You need to divide your share dividends into the following;
- Dividends paid by Irish companies
- Dividends paid by UK companies
- Dividends paid by US companies
- Dividends paid by Canadian companies
- Other foreign dividends
Dividends paid by Irish companies
Many Irish companies pay dividends twice a year and will always deduct 20% tax at source from the gross dividend. If you are liable for tax at a higher rate you will pay tax on the gross dividend at the higher tax rate and be given a credit for the 20% tax already deducted.
PRSI and the USC are also due on the gross dividend and will be collected through the Self Assessment system if applicable.
Dividends paid by UK companies
You pay Irish tax on the net dividend received by you. No credit is allowed for any UK tax already deducted from the dividend payment. You must convert the net payment received to Euros and declare it on your Irish tax return form.
PRSI and the USC are also due on the dividend and will be collected through the Self Assessment system if applicable.
US, Canadian, & Other foreign dividends
The rules here are very complicated and the credit allowed by the Irish Revenue for foreign tax paid depends on whether or not we have a Double Taxation Treaty with the country from which the dividend is received. The basic rule is that the Irish Revenue will never grant a credit for foreign tax that exceeds the Irish tax liability on the foreign income and will never refund foreign tax to you.
There is a complex formula that must be applied to foreign dividends received from countries with which we have a Double Taxation Agreement. This involves grossing up of the net dividend received by you at an agreed rate published by the Revenue Commissioners for various countries. This rate recognises the tax already paid by the company abroad in earning the profits out of which the dividend is paid. Current Revenue practice seems to be that dividends received from the USA and Canada must be separately identified on your tax return form and dividends from all other countries get lumped together notwithstanding the different underlying tax rates that may apply to different countries.
Unless you have very substantial dividends from foreign countries (ignoring UK, USA & Canada) then the broadbrush approach applied to such income will not make any significant difference to your Irish tax liability.
Sometimes dividends received from foreign countries will suffer an Irish tax deduction on encashment. If this applies you will get a full credit against your Irish tax for this deduction. If you do not owe tax you will get a refund of the Irish tax deducted.
Where dividends are received from foreign countries where no double taxation agreement exists you will normally pay Irish tax on the net dividend received with no credit allowed for the foreign tax deducted from the dividend payment.
We can provide further advice on this matter by way of consultation.
Our Dividend Recording System
When recording information in this section you will be asked to identify the source of the dividend payments i.e. Irish, UK, or Foreign. The credit for Foreign Tax will be allowed in the calculation of your tax liability in the field Foreign Tax Deducted in the main income tax calculator.
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