Why US Citizens Pay Taxes Manually
Refund of foreign withholding tax - important information for investors
Spain charges 19% withholding tax, only 15% are credited. The difference can be requested from the Spanish Tax Office using a form. However, a lot of patience is required here, as the reimbursement can sometimes take longer.
In Ireland, the regular withholding tax on dividends is 20%. For EU citizens or countries with which Ireland has a double taxation agreement, the withholding tax is completely waived. The prerequisite is that the place of residence has been communicated. Unfortunately, most custodian banks do not offer this service, in which case 20% will be charged. These cases have been increasing recently. It appears that now mostly withholding tax is charged because residency outside of Ireland is not apparent to the paying agent as there is no name disclosure of the holdings. Therefore, before you plan to invest in Ireland, you should check that your custodian provides such name and residence disclosure.
Italy levies a withholding tax of 26%. The difference to the chargeable 15% must be submitted to the Italian authorities for reimbursement. This can take a long time. The application must be submitted within four years, until it is reimbursed, which can also take years.
Withholding tax shouldn't be a problem on capital gains in France. The state charges 12.8%, 12.8% are also creditable. However, most banks collect 30% withholding tax on dividends, for security reasons, since it is not necessary to prove at the beginning that they are German private investors. In these cases, an expensive and time-consuming reimbursement process must be initiated through the bank
Switzerland levies very high withholding taxes of 35%, only 15% are creditable. The Swiss authorities will reimburse the difference on request, provided that supporting documents such as bank statements and certificates of residence etc. are presented. It may take a few weeks for a refund to be issued.
Refunding excessively paid taxes for dividends in Austria is fairly straightforward. There are only deadlines to be observed and the forms for reimbursement must be submitted including all necessary receipts.
Denmark levies high withholding tax rates (27%), of which 15% are directly deductible. The difference can be reimbursed on request. However, the reimbursements are often refused on suspicion of “cum-ex deals”. Then a request for notification must be made. Refunding withholding tax is therefore a time-consuming and laborious process for investments in Denmark.
Sweden - like most Scandinavian countries - levies very high withholding taxes (30%). The difference to the chargeable 15% can be reclaimed using the form.
Processing the withholding tax refund for investments in Norway is a bit complicated. Norway levies 25% withholding tax, of which the custodian bank does not credit. Investors can choose between filing for a refund in Norway. However, there is then no full refund. The second variant can therefore be cheaper: Only 10% reimbursement is requested in Norway, in Germany 15% is then offset against the German tax via the tax assessment.
Finland levies 30% withholding tax on dividends from private investors. 15% are credited according to the double taxation agreement. The difference can be requested using a reimbursement application.
Australia normally does not levy withholding tax if the dividends are paid out of profits that are fully taxed by the Australian company (franked dividends) or if the dividends are distributed on conduit foreign income. All other dividends are taxed at 30%, with withholding tax reduced by 15% due to the double taxation agreement. As a rule, investors do not have to take action here; the 15% is automatically credited.
Canada collects a 25% withholding tax on dividends. A refund of the difference is possible via Form (NR7), however, this is time-consuming, usually only possible through the custodian bank and associated with high costs.
The US levies 30% withholding tax on dividends, but German investors can reduce the tax rate to 15%. For this purpose, legitimation obligations must be fulfilled before the dividend is paid out, after which the reduction on the maximum rate of 15% that can be credited according to the double taxation agreement takes place automatically. This only applies if the income is proven to flow to a foreigner; a custodian bank that is registered as a “Qualified Intermediary” is a necessary requirement. This means that with good planning of the investment and with the help of a suitable custodian bank, capital gains in the USA can be realized with the creditable 15% withholding tax.
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