Withholding tax on foreign dividends

fonsde

I recently bought some shares on some French company to get back some dividends; only to notice that there was a 30% tax withheld.
Is there some form to claim a tax discount? like the W8-Ben that reduces the US tax from 30% to 15%
Also if that is the case, I feel like it's probably not wise to invest overseas for dividends. Or perhaps it's probably better to invest via an investment trust or ETF for foreign exposure. 
Note: I make less than 2,000 in dividends a year

Thrugelmir

That's the downside of investing directly in European shares generally on a nominee basis. 

Steve182

I cannot comment on European shares as I own none. However I always put US divi paying shares in a SIPP where they are free from withholding tax.

I own a fair few international equities in smaller companies listed on AIM. Curiously they are pretty much all domiciled in small states with no withholding tax, such as Bermuda, IOM, Jersey, Guernsey, Cyprus, Cayman Islands.

Now I always include checks on withholding tax as part of my due diligence before buying any share.

wmb194

There is/used to be a French tax authority form that you need to fill in to reclaim the excess over the UK/France dividend double taxation treaty rate (15%?). The problem you'll face is that it requires the broker to stamp the form to confirm that you received this dividend and it might be difficult if you’re using a discount broker. Holding foreign shares in a Sipp is usually the best way to reduce or have no tax to pay otherwise yes, use some other vehicle like an ETF or IT and they'll deal with it. Obviously you won't get the same direct exposure, though .

fonsde

Is there a similar tax on capital gains for foreign stocks?

wmb194

fonsde said:

Is there a similar tax on capital gains for foreign stocks?

No, nothing will be withheld for payment to e.g., France if that's what you mean. Capital gains for foreign shares are dealt with in the same way as those listed in London.

bd10

I experienced the same issue with French shares. As French non-res investor we should only have to pay 12.8% with no social charges. But this would need to get declared on the French side. So I bet none of the providers really bothers with that paperwork. I spoke with HL and they said it would be up to me to claim the difference from the French authorities. Yeah good luck with that. So I am holding my French shares directly in France instead.

(Of course this will be outside tax wrappers but that's a different consideration).

By the way, it's similar for German shares. Their local withholding tax is around 26% which would be difficult to be overcome unless one holds an account in Germany with the status as "fiscal foreigner". It can be done, bit of hassle though as it cannot be done online but only in person.

fonsde

thanks. Last question. If US shares are bough on ISA (e.g. freetrade) will I get 0% tax on dividends? 

underground99

fonsde said:

thanks. Last question. If US shares are bough on ISA (e.g. freetrade) will I get 0% tax on dividends? 

You won't pay UK tax on any dividends within an ISA. 
But you'll still pay 15% US tax which will be deducted from the dividend before you receive the net amount, and you won't be able to offset that from your UK tax on the same dividend, because you don't have any UK tax to pay on the dividend, so the US tax money is essentially 'lost'.

soulsaver

What, if any, is the effect on UK tax, if otherwise due on a retained tax foreign dividend payment (so greater than £2k outside a wrapper)? 

Chino

soulsaver said:

if otherwise due on a retained tax foreign dividend payment

They're words Jim, but not as we know them.