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Foreign Shares – How do I claim tax on foreign dividends? | News

Sunday, August 27th, 2017 | Economy

Claudio from Zurich is a private investor. He is not a stock exchange professional and in his free time occasionally acts independently with shares, which he is recommended by friends. For example, he has ten Munich Re shares in his custodian account, which, with a dividend distribution of EUR 8.60 per share, yield an attractive dividend yield of 5 percent.
But when the dividend is paid out, the big annoyance comes: Instead of the hoped-for 86 euros, he gets only 63.30 euros. He feels betrayed by the remaining 22,70 euros. What Claudio does not know: In the case of dividends from foreign shares, the respective country of origin retains a withholding tax which is already deducted before the dividend payment.
The withholding tax varies from country to country and can amount to as much as 30 percent, for example in France or the USA. In the example of a German share mentioned above, the tax is 26.375 percent (see also table below). For investors like Claudio this is very annoying, especially since the dividend in Switzerland is already subject to the property tax.
Complete recovery possible, but (often) elaborate
But the money is not lost. "An estimated 80 percent of private investors do not know that the withholding tax can be reclaimed on the dividend payment," says Thomas Schwarze, CEO of Furado, a company specializing in the recovery of withholding tax Up to three years, as investors are more dependent on such sources of income in the ongoing low-interest rate.
Due to double taxation agreements, part of the already deducted withholding tax can be applied to the income tax in Switzerland. For most countries this amount is 15 percent of the dividend. For this, the form DA-1 (application for flat tax credits) must be filled in at the cantonal tax office.
The remaining balance is more complicated: this must be repaid in the country of origin of the respective share. The forms for reimbursement in individual countries are made available online by the Federal Tax Administration.
The process of reimbursement differs from country to country, even within the EU: "For dividends from Germany and France, the private investor must necessarily go to his custodian bank in order to get the withholding tax refunded," says Schwarze. Relatively easily and without consultation with the bank, the restitution is possible from Austria, Sweden and Finland. "Even in Italy it is basically simple, but the refund can take a very long time." Cash knows cases where the reimbursement from Italy lasted for up to three years.
Recovery abroad is not always worthwhile
Back to Case Claudio: When he examines the dividend document, he notes that 26.375 percent of his 86 Euro dividend – ie 22.70 Euro – was charged as withholding tax. By completing the form DA-1 and adding the dividend payment, he gets back 15% of the dividend – or 12.90 Euro – relatively easily in Switzerland.
In order to demand the remaining € 9.80 from Germany, he is in contact with his house bank. This tells him that the bank basically supports their customers in the event of a reimbursement, but in this case it does not make sense. From Germany, a tax card from the campers' office for Munich Re-titles should be requested, which alone is already connected with costs of 100 francs. In addition, there would be additional expenses for the bank. In conclusion, a loss business for Claudio. It therefore decides to waive the recovery in Germany.
Whether a reimbursement abroad is worthwhile, is ultimately to be individually weighed. In principle, it is useful if a high dividend amount is of the same title and the portfolio is not too fragmented. Either way it is advisable to inquire at the house bank for the possibility of a recovery service. "As a rule, banks do not offer this on their own," says Schwarze from his previous experiences.
In order to save money, Schwarz recommends not requesting repayment of the withholding tax annually, but only approximately every three years. Reimbursement is also possible retroactively, so that the source taxes can be requested at the same time for several years. But beware: The claim for repayment ceases in most countries after four to five years. An exception is France, where the recovery must take place within two years.
There are countries without withholding tax
If you want to avoid such problems and still want to invest in foreign dividend securities, you can simply purchase British and Australian stocks. In these two countries, there is no source tax on dividend income. The Netherlands is also uncomplicated: the accruing 15 per cent can be reclaimed fully in Switzerland.
In addition, there are active funds: "This is the task of the fund administration to reclaim the withholding tax," says Schwarze. The private investor does not have to do anything on his own initiative. In contrast to dividend-paying passive funds, so-called ETF: These are to be treated as shares. This means that the private investor must himself demand the withholding tax.
Dividend taxation of foreign shares for private individuals *
country
Withholding tax, in%
Reclaimable in Switzerland, in%
Recoverable abroad, in%
Australia
0
0
0
Germany
26.375
15
11,375
Finland
30
10
20
France
30
15
15
Great Britain
0
0
0
Italy
20
15
5
Japan
20
10
10
Netherlands
15
15
0
Austria
25
15
10
Sweden
30
15
15
Spain
21
15
6
USA
30
15
15
* Information applies to holdings of less than 10 percent.
Source: admin.ch

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