Marie Brennan ACCA, 4th September 2019
There are many factors for shareholders and companies with ownership interest in a business prior to withdrawing a dividend from a company. One obvious factor is the availability of an exemption from dividend withholding tax (DWT) to both Irish and Non-Irish residents. There are a myriad of factors that influence the availability and extent of residents or non-residents to be DWT exempt.
Dividend Withholding Tax Exemptions for Residents
As standard, an individual who is a natural person resident in Ireland will be subject to 20% Withholding Taxes on the gross value of the dividend being taken, e.g. €15,000 as a dividend incurs a tax liability of €3,000.
Exemptions typically come into force when entities or bodies are taking a dividend from a company. They would need to be shareholders of the business and their percentage can impact this. While not always clear cut, entities like companies, pension schemes, charities, trusts, etc. will be able to avail of an exemption for DWT. The reason these exemptions come into force is under the understanding that much like the way Vat operates, an end receiver will incur a tax liability which will account for tax on the dividend – essentially an individual will pay tax on the dividend at some point.
In all cases, if a company or other entity is filing as DWT exempt, a form must be submitted to the Irish Revenue detailing the same.
Dividend Withholding Tax Exemptions for Non-Residents
For those individuals, companies and entities based outside of Ireland the rules pertaining to who is DWT exempt become that bit more complicated. The system for non-residents is heavily impacted by both the type of shareholding and the country of origin of the shareholder.
While the exact conditions will vary based on the type and percentage of shareholding, typically, individuals, companies or other entities that are tax resident in an EU state other than Ireland or are tax resident in one of the 73 countries that have active double taxation agreements in place with Ireland, can be DWT exempt.
As with the Irish resident version, this process provides that the individual, company or other entity will account for taxation on the dividend at some other stage. For example, if an individual takes a dividend from an Irish based business and can avail of the above conditions then they would account for taxation on the dividend wherever they are tax resident, e.g. resident for more than 6 months or 183 days.
If you would like more information on Dividend Withholding Tax for Irish residents or the possibility of being DWT exempt as a non-resident individual, company or other entity feel free to Contact Us or call the Company Bureau team on +353 1 6461625.
Disclaimer This article is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Company Bureau for any action taken or not taken in reliance on the information set out in this article. Professional or legal advice should be obtained before taking or refraining from any action as a result of this article. Any and all information is subject to change.