Dividend Taxation

[Toxico]

I have a rather complex issue about dividend taxation here. And I hope someone here can give me the right anwer. Let's say I have 1000 stock of a US company X. They decide to pay out a dividend of 1$ a share.

I would get a gross dividend of 1000$. The question now is, how many taxes I need to pay (or will be deducted) in wich county. And what would I eventually have left of those 1000$ the company turned out to it's shareholder.

Knowing that:

1. It is a US stock
2. I am Belgium citizen
3. My broker is Interactive Brokers (United Kingdom)

I have been looking and looking for answers but I cannot find the right one since this seems a very complex issue. Because 3 countries are involved here. Who can please help?

My toughts so far are:

Dividend 1000$
- 15% US tax wich will be deducted from the scource (arrangement between BE and USA)
- then 25% dividend tax in Belgium (needs to be filled in on Tax report)

OR

Dividend 1000$
- 0% in the UK because they have no withhold tax
- then 25% dividend tax in Belgium (needs to be filled in on Tax report)

Anyone who knows the correct answer on this, can call himself a Tax professional, thats for sure! Thanks in advande;

 

[dreamland]

confusing

 

[grantx]

Toxico,

Currently under investigation for posing as a tax professional and giving bad advice. However, these are my thoughts. My assumptions are that the US, UK and Belgium have similar tax regimes.

IB's location is irrelevant.

Dividend tax in Belgium applies only to Belgian (or Belgian based) companies via corporation tax.

As a Belgian resident, dividend income on foreign investments, eg US, will probably be subject to either your (Belgian) income tax rate on earnings; or if you have one, the UK equivalent of Capital Gains tax , ie returns on unearned income. The tax deducted at source by the US may be offset, partly or in full, via a credit on your tax allowance.

I am not a tax professional, Toxic, so my opinion shouldn't be regarded as absolute. However, the points I've mentioned are the points you should raise when someone is dealing with your tax.

Grant.

 

[Toxico]

Well it is allready nice to know, that the location of the broker does not seem to matter. That does make it a lot more easy. Since Belgium has no capital gain tax (only on very speculative trades, wich mine are not), there should only be paid a dividend tax of 25%. So I think I should just pay 15% to the US. And 25% to Belgium. I think I better contact the goverment Tax agentcy to answer if I need to pay both or none, just to be sure.

 

[grantx]

Tox,

If these are not speculative trades then they must be commercial. Therefore, I presume the cost can be offset against your tax. Gains or losses should not enter the equation because if these are hedges, one side offsets the other for a net zero gain/loss. However, the treatment of any possible gain due to hedging mis-match is beyond my realm of speculation, I'm afraid.

In what way are your investments in stocks not speculative?

Grant.

 

[Toxico]

Speculation by law here is defined by holding stocks for short term, in the hope of making relatively great profit (or loss). Also options are being seen a speculative (and in theory should be filled in in the tax form here).

So when someone buy's a stock, and keeps it for let's say 5 years, it is not seen as speculative. But if someone has a stock for 15 days and sells it with a 15% profit (or loss) it is being seen as speculative (in case of a gain, income tax should be paid on the profit).

But off course all depends on volumes and quantities to. The goverment won't bother if you did not fill in the let's say 40 euro a person would make on speculative bet's.

 

[grantx]

Tox,

Interesting. Thanks for the clarification.

Grant.