tax reflect agreements with USA, due to W8-BEN. Countries like Germany/France donāt have same sort of system. Thus it is more complicated in making same happen with French/German companies.
Non is questioning lack of agreement because I would say all EU countries have mutual agreementsā¦
As I have said before, Germany and France has also double taxation treaty with other countries for sure as they have it with Slovenia and in that case withholding tax on dividends is 15% for non residences and not 28 or 30%. Also all taxes on stock gains are paid in the country of stock holder residancy not in the country of residency of broker company, in this case T212. Broker company in the case of Germany or French companies must arange dividend taxatoin in the same way as they arrange ti with companies from USA or Canada.
Unfortunately this is what the tax authorities expect shareholders to do. If there is fault it lies with governments, not Trading 212 or any other broker. I donāt think you will find any broker or platform who can arrange reduced rates of French or German tax to match the Slovenia treaty rates in the manner you desire. As I have commented even the most expensive of UK platforms, Hargreaves Lansdown, does not do this.
Those who cannot handle the tax reclaim themselves have can hire an accountant to do it for them, but for a small shareholder the tax savings are less than the cost of an accountant. This is one reason my preference is to use ETFs for investing in eurozone. I use VERX and VX5E. Perhaps this is one reason that US market is so popular. Another is the lack of significant transaction taxes.
I donāt see the problem. German tax people know what is their standard rate of withholding. Slovenia tax people will know what standard amount the Germans have deducted. Germans will let you reclaim some tax, Slovenians will allow you some tax credit, if you or an accountant complete the right paperwork. If you donāt do the paperwork {as I expect most small investors do not) they are content to let you pay more tax than you strictly need to. Unfair of course. But that is life.
That is correct, but I was talking about something else. For example, I live in Croatia and I receive dividends from UK companies. From what I read in another topic, withholding tax in the UK is 0%. Tax laws are too complicated for me, so I wrongly conclude that I donāt have to pay tax in Croatia, or I already paid it in UK.
Someone will say itās illegal and I will get a penalty. But that means that someone from HMRC sends data to the tax administration in Croatia, and that someone in the tax administration in Croatia compares how much tax I paid with how much tax I had to pay, and if I didnāt pay what I should have sends me a payment slip. In short lines, the tax administration in Croatia must know how much tax I was obliged to pay, regardless of my/ours calculations.
Tax authorities rely on taxpayers to be honest in their self-reporting of investment income. Most people are.
They also have ways of checking up and can conduct audits and impose fines. Trading 212 reports to the UK FCA on customer transactions. National tax authorities exchange information. Crotian tax authorities may select you for random audit and ask you to produce records for all transactions in your Trading 212 account. Tax authorities expect you to be fully acquainted with applicable tax requirements and do not show sympathy for ignorance.
Yes, they can, but in any case they need to know how much tax I had to pay in order to be able to determine whether I paid correctly i.e. whether the documents I submitted are correct, or I inadvertently made a mistake somewhere.
, T212 or IB (or maybe some other ltd as a separate entity in case T212 or IB go bankrupt our shares are not part of their assets).