Dominic Coyleanswers your questions
Dividend tax
I have a query on how I should treat dividends received from a Swiss public company in my 2006 tax returns. I am a PAYE worker but I am required to file a Form 11 self-assessment return.
The dividend is subject to 35 per cent withholding tax deducted by the Swiss authorities and a further 20 per cent is deducted from the net dividend by my Irish broker. The following example will help illustrate the deductions before I receive the dividend.
Gross dividend €100
Swiss WHT @35% -€35
Net dividend received by Irish broker€65
Irish WHT @20% -€13
Net dividend received €52
My query is: a) is this dividend subject to any additional Irish tax? b) do I get a credit for the Swiss and/or Irish WHT already deducted? c) can I reclaim the Swiss withholding tax?
Mr S.P., Dublin
In the simplest terms, dividends are income and, as such, are taxable at your highest rate. Thus if you are a 41 per cent taxpayer, you are liable to 41 per cent on dividend income - whether it derives from Switzerland or elsewhere.
You are right that the Swiss impose a 35 per cent withholding tax on dividend income. However, under the terms of the double taxation agreement signed by Ireland and Switzerland back in 1966, withholding tax on dividends paid by Swiss firms to Irish private residents cannot exceed 15 per cent. Where it does, as in your case, you are entitled to a refund of 20 per cent of the dividend but you will need to apply to the Swiss federal tax administration.
Its website www.estv.admin.ch/e/index.php says the relevant claim form for people in your position is Form 91. You could also call them on 0041 31 3227106. They do speak English.
Of course, given that your Swiss tax liability on the notional €100 dividend is now €15, the remaining €85 now has to be taxed in Ireland - at 20 per cent. Twenty per cent of €85 is €17, so of your notional €100 Swiss dividend cheque, you now have €68.
On that basis, assuming you are a top rate taxpayer, you are liable to income tax of a further €9 on this dividend as you will be given credit for both the Irish and Swiss tax paid.
You should check through your broker whether you can persuade the Swiss, in future, to deduct only 15 per cent of your dividend to save you going through the refund process.
Property fund
I recently invested a lump sum in a property fund, proceeds of a recent house sale. Do I need to declare this investment to the tax authorities ?
Mr J.M., Wicklow
You have invested this money recently, so the property fund will be one of the newer "gross roll-up" model. This effectively means that your money will continue to grow - assuming the fund makes gains - until the point at which you draw it down.
At that stage, the fund manager will deduct a sum equal to the lower rate of income tax plus three percentage points on the investment gain. On the basis of the existing basic income tax rate of 20 per cent, that would mean an exit tax on your investment of 23 per cent.
You don't need to declare this investment to the tax authorities as your fund manager acts as an agent of the Revenue in this case.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by e-mail to dcoyle@irish-times.ie.
This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.
