ISA and Withholding tax

Leakingtile79

Hello everyone,

I have an internal debate regarding ISAs, and I will expose the situation below:

I plan to buy some shares from a French based company which pays dividend. The french dividend comes with a retention in origin of 25%, and as it's an ISA, no tax is liable in the UK. Now, because France and the UK have signed a withholding tax treaty, in theory, you should be able to reclaim the tax held in excess in origen, as I am not a french tax resident (the treaty tax rate in origin for dividends is a 12.8%). So, the difference between 25% and 12.8% it's recoverable in theory as the treaty stipulates. In order to claim that money to the french government, you need to provide a tax residence certificate issued by HRMC. The question is, he's anyone got a HRMC residence certificate and effectively got it for an ISA? Many thanks in advance!

Woodstok2000

I am not an expert, but i did get some advice on this a few years ago. Going by memory so this may be inaccurate, but as i remember it , as you say France's WHT rate for non-resident investors is 25%. This overrides the ISA’s usual tax-free status because the tax is applied at source (i.e., by France before the dividend reaches your account).
The 25% is set by France (not the UK) and is paid to the French tax authority.
The UK’s tax-free ISA wrapper only protects you from UK taxes (like dividend or capital gains tax). It does not override foreign WHT unless the treaty explicitly exempts it.

In this case, the treaty explicitly allows France to tax dividends, but the maximum total tax rate can't exceed 15%, so you should be able to claim back 10% of the tax once you get your residence certificate. (Ref. Article 11, 1a and 1b below):

https://www.gov.uk/government/publications/france-tax-treaties/2008-uk-and-france-double-taxation-convention-in-force#article-11-dividends

wmb194

Leakingtile79 said:

Hello everyone,

I have an internal debate regarding ISAs, and I will expose the situation below:

I plan to buy some shares from a French based company which pays dividend. The french dividend comes with a retention in origin of 25%, and as it's an ISA, no tax is liable in the UK. Now, because France and the UK have signed a withholding tax treaty, in theory, you should be able to reclaim the tax held in excess in origen, as I am not a french tax resident (the treaty tax rate in origin for dividends is a 12.8%). So, the difference between 25% and 12.8% it's recoverable in theory as the treaty stipulates. In order to claim that money to the french government, you need to provide a tax residence certificate issued by HRMC. The question is, he's anyone got a HRMC residence certificate and effectively got it for an ISA? Many thanks in advance!

A tax residence certificate won't make any reference to an Isa so don't worry about that and France's tax authority won't care that you received the dividend in an Isa. Not from France, but I've reclaimed overpaid foreign withholding tax on dividends received in an Isa.

Leakingtile79

wmb194 said:

Leakingtile79 said:

Hello everyone,

I have an internal debate regarding ISAs, and I will expose the situation below:

I plan to buy some shares from a French based company which pays dividend. The french dividend comes with a retention in origin of 25%, and as it's an ISA, no tax is liable in the UK. Now, because France and the UK have signed a withholding tax treaty, in theory, you should be able to reclaim the tax held in excess in origen, as I am not a french tax resident (the treaty tax rate in origin for dividends is a 12.8%). So, the difference between 25% and 12.8% it's recoverable in theory as the treaty stipulates. In order to claim that money to the french government, you need to provide a tax residence certificate issued by HRMC. The question is, he's anyone got a HRMC residence certificate and effectively got it for an ISA? Many thanks in advance!

A tax residence certificate won't make any reference to an Isa so don't worry about that and France's tax authority won't care that you received the dividend in an Isa. Not from France, but I've reclaimed overpaid foreign withholding tax on dividends received in an Isa.

Thanks, then I can recover the excess tax from french authorities. Regarding the tax ceritifcate, I filled the form a few days ago, i got asked a few questions, but havent heard anything from HRMC yet... as I would like to see this tax certificate, as I havent seen it yet. Then, obviously, need to fill the french forms aswell...